And the walls They Came Tumbling Down!

Joshua fought the battle of Jericho and the Walls came tumbling down.

 For as long as I have been a residential real estate agent the walls of Silicon Valley were impenetrable to the various market and economic cycles that threatened home prices.  The East Bay and communities around us saw prices decline Silicon Valley remained strong.  It was like a wall that surrounded it.  Just as the Biblical Walls of Jericho came down so are ours.

I have written in the past of the immigration of residents as the pandemic began.  Employers embraced work from home and as they did employees began to look at greener more affordable pastures.

This weekend's San Jose Mercury News and the San Francisco Chronicle have finally put the fact on front pages.

It started with Marisha Kendall's article..."Santa Clara County properties valued at $553B before pandemic".  "We have peaked" said Santa Clara County Tax Assessor Stone.  "Next year, Stone expects to see even more properties to decline in value.  Commercial Properties will be hit especially hard".  

From my view, the commercial market appears to be the greatest vulnerable stone in the wall.  Renters are moving out of the area.  Some to central valley, some out of state.  They are moving out of the Silicon Valley and San Francisco.  Rentals will have the biggest impact on the commercial market as many rentals are left empty.  The additional risk will be to the many large projects; such as, those under construction that line El Camino Real.  The El Camino projects appear to have stopped construction.  Previous pre-pandemic era projects began and finished in record time with rentals in offices and apartments quickly filling.  The pandemic took care of demand as renters moved and offices closed. The Kendall article quoted a commercial realtor noting, "commercial leases are coming down".

Kathleen Pender of the SF Chronicle followed up in the Sunday paper, "Bay Area rents keep spiraling down - SF hit hardest".  SF rental prices plunged 20% during the pandemic.  Whether the quoting of the market rental decline is from Zumper or the Census and Department of Housing and Urban Development which include rents for older units and those of lower-income neighborhoods, rents are declining.  Median rent September 1st is down 6.9% in San Francisco, down 4.1% in Mountain View, down 2.5% in Palo Alto, down 5.1% in Redwood City, down 4.8% in Menlo Park, down 4.9% in Cupertino, down 5.2% in Santa Clara.  Going across the Bay is 0 for Emeryville, 0 Dublin, 0 Union City, 0 Alameda, and 0 in Antioch.

Louis Hansen of the Mercury News follows on with an article "S.F. housing market cooling off"  Hansen states, "Outside San Francisco, the Bay Area Covid-19 real estate market has been red-hot with few homes for sale, quick deals, cash transactions and high-end spacious properties are selling for a premium."  In San Francisco homes for sale doubled with prices dropping 5% to an almost buyer's market classification.

Finally, in the section of the San Jose Mercury News called, "Today's Economy", Jonathan Lanser writes, "Economy pushing Californians inland."  The story is not new.  I saw this months ago when rentals were taking "Pets".  Heretofore, "pets" were not accepted and rents were high by any standard.  

The reason for buying a larger home at affordable prices becomes evident when one looks at the real estate market in the Central Valley, or the Sierra Foothills.  Watching the weekly action in the MLS, I saw price cuts, and sales prices at less than list.  The summer would usually see a cycle of taking a house off the market for the fall buying period.  Not so any longer.  They stayed on and prices were cut to sell.  To me this is the beginning of a buyer's market.  It does not matter if it is Los Altos, Palo Alto, Menlo Park, Atherton or Redwood City.  A listing strategy I observed was to under price a house dramatically and get over bids.   Over price a property and 30 days later it was followed up with a 10% price cut.  Even those homes that were fairly prices did not sell at list.

What is the value of living in a community with shops, restaurants and gathering spots that are gone or cannot be used?  Many of the small businesses have either gone out of business or are on edge.  It Ain't Going to Get Better Soon!  Sooner or later homeowners think "why stay here, let take our equity elsewhere"?  

To those who are deeply rooted in Silicon Valley or are here for the long term, this is the opportunity for buying real estate in Silicon Valley communities.   The pandemic will eventually come to an end.  When it does the value of the valley will be resurrected.  Think long term when you buy your home.  The idea that it is an asset to be traded must be lost from your mindset.  There was a time homes passed from parents to children to their children.  Lets resurrect the traditions of the past.  Remember the parents property tax basis is passed along to the children, while the tax basis is updated.  That in itself is a big benefit for keeping property within aa family.