Covid Economy Falters Bay Area Luxury Home Sales Boom

While rents collapsed, rent went unpaid and landlords fought to keep above water an exodus evolved from the Bay Area; but within Silicon Valley, Luxury Homes escalated in numbers sold and in median prices.

Quite an aberration.  In San Mateo County the number of Luxury Home Sales went from 564 in 2020 to 679.  In Santa Clara the number of Luxury Homes sold went from 1465 in 2020 to 1498 in 2021.  

For 2021 Luxury Median Priced homes popped from $1.45 million to $2.90 million and Santa Clara from, $1.33 million to $2.66 million.

(Thank you Louis Hansen of the Mercury News)

The rush from San Francisco was  evident as Woodside, Portola Valley with their 1 acre minimum parcels provided space and safety. 

*News Break states that East Palo Alto is among the Cities where home values are falling the most.  Between January 2020 to January 2021 the typical American Single Family home appreciated by 9.1%.  In East Palo Alto it declined 2.6% with a change in population, only to be beat by San Francisco down 3%.   Both cities represent the Worker Bees of Silicon Valley.  San Francisco with the diverse Silicon Valley market and East Palo Alto the proximity to the Facebook Campus.  With Facebook bringing back only 10% of their work force and the Facebook decision to work mobility the need to live near campus is diminished.  East Palo Alto is not a Luxury Home Market, just an average first-time home buyer market with the Facebook campus nearby.

No place is easier to leave than Silicon Valley.  7 out of 10 workers were born out of state.  It is estimated that 13% of the workers in Silicon Valley are mobile, rent and have no children or spouse.  San Jose has 46% of the mobile market, the epicenter of Silicon Valley.  The average income of the mobile worker is $118,000 and the average salary to the non-mobile worker is $48,000!  Who is going to move?  It is obvious.

Why then the strong Luxury Market?  Start ups being brought public and purchased.  The creation of the fund or investment tool know as a SPAC, special purpose acquisition company, has created newly found wealth to all the risk takers willing to work for a start up for low income and stock.  The large cash distributions and distribution of restricted stock with substantial jumps in income have put the Luxury Market as a clear target.  

7 out of 10 are not from California so therefor 3 of 10 are!  Those 3 will look to stay close to home and seek a town that represents a step up form the rental they were once crowed into.  Some move out of the Bay Area, but within a few hours drive to network with new startup opportunities and or go to the new employer's meetings when called.

This 3 of 10 do not want a fixer upper, needs work or dated home and property.  In comes a newer breed of investors.  Flippers moved over as the new set were contractors and real estate agents who were able to buy the dated properties, tear them down and build a new current and up to date home in Woodside, Palo Alto and Menlo Park and Farm Hill and Emerald Hills in the Redwood City area.  What once was a $1.4 million fixer becomes a $4.5 million Luxury Property.

What will be the demand this Spring?  Location, Location, Location may be the Realtor's slogan, but this spring the buyers are interested in Space, Space, Space.  All adding to gyms, home offices, dining rooms, sun rooms, sauna's, wine cellars, steam showers; even garages for the collection of new and classic cars; maybe, even an elevator to get groceries and parents to the upper floors.

To counter the growth on value we have seen is the States plan to create a wealth tax.  See the linked exclusive from McKae Properties. Link