Why there is no housing bubble
Jul 27, 2022A 2021 Blog Post
There is No Housing Bubble
By Pat Kapowich
A bat virus continues to play a critical role in skyrocketing Silicon Valley property values. The typical family home became a precious haven, office, and childcare center from COVID, increasing housing costs exponentially. Now, the second wave of infections underway created by the unvaccinated will prolong the housing boom.
In my hometown of Sunnyvale, California, in the heart of Silicon Valley, single-family home sellers received 114% of their asking price in June 2021 compared to 116% in May 2021. The median sale price showed a 10% increase from $2,090,000 in May 2021 to $2,290,000 in June 2021. In Santa Clara County, AKA Silicon Valley, in June 2021, single-family home sales were up 47%, while active listing housing inventory was down 28%. Its median price of $1,750,000 is a 27% year-over-year increase.
In Silicon Valley, investors buying office complexes have been as aggressive as the animal virus. Experts are betting that the country's leading office market will be San Jose, California, located in the heart of the tech ecosystem with talent, accountants, attorneys, public transportation, and a Mediterranean climate.
The robust housing market will continue based on my interviews with leading experts from our Bay Area multiple listing service (MLS), the Santa Clara County Assessor’s office, the National Association of Home Builders, and our California Association of Realtors. More importantly, the commonality between the lead-up to The Great Recession and today’s housing markets is sharply rising prices.
The current market’s homebuyers purchased with 20%+ down payments, fully documented home loans, and historically low 30-year fixed interest rates while employed in the upward economic arm of the coronavirus pandemic-induced K-shaped recovery. Additionally, housing inventory is as critically low as housing starts.
Conversely, reckless home buying methods leading to the 2008 housing bubble saw little-to-no down payments, dubious home loans, escalating adjustable interest rates, and properties without equity, fueled by ample housing starts and inventory. Once that bubble burst, layoffs were permanent, and tragically, "loss mitigators" tasked with selling off bank-owned properties hired less than one-tenth of one percent of the nation's 1,200,000 real estate agents. Unable to properly service listings, these "chosen few" listing agents competed with price reductions to expedite sales, devastating property values throughout America's neighborhoods.
Real estate prices receding in the future is a truism. However, there are no signs of a Bay Area housing bubble bursting without fast-tracked trending price reductions, lowering sale-to-list price ratios, rising days-on-market, declining median prices, and an increasing inventory of properties for sale.
In 2008, a critically acclaimed, bat-themed film, “The Dark Knight,” filled theaters. In 2020, a bat-inspired coronavirus emptied them. We won’t see daylight between price increases until we sit maskless, shoulder-to-shoulder, in a darkened theater.
#HousingMarket #SiliconValley #Housing Bubble
Questions? Or are you or someone you know navigating life’s transitions? Let lauded negotiator Pat Kapowich make your next move easy. Visit Kapowich’s website for free area housing data, insights and trends. Or put his artful blend of specialized credentials, decades of experience and endorsed skill set to work for you. Kapowich instills confidence when buying, selling, relocating or resizing homes. Do not just make a move — make the best move. Contact him today, Realtor Pat Kapowich, a career-long consumer-protection advocate.
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