Silicon Valley Ca- real estate outlook for 2017

Real Estate Agent with (408) 425-1601 CA bre 1519182

                                                                              Sam Shueh

                                                                          Realty One Group

                                                          Campbell, CA


The lenders did not waste any time. Before the announcement of interest hike by 85 points all interest rates have moved up and they change more often today than before November 2016. I just checked many lenders are now charging 4.375% for 30 year conforming loan or 4.125%-4.25% for jumbo 30 year fixed mortgage over $471,000 popular here in Silicon Valley.  The no point no cost mortgage is not readily available in some banks.


In Silicon Valley a $1.3 million dollar home often is a remodeled 3-4 br, 2 bath, 50+ year old tract 1,300-1,999 sf  home on a 5000+ sf lot.  Many buyers often put a larger down payment in order to keep their mortgage payment manageable.  


For a $1,000,000 mortgage for a 30 year fixed rate jumbo mortgage, the monthly mortgage (PITI) and minimum required annual income needed is:

- 4.65%     $6,781                $201K                                                     2017  

- 5.15%     $7,085                $209K                                                     2017 

- 5.65 %    $7,400                $217K                                                     2018?


For each 1% in interest rate increase it translates into ~10% increase in monthly mortgage payment. To keep same mortgage payment the housing price needs to be 10% lower during each rate change.  


It is likely our mortgage interest may increase up 2% in the foreseen future. Home prices then needs to be lower by 20%. Local wage increases is probably about 3.5% annually while local housing can absorb a 6.5% price decrease.  With traffic back to back on the freeways with too many cars (job) most do not mind live close work.  A few years back the high tech workers preferred a good school neighborhood like Sunnyvale or Cupertino. These days school rating can take a back seat since get to work on time being close to work matters.


Mountain View, CA had many non-professional residents and school quality was just average before. Since Google IPO in 2004 it took about 10 years to improve school quality after home prices climbed ~3X from the bottom of the Great Recession. 


In 2017 one expects only a modest may be 3-4% increase in some desirable neighborhoods often close to high technology centers. Some higher priced estates may even continue to see a price decrease too cool of the speculations. Uber may be going ipo but not everyone will become instant multi-millionaires ready to purchase homes.  Apple may even expect cut back in spending and staff as their CEO Tim Cook took a pay cut! He just received -15% less than previous year! In 2017 Apple already reduced the iPhone 7 production by 10% during Q1 2017 because there are a more unsold iPhone 7.


Santa Clara County historical listing #                                       Historical home listings in Santa Clara County (2003- )


Regardless of affordability of housing, escalating cost, the inventory is still very limited. The data above for single family in Santa Clara County seems to support that housing will still be competitive.  We expect another great 2017 year in residential real estate.


Snopsis on Mortgage Interest Rate vs Affordability (Silicon Valley affordability)   

How is my Silicon Valley home worth? (Silicon Valley Home Values

Real EstateBlogs 


Sam Shueh Realtor   

 I've called San Francisco South Bay home for over 30 years. We love this area and all it has to offer, and I enjoy sharing what I know about homes.  I documented in several books about Silicon Valley history. I have much expertise in real estate...please give me a call.       

         (Four-O-Eight)  425-1601


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Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Sam Shueh - I am with you. Nice calculation about the 'affordability' which will go down by about 10% with just 1% increase in mortgage rates.

Hope buyers understand that, too.

Jan 12, 2017 03:50 PM #1
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

And yes, thanks a lot for your participation in this contest Sam Shueh 

Jan 12, 2017 03:50 PM #2
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Hi Sam, there's so much more to numbers than meets the eye. Your expertise in the marketplace will be very valuable for buyers and sellers alike. 

Jan 16, 2017 03:32 PM #3
Rebecca Gaujot, Realtor®
Perry Wellington Realty, Adam Conrad, Broker - Lewisburg, WV
Lewisburg WV, the go to agent for all real estate

Sam, great information and entry for the contest.

Jan 16, 2017 08:30 PM #4
Roy Kelley
Realty Group Referrals - Gaithersburg, MD
Roy and Dolores Kelley Photographs

Thank you very much for sharing some of the predictions for the area.

Have a most productive 2017!

Jan 17, 2017 08:52 AM #5
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Sam - very good analysis and useful information.  This interest rates will certainly affect affordability.

Jan 19, 2017 02:52 PM #6
Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents
Lyon Real Estate - Sacramento, CA
Put 40 years of experience to work for you

Same situation in Sacramento, Sam. Hardly any inventory. Makes it really difficult for sellers to sell and move up when their choices are so limited. Yet demand is super strong.

Jan 20, 2017 08:23 AM #7
Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

There were two cottages in the mountains.  One was next to a creek in earthquake country and fire zone.  When we received 9 inches of rain. Someone put in a cash offer that the owner could not resist. The other had 60 steps to walk up to the front. Gone multiple offers.

Jan 20, 2017 10:39 AM #8
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