What to Expect from Silicon Valley Real Estate in 2022
Buying a home in Silicon Valley has been challenging since the pandemic began in 2020. Remote work took over daily trips to the office, and families were forced to quarantine as schools and workplaces began to close. The need to own a home was felt by many. Home prices increased with the desire to own. Offering more money than the listing price became a necessity, buying on contingency became a nonviable option, and beating others to the offering table was a way to try to secure a contract. Despite all of this, in 2021, the inventory sank to record lows and continued throughout the beginning of 2022. If you’re looking to buy or sell this year, there are a few things you should know.
What’s in store for Silicon Valley real estate over the rest of 2022?
It’s likely to stay a seller’s market
Buyers move quickly when a home pops up for sale and sellers are struck with multiple offers at once. This makes the next six to 12 months an optimal time to sell any real estate you’re holding onto. The active inventory available even made a dip in the last quarter of 2021. The time it takes for a home to go under contract is less than a month from when the home is first listed. Seasonality also isn’t coming into play as much as it used to. Though Silicon Valley has never had a hard-set seasonal shift in the market, it’s becoming even less so. Currently, sellers can list their homes at any time of year and expect to receive multiple offers in a short amount of time.
Interest rates will rise
Mortgage interest rates are forecasted to trend upwards throughout 2022. This week, the average interest rate for loans over $1 million is hovering around 3.74% for a 30-year fixed mortgage
. The rates are at the lowest they’ve been since 2016, thanks to the COVID-19 pandemic. While this was enough to make the dream of homeownership more attainable for some, it drove the demand for homes higher. As the pandemic begins to wean and, hopefully, end in 2022, the low rates will slowly begin to wean as well. Rates have jumped nearly a percent over the past year, and looking at the current rate of inflation, they won’t be dropping again any time soon. A rate increase has different effects on buyers and sellers. Buyers may try to buy sooner and beat the increase, urging agents and sellers towards the finish line. Sellers are at an advantage when it comes to the market but should keep in mind that demand may gradually decrease as higher rates surge.
Technology will affect home values
Google Village, Image courtesy of The Mercury News
When the pandemic hit, tech workers in San Francisco and throughout the Silicon Valley were uprooted from their job environments. Companies that occupied office buildings in the city were forced to report losses on these investments. Fortunately, companies of substantial size, such as Google, were still able to thrive. Evidence of this is still affecting a portion of Silicon Valley, specifically in San Jose. Google’s proposed neighborhood
on the edge of Western Downtown in San Jose has already begun to boost property values in the area, despite the fact that the project won’t break ground until 2023. It’s a proposed large-scale community space that will incorporate both existing structures and newly constructed buildings to bolster the amount of existing residential, retail, and office spaces. Referenced as the Google Village, the project will bolster surrounding home values for years to come.
Location will be more important than ever
If we didn’t learn anything else from the pandemic, we discovered just how attainable the work-from-home lifestyle really is. While location has always been a key factor in the value of a home to a buyer, the elements that decide whether or not a prospective buyer makes an offer have evolved. The need to be near major transit routes was less important than whether the home was near or adjacent to outdoor areas. Parks and open spaces are the center points for hot real estate listings, followed closely by slow streets. Any property that allows the buyer to get outside and go for a walk, a bike ride with the kids, or morning yoga in the grass is desirable.
Paying extra for more space
Silicon Valley real estate has solved the open space issue for many families and young adults. San Francisco professionals have transitioned to searching lower in the valley for larger homes on grand lots. Spaciousness is key as buyers prioritize homes that have extra bedrooms they can use as home offices, exercise spaces, Zoom rooms, and homeschooling areas. Combine location with larger home sizes, and you’ve got the perfect recipe for a guaranteed hot commodity in the listing market. The demand for extra rooms, amenities, and upgrades won’t stop anytime soon. 2022 is likely to see single-family homes with more square footage selling at a healthy rate above the asking price.
Problems the market faces
As the average price per square foot continues to climb, the rush to obtain real estate does as well. Americans are worried if they don’t buy now, they won’t be able to in the future. Some see the current low inventory as a regular occurrence in the future. This is exasperated by the number of people refinancing their houses and purchasing homes in more remote locales without also selling their first property. Buyers are left at a disadvantage as they fight to find a property in this blazing hot market. The race to the closing line on the few properties on the market continues to grow tighter, edging out previous homeownership options. Pre-planning as a need is growing more and more paramount. This includes everything from getting pre-approved for a mortgage to having all of your documents ready to supply the loan officer and being prepared to jump on your chosen property as soon as you can instead of waiting to get everything in order.
Because of the pace of the market these days, seasonality in the area is practically non-existent. Instead of waiting for the warmer seasons to begin their home search, buyers are keeping their eyes on the market all year long, waiting for the perfect property. What used to be tougher seasons in real estate are now keeping pace with the rest. In January 2022 alone, buyers were ready to spend up to 20% more than the list price in order to secure a deal. The lack of inventory available accounts for a large part of both of these market limitations, and it’s not getting much better in the foreseeable future. Companies are discovering how accessible it is to have employees work from home, encouraging more people to step over the line from renter to homeowner in favor of being able to have more say on their surroundings. It’s also becoming more and more likely that buyers will purchase a home they’re less than pleased with in order to stake a claim on the space.
Looking at houses in Palo Alto and the Silicon Valley area?
There’s a lot to understand when it comes to the local real estate market. Knowing when is the best time to buy a home in these conditions can seem daunting, and understandably so. What’s important are the steps you take to make homeownership attainable for you, even when the market is less than favorable. Get off on the right foot with a real estate agent who has the knowledge to put all of your biggest plans into action and get you into the home of your dreams.
Contact The reSolve Group today
, and get the help you need to make your home purchase a reality. From Palo Alto estates to luxury condos in Redwood City, the reSolve Group has the skills and knowledge necessary to give you an edge over your competitors.