Silicon Valley housing boom may be fizzling
By Jim Hopkins
USA Today
SAN FRANCISCO — Signs are growing that Silicon Valley's housing boom may be ending its sizzling run amid the Internet bust and technology slump.
The number of homes sold in February skidded 33.5 percent from a year ago in Santa Clara County — the fourth consecutive month of declining sales in the heart of Silicon Valley. Nationally, volume rose 1.2 percent during the month.
Prices, still the nation's highest, also are getting squeezed. February's median was $535,000 — up 1.9 percent from a year ago vs. an 8.2 percent rise in the U.S. median, $161,600. The area's increase was the smallest since after the Sept. 11 attacks, when prices fell before rebounding.
The impact is likely to be felt well beyond tech-focused Silicon Valley.
Many valley entrepreneurs finance startups, and the innovations they produce, with home-equity loans, says Andrew Leigh, a researcher at Harvard University. If home prices stagnate, entrepreneurs cannot raise as much for their startups. Fewer may blossom or survive to the point where employees are needed, Leigh says.
The valley's real estate strength has held up despite huge losses of jobs.
Santa Clara County, home to tech giants such as Hewlett-Packard, Intel and Cisco Systems, has lost 16 percent of its jobs since employment peaked at more than 1 million at the end of 2000. The jobless rate soared to 8.5 percent in February from 1.3 percent in December 2000.
Yet median home prices, driven partly by low interest rates, hit a record $578,000 last May. Recently, they've been sliding because of:
More supply. There are about 3,600 homes for sale in Santa Clara County — double the number a year ago, Creekside Realty says. Three years ago, when prices were "on fire," there were just 915 homes for sale, says Creekside owner Richard Calhoun.
Fears. Some would-be buyers are on the sidelines because they worry prices are too lofty or may fall in the county and the broader San Francisco Bay Area, real estate experts say. "Sticker shock is a huge, huge issue," says John Karevoll at researcher DataQuick.
Jill Lublin, 41, a publicist in Novato near San Francisco, gave up a yearlong hunt for a single-family home as an investment. She's now looking north, near Sacramento, where prices are lower.
Economic weakness. Job losses continue to pile up in the valley. Since May, area companies have shed 25,600 jobs. "And the layoffs are continuing," says Stephen Levy, head of the Center for Continuing Study of the California Economy.
Calhoun says April's figures could be even weaker, showing a year-over-year decline — the first since the months after Sept. 11.
Sales volume throughout the seven-county Bay Area was down 22 percent in February compared with a year ago. The median price rose 4.3 percent — the fourth consecutive month of lower annual growth.
