Housing Skyrockets In Silicon Valley
New Home Company has a ton of shovels digging in Silicon Valley (so if you're missing yours, you know where to look for it); the homebuilder's regional VP Charles McKeag will explain why at Bisnow's Residential Real Estate Summit at Hotel Nikko tomorrow (register here).
Charles, here in his Walnut Creek office, tells us the recipe for insane Silicon Valley prices: Demand is intense, buyers have good jobs, interest rates are low, and there is very little supply. Buyers in the middle third of the market want something new, convenient, and intelligently designed. While some will opt for resale fixers, demand for new product is high. Buyers at the higher end are looking for more space for their money, which is pushing prices upward in traditionally suburban markets like Morgan Hill, Almaden Valley, and the Tri-Valley, he says.
A few months after New Home Company went public, it's taking the Bay Area condo market by storm by starting hundreds of units from Foster City to Lafayette this year. Silicon Valley as we know it today is larger and more diverse than the Silicon Valley of 10 to 15 years ago, he says. While the core is still in central/western Santa Clara County, tech sector growth in other areas (like the Peninsula, S.F., and even parts of the Tri-Valley) has generated a “Valley Effect” in many real estate submarkets throughout the Bay Area, he says.
New Home Company has 239 homes under construction in San Jose's Orchard Park (above), comprised of traditional three-story row towns and four-story elevator-served flats. Demand for housing in Silicon Valley is, at its core, a direct result of strong job growth. Folks with high-paying jobs and strong credit make for a very aggressive buyer pool. Lack of housing supply is—and likely always will be—a problem that plagues most Valley submarkets, he says. Local entitlement constraints and inefficiently planned industrial/commercial development patterns are largely to blame.
This year Forbes named San Jose one of its top 20 fastest-growing cities the US, clocking in at No. 19, and its job growth is turning up the volume on apartment demand. (Here, Bay West Development's Matt Gingery turns up the NEST thermostat in his new 293-unit Aire apartment complex in San Jose.) The City continues to add 25,000 to 30,000 new jobs annually, including many high-paying tech jobs, heating up the already hot San Jose apartment market.
New Home's 404-unit Foster Square development underway in Foster City, above, is comprised of 200 for-sale senior condos, 156 assisted living apartments, 66 senior affordable apartments, and 35k SF of restaurant-oriented retail. It's also got some projects cooking in the planning and entitlement stages in Santa Clara, Fremont, and Morgan Hill.