Although some of its high-tech workforce gravitates up to Seattle firms, the population continues to grow in California's San Jose-Sunnyvale-Santa Clara Metropolitan Statistical Area, while both unemployment, at 2.6%, and the supply of homes, at just a month, are extremely low.
According to the second quarter 2018 VeroFORECAST from Veros Real Estate Solutions, these factors recently boosted the San Jose market into the ranks of the nation's ten MSAs predicted to see real estate values appreciate at the highest rate over the 12 months ending May 31, 2019. The data came from 354 MSAs, which include 1,005 counties and 13,877 zip codes, and account for the residences of 82% of the U.S. population. That is a dozen more MSAs than were used for the first quarter report.
Both the San Jose market, which ranks fourth highest in projected appreciation at 9.5%, and the Bay Area's San Francisco-Oakland-Fremont MSA, at number nine with 9.2%, are new to the VeroFORECAST top ten this quarter. In the first quarter report, released in late March, the lone California entry in the top ten was the nearby Vallejo-Fairfield MSA, between the San Francisco and Sacramento-Arden-Arcade-Roseville, CA MSAs. In the new report, it is at number 25, with a projected rate of 7.8% appreciation.
The tech segment's continuing growth is fueling the construction of mega-campuses in San Jose that are in turn attracting new residents for high-paying hi-tech jobs. However, new housing construction is not keeping pace. Without housing to fill demand, this is one of the strongest real estate markets in the country.
In April, The San Jose Mercury News reported on separate construction projects that are moving ahead. In one, Google has now identified an additional site for its proposed transit-oriented development in downtown San Jose that will result in an estimated 8 million square feet of space.
The paper also reported on another developer's request for construction permits to begin its 1 million square-foot, three-building complex. And, in June, Micron Technology, a semiconductor company with nearly $26 billion in revenue in its last 12-month report, announced its Silicon Valley operations will move from Milpitas to a three-building complex in north San Jose.
As I've mentioned in previous columns, the market tightening that often drives the appreciation of real estate in these top-tier markets, provokes public concern. That has been the case in Seattle, which again tops the VeroFORECAST with an average projected 11.0% appreciation rate. The same is now true in San Jose, where local media see some tarnish on the gold rush for Silicon Valley residential real estate.
"More bad news for people house-hunting in the Bay Area," is how the Bay Area News Group's Katy Murphy described it in January. "Of the 10 hottest neighborhoods in the country this year, nine are in the San Jose metro area. The tenth," she added, "is in San Francisco."
Murphy, whose story was based on a Redfin report that placed "San Jose neighborhoods atop the nation's 'hottest' list," identified San Jose’s Bucknall neighborhood as the nation's "hottest."
"The median sale price last year was $1.57 million and 100 percent of homes sold for above list price."
Quoting Redfin Silicon Valley agent Kalena Masching. Murphy wrote that "open houses have been swamped, homes have been getting 15 to 20 offers each, and people have taken off work to check out houses the moment they come on the market."
Masching also noticed something else: “What we’re seeing is a disregard for recent comparable sales and people deciding what the home is worth to them and just giving that as their offer.”
So, it's no surprise that San Jose has jumped well into the top ten of the recent VeroFORECAST.