With all the talk about bubbles in the housing market, it is important to consider that Silicon Valley is something of a special case. The Santa Clara County housing market in 2017 spanned a range from $220K to $25M, and the average price of a home sold rose 29% to finish the year at $1.37M in December 2017. Meanwhile, sale prices in most of the country are still below the 2007/8 pre-crash levels.
Here in Santa Clara County, February prices have already climbed to an average of $1.48M, or 8% over December. Projections for the end of the year range from $1.6M to $1.75M, or up to an additional 18-26%. Coupled with expected interest rate hikes, the cost of buying an average home could rise dramatically.
The graphic below summarizes the impact of rising prices and interest rates on the cost of owning an average home over a 5-year period. The 5-year cost of ownership, already up almost $80K this year, may rise an additional $174K by the end of the year, including an additional $49K for a 20% down payment. (Note: This estimate does not include closing costs and insurance premiums.)
Meanwhile, Santa Clara County rents are expected to rise 2-5% even with the imposition of rent controls in San Jose.
First-time buyer programs are available from a number of lenders allowing as little as 3% down to qualified borrowers. As of today, there are 371 homes listed below the average mark of $1.48M, 230 below $1M, and 19 below $500K. If you are capable of buying, now may be a perfect time to make a move.