House prices in Silicon Valley are skyrocketing year after year due to the booming IT and tech industry. Houses are being sold for more than their asking price and the sale period has also shortened. Now a recent study finds that even the highest paid professionals in the tech industry struggle to get a home in the San Francisco Bay Area.
And it’s not just San Francisco in particular. According to other reports, there is a global housing crisis in most metros around the world. Perhaps it’s because of an increasing urban population around the world.
The Ever-Increasing Silicon Valley Housing Prices
The real estate platform Open Listings released their study on housing prices at Silicon Valley recently. They considered the median price of houses located nearby tech headquarters of leading companies such as Google, Facebook, Uber, Reddit and others. The housing prices from Los Angeles and San Francisco were taken into account and put against the average salary of the professionals.
Engineers in companies like Facebook, Twitter and Google earn around $200,000 yearly. To purchase a home within 20 minute of commute from their workplace costs them roughly $1.2 million. The house prices hover around the same range in the San Francisco Bay Area neighborhoods such as San Jose. The agency Zillow in their study also put the value of homes in San Jose at the same value. Just next to it ranks San Francisco with house prices of around $923,700.
The Observer noted that to afford a house in such areas, the software engineers of top companies have to set aside at least 30% of their monthly income. But in reality, many professionals residing in the area devote around 50% of their monthly salary to paying rent for their homes. It is also unfortunate that many of the professionals will not qualify for mortgage to purchase a home in Silicon Valley, according to experts.
Also, due to GOP tax reform, the property taxes have also risen to around $10,000 serving as a deterrent to home buyers.
More than Healthy Growth Rate
The Zillow monthly housing market report has predicted San Jose to be the hottest housing market for 2018. According to Zillow, the national growth rate of home value was 6.7% in 2017. But in comparison, San Jose homes experienced a growth rate of 22.9% due to high demand and short supply of accommodation options.
Home values also received appreciation with 68.5% of homes being sold for more than their asking price in 2017. The properties in Silicon Valley are also selling fast- in 2010, the average selling period for a home was 75 days; in 2016, they were gone from the market in 50 days- while in 2017, it took only 42 days for a house to be sold!
Along with prices, the rates of home interest have also fueled. From 3.77% in January, the interest rate rose to 4.04% by the end of February 2018. Affording a house in Silicon Valley is going to get tougher by the day!