When I ask my family in Texas this question, the answer is “Hell yes! You people are crazy out there”.
To prevent family disharmony, I don’t get into the value impact of weather, job opportunity and lifestyle. The real question is not if the values in the Bay Area are high compared to other areas of the country, it is if we are high within our unique local environment.
The main challenge is to determine a foundational baseline which has been difficult for the past 8 years. 2007 through 2010 was not a normal economic cycle. This was a national crisis brought upon by deception on the American people which locally we recovered about 4 years ago. Sadly, many parts of the rest of the country have not. So the where do we go to find a baseline to build upon?
Why do I like 2003 as a baseline?
Because 2004 was the introduction of the “Stupid” loans. This is when the 100% financing, no verification of income and short term interest rate adjustment period were brought to the market. These loans left bodies in their wake and not a part of the normal landscape of our Real Estate market.
For 2016, Santa Clara County median price range was $1,020,000 as compared to $550,000 in 2003. It this increase a lot?
The average annual increase has been 4.87% since 2003. The drama of this return has been a roller coaster ride to this point in time. Articles love taking select points of time in our Real Estate cycle to create exciting headlines. Don’t be fooled by people who are “headline seeking” and take the time to do the research.
Let’s compare the increase to the Dow Jones. At the end of 2003, the Dow Jones was approximately 10,400 as compared to the conclusion of 2016 of 19,762. This represented a 5.06% annual increase of approximately .19% higher than homes.
Now let’s look at the Nasdaq, which most represents the growth of our local companies here in Silicon Valley. End of 2003 the Nasdaq was at 2,080 as compared to 5,420 at the end of 2016 representing a 7.65% annual return, over 50% higher rate of return than Home Prices.
In conclusion, Real Estate yields are not out of line with the other financial markets. In comparison, Bay Area homes have risen more modestly than both the Nasdaq and Dow Jones.
Even though I compared Real Estate to financial markets, homes should not be treated like a stock. Wise plays for purchasing property involves a long term strategy.
In the future the companies that dominate the job market may be completely redefined. Many of the current top companies in the Bay Area did not even exist 20 years ago, but Real Estate always has the same demand. People always need a place to live.
Call me directly to discuss how Myrick Estates Team can help you find your next home in Santa Clara County or Carmel!
Jim Myrick: 408.836.5375