Crazy housing market moves into San Jose

The San Jose metro area could be the nation’s hottest housing market this year as buyers seek more affordable prices near high-paying jobs.

Home prices in Santa Clara County hit a record $1 million in December, up 24.2 percent from December 2016, according to a CoreLogic report released Wednesday. That was the largest yearover-year increase of any Bay Area county.

For the ninecounty region as a whole, the median price paid for a new or existing home or condo in December was $750,000, down 4.5 percent from a record high of $785,000 in November but up 12.1 percent from December 2016.

Redfin predicted this week that nine of the 10 hottest neighborhoods in the nation this year will be in or near San Jose. The 10th is San Francisco’s Sunnyside neighborhood. The forecast is based on page views and favorites on its house-hunting website.

“We’ve done this report for six years straight and we've never seen a concentration of hottest neighborhoods like this before,” Redfin spokesman Jon Whitely said.

This time last year, Redfin identified neighborhoods in 10 different cities, in six states

and the District of Columbia, as the hottest for 2017.

The San Jose metro area “seems like it’s blowing up,” Whitely said. “It’s just crazy.” Large employers, including Apple, Google and Adobe, have purchased land or announced plans to expand in San Jose. And it’s still relatively affordable compared with San Francisco and San Mateo counties, where the median prices in December were $1,174,000 and $1,200,500, respectively, according to CoreLogic.

Zillow, another real estate website, also predicted that San Jose will be the hottest market this year. “Home values in the Silicon Valley hub gained 17.4 percent over the past year — the fastest growth among the 50 largest metro areas — and it tops Zillow’s list of hot markets for 2018, as high-paying tech jobs continue to keep pace with climbing housing costs,” it said in a report. San Francisco ranked fifth on Zillow’s hot-places list.

Home prices in the Bay Area often spurt in January, because buyers hit the market after the holiday slowdown faster than sellers can list their homes.

But this January, “it’s been a little nuts,” said Kalena Masching, a Redfin agent in Silicon Valley. “I’m starting to see homes selling the day they come on the market, or three days later. That was not the case last year, even a couple months ago.”

Masching said some sellers are accepting offers before the first open house, before the official offer deadline, even before homes are listed. These preemptive offers “are so good they are not worth the seller waiting to see other offers,” she said.

“Los Altos, in the last 30 days, has had three homes sell before hitting the market and a couple went into contract less than a week after listing,” she added. In Mountain View, “we have 10 sales that went pending in six days or less.”

Kevin Cole, a broker with Alain Pinel in Saratoga, was not surprised to see the San Jose neighborhoods of Bucknall, Cambrian and White Oak at the top of Redfin’s list of hot markets. Those areas, along with Lakewood in Sunnyvale, “used to be lowerpriced neighborhoods,” he said. “Now they are equaling or surpassing the median price in Santa Clara County. As Sunnyvale gets too hot, buyers shuffle over to Cambrian. As Cambrian gets too hot, they shuffle over to Bucknall.”

Two of his children sold homes in Cambrian at double the price they paid four or five years ago, he said.

First-time buyers Karishma Salver and her husband were outbid on five or six homes in the San Jose area last year before landing one at the end of November in south San Jose, the “last affordable neighborhood before Morgan Hill or Gilroy,” she said. “It was challenging, stressful. The market was moving so quickly that we would see a house and it would be gone by the next week.”

Sometimes they’d show up at open houses and be told the house was already sold. “At some point, we were considering going further south,” Salver said, but “we got lucky.” Although they paid $34,000 more than the asking price, they got a four-bedroom, 1,800-square-foot home for under $1 million. But they’ll still have to endure long commutes to their jobs near the San Jose airport and in San Ramon.

For the year as a whole, the median Bay Area home price rose 10.2 percent in 2017, compared with a 5.5 percent gain in 2016, according to CoreLogic. The counties with the highest appreciation rates last year were San Mateo (16.3 percent), followed by Santa Clara (11.9 percent), Sonoma (11.7 percent) and Alameda (10.3 percent). San Francisco had the lowest rate, 4.3 percent, but the highest full-year median home price, $1.2 million.

It’s still too soon to say what impact, if any, the new federal tax law will have on Bay Area home prices. The law erodes some of the tax benefits of homeownership, primarily for higher-end homes.

But most homes sold in December went into contract before the law was signed Dec. 22. Anecdotally, agents say it doesn’t seem to be discouraging buyers. San Francisco Realtor Craig Ackerman said he listed a home on Dolores Street at just under $1.6 million on Jan. 8 that will close Friday at $1.9 million. He listed one on McAllister Street at $899,000 on Jan. 12 with a pending contract at more than $1.2 million.

“From everything I hear, inventory is so low and demand is still strong, people are feverishly buying those few homes that are available,” said Patrick Carlisle, chief market analyst with Paragon Real Estate Group in San Francisco. “That’s the short term.”

Longer term, the tax law could have an impact if it affects how people and businesses think about moving to the Bay Area. The other big question mark is immigration, which has fueled the Bay Area’s population growth, Carlisle said. If Trump’s policies discourage immigrants’ decision to stay or relocate here, it could impact the market.