Silicon Valley Real Estate Market Trend Report:

Santa Clara County (SCC): Prices End Year on High Note, Again

Prices for both single-family, re-sale homes and condos jumped by double-digits in December to set new all-time highs for the third month in a row.

That’s the seventh month in a row the median price for homes has been higher than the year before by double-digits. The average price was up by double-digits for the sixth month in a row.

The median price for homes jumped 34.8% over last December. At $1,293,690, the median price squeaked over the previous high of $1,288,500 set in November.

This is also the 70th month in a row the median price has been higher than the year before.

The average price for homes rose 31.2% to $1,556,330.

Condominium prices also set new highs in November. The median price for condos gained 27.8%. Notably, the median price for condos has been higher than the year before every month since July of 2011!

The average price for condos was up 26.8% over last December.

Multiple offers continue to be the norm. The sales price to list price ratio, or what buyers are paying over what sellers are asking remains at triple digits: 109.3% for homes and 110.8% for condos. That’s the highest it has ever been for condos.

The ratio has been over 100% for homes since March 2012 and for condos since April 2012.

Homes and condos are flying off the shelf. It is taking only twenty-one days to sell a home, on average. Condos are taking thirteen days.

All of this is due to an incredible lack of inventory. Since January 2000, Santa Clara County has averaged 94 days of inventory. Last month it was twelve.

Condos have averaged 87 days since 2000. Last month it was three

December 2017 Sales Statistics (SCC)

* Total inventory is active listings plus pending listings. Active listings do not include pending.

More information is available in our on-line report at http://avi.rereport.com/market_reports

How Will the Tax Cut Affect Real Estate? (SCC & SMC)

The real estate market will be among the sectors most impacted by the tax bill.

The legislation calls for reduced tax rates for individuals with higher standard deductions but institutes caps on mortgage interest deductions and the deduction of state and local taxes. The individual cuts expire in 2025.

How it will shake out is still unknown, but many real estate experts have been up in arms about the changes, with the National Association of Realtors (NAR) initially warning that it could lower home prices by up to 10% in every state.

Tax Deductions

The new $10,000 cap on how much local and state tax can be deducted from federal income taxes will have an outsized impact on the Bay Area.

Take couples with enough adjusted gross income to put them in the state’s 9.3% category, that’s income between $105,258 and $537,499, the state income tax ranges from $9,786 to $49,987.

Now, let’s get to property taxes. In Santa Clara County, the effective tax rate is about 1.21%. Let’s apply that to the median price of homes sold in 2017, which was about $1,200,000. Property taxes on homes that were sold for that amount, or assessed for that amount, equals $14,520.

Yeah, the new tax bill will not be friendly to homeowners in the Bay Area, and we haven’t even added in sales tax paid.

Mortgage Deductions

In another blow to future homeowners, the deduction for mortgage interest has been lowered from $1,000,000 to $750,000. Existing mortgages will be grandfathered in. That might give people less incentive to move.

Interest on home equity debt is no longer deductible, unless the proceeds are used in a trade or business acquisition or to improve rentals. Home equity debt includes refinances on your primary or secondary residences as well as HELOCs.

In conclusion, many real estate experts have been up in arms about the changes, with the National Association of REALTORS® (NAR) initially warning that it could lower home prices by up to 10% in every state. All-in-all, it looks like the Bay Area will be severely affected by the new tax bill. We are already experiencing low inventory which has pushed property prices to new highs.
If the tax bill does result in fewer people moving, inventory will continue to by abysmal. On the other hand, the loss of the tax deduction and the lowering of the mortgage interest deduction will probably curtail demand.
At this point, all we can do is keep a watch on the market to see how this all plays out.
Although we have cleaned this information from reliable sources, the IRS and CPAs have only had a few weeks to go through the tax bill. They’re still trying to figure out all the nuances.

Please discuss the new rules with your tax advisor to determine how the changes will impact your personal circumstances. This article may not be relied upon as tax or legal advice.

Call or email me if you have any questions.

For further details and a city-by-city breakdown statistics, go to http://avi.rereport.com/market_reports.

Real estate related Articles

California homeowners interested in building accessory dwelling units on their property just caught a break, potentially shaving off thousands of dollars in fees and permits.
In a move proponents say will help ease the Bay Area’s housing crisis, Gov. Jerry Brown on Tuesday signed Senate Bill 1069, making the so-called “granny units” easier and less expensive to build throughout the state.

For more read California eases restrictions on ‘granny units’
and http://www.hcd.ca.gov/policy-research/AccessoryDwellingUnits.shtml

Helpful resource for home owners

Many new home owners or owners who consider remodeling or rebuilding their homes should take advantage of their county Tax Assessor web site. These web site and their respective city building departments web site typically have vest information regarding the process for applying for permits, the impact on their taxes and many other resources that home owners should be aware are available for them.

For the San Mateo County Tax Assessor office visit http://www.smcare.org/default.asp

For Santa Clara County Tax Assessor visit https://www.sccassessor.org/index.php

The Silicon Valley 150 Index Corner

The Silicon Valley’s Real estate market is a derivative of the local economy–it prospers and withers depending on how well the local innovation-based sector performs. The San Jose Mercury News tracks the performances of the largest 150 publicly traded companies headquartered in Silicon Valley through an index called the SV150, which may be found at www.mercurynews.com. Stocks are valued based on several criteria, but one of the more important criteria is a company’s future earnings. Therefore, I see the SV150 as a leading indicator for Silicon Valley’s real estate market.

Investors Corne

THE S&P CORELOGIC CASE-SHILLER NATIONAL HOME PRICE NSA INDEX CONTINUES STEADY GAINS IN OCTOBER

NEW YORK, DECEMBER 26, 2017 – S&P Dow Jones Indices today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for October 2017 shows that home prices continued their rise across the country over the last 12 months. More than 27 years of history for these data series is available, and can be accessed in full by going to www.homeprice.spdji.com. Additional content on the housing market can also be found on https://goo.gl/3SLHUF

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San Mateo County (SMC): Average Price for Homes Sets New High, Again

The average price for single-family, re-sale homes is closing in on $2,000,000. It was $1,861,700 in December. A gain of 13.4% year-over-year.

After setting new highs in November, the prices for condominiums backed off slightly last month. Nevertheless, the median price was up 25% compared to last December.

Sales, meanwhile, continue to be impacted by the lack of inventory. Home sales were off 1.0% year-over-year, while condo sales were down 21.0%.

Multiple offers continue to be the norm. The sales price to list price ratio, or what buyers are paying over what sellers are asking remains in the triple digits: 109.6% for homes and 107.6% for condos.

The ratio has been over 100% for homes since April 2012 and for condos since June 2012.

Homes and condos are flying off the shelf. It is taking only twenty-eight days to sell a home and seventeen to sell a condo, on average.

All of this is due to an incredible lack of inventory. Since January 2003, San Mateo County has averaged eighty-four days of inventory. Last month it was sixteen. The number of homes for sale as of the fifth of December were 165. The average is 1,287.

Condos have averaged ninety-four days of inventory since 2000. Last month it was ten. The number of condos for sale as of the fifth of December was twenty-seven. The average is 350.

December 2017 Sales Statistics (SMC)

Call or email me if you have any questions.

For further details and a city-by-city breakdown statistics, go to http://avi.rereport.com/market_reports.