The supply of homes for sale in San Jose has become smaller and less affordable, while tenants may have had a little respite during the Covid-19 pandemic that rocked every part of residents’ lives over the past year.
Officials from San Jose recently released the report on the update of the city’s housing market, which covers both apartments and single-family homes in 2020. The fifteen-page report compares the trends of the past year with the past decade. The data shows that the pandemic made it easier for workers and businesses to get out of the area and that the prices of homes for sale continued to rise, making home ownership at the average price out of reach for nearly 80 percent of the city’s residents brought.
While the number of homes in the market declined 40% in the final quarter of the year alone, average single-family home prices rose 14% to an average cost of $ 1.225 million. That means potential buyers must make at least $ 98 an hour, or $ 203,497 a year, data from San Jose shows.
“Silicon Valley is unique because we have a high concentration of highly skilled, highly paid workforce, and that means higher salaries and potentially higher prices,” said Sandy Jamison, owner of brokerage firm Tuscana Properties and former chairman of the Santa Clara County Association of Brokers. “Everything will continue to rise together – the challenge is that people’s salaries don’t always go up when the cost of things goes up.”
According to Jamison, many of her clients – especially those over 55 years old – want to sell their homes but have paused the process as the pandemic and associated lockdowns wear off. This has only further reduced the available housing stock and contributed to the rising costs.
However, as apartments for sale became more expensive and scarce, many tenants saw the opposite trend. Rental costs fell last year as landlords put the brakes on rising vacancy rates, the data shows.
Average rents in San Jose fell 7.3% from late 2019, while the average vacancy rate in San Jose was 8.7% – a sizeable jump from previous years and significantly higher than the national average national vacancy rate of 6.5%.
It remains to be seen how quickly rents will rise again or how soon vacancies will fall to pre-pandemic levels, but the deciding factor will be how quickly city and county officials approve new homes in the near future, according to Jamison.
Starting last year, building permits numbers have been falling – possibly a symptom of the oscillating lockdown orders that slowed the pace of business, especially at the start of the pandemic in March and April.
Last year, San Jose granted 1,375 residential building permits and approved 663 affordable homes on the property. Another 378 were spent on additional residential units (ADUs) or a small second home that homeowners often build in their backyard.
However, those numbers represent a significant decrease from 2019 when 2,425 housing permits were issued, including 853 new affordable units. A total of 416 ADU permits were given the go-ahead in 2019 when San Jose officials approved new ordinances and programs to make building the backyard homes a little easier.
Jamison is confident the downtrend will reverse course – and quickly.
“We will continue to face these challenges until we can solve the supply problem,” she said. “It always depends on the supply. We have to build as much as possible, but we’re so far behind that it will be years before we catch up. “
Read more about the city’s results here.