Tuesday, June 18, 2019

US Home Sales Data Reports Homes Prices Are No Longer Rising

There are growing signs that U.S. home prices are no longer rising. If this is indeed the case, now is the time for sellers or prospective sellers to take a good look at the state of housing markets around the country.  To make smart decisions, home sellers as well as buyers need to find out whether home price gains are simply slowing or whether housing markets are actually topping out. 
An excellent publication,US Homes Sales Report, published by real-estate data firm Attom Data Solutions, gives a detailed look at conditions in major U.S. housing markets. This quarterly report provides data on the actual gross profit that sellers pocketed in 124 housing markets nationwide.  It tracks every home sold in that metro and compares the price to what the seller previously paid for the house. An average is then taken for all the homes sold in that quarter. The result is the average gross profit in each metro before commissions are deducted.

This data is extremely useful for prospective sellers because it tells them what kind of profit they can expect should they decide to sell their home. Sellers need this information to determine if they will have enough net profit, whether they’re looking to trade up or downsize.
We compiled data from Attom Data's US Home Sales Report for the first quarter of 2019 into a table highlighting 12 major U.S. markets and what they reveal about home sales at four different points in time. These 12 major metros were chosen for geographic diversity.
The percentage figures in the far right column show what the average gross profit was for homeowners who sold in the first quarter of 2019.  For example, in what had been the hottest market of them all — San Jose, Calif. (Silicon Valley) — homeowners who sold in the first quarter of this year realized an average gross profit of 84%. Yet had they sold a year earlier, the average gross profit would have been 103%. So the average gross profit on homes sold in San Jose has slipped almost 20 percentage points over the past year. In fact, the gross profit figure in this metro peaked at 114% in the second quarter of 2018.  
The second-hottest market in the nation was probably Seattle. Owners there who sold last quarter had an average gross profit of 63%. A year earlier, their profit would have been 72%. Gross profit in Seattle peaked at 78% in the second quarter of 2018.  Like San Jose, the average gross profit in Seattle has declined for three consecutive quarters. 
In all except two of the metros covered in the table, homeowners would almost certainly have been better off had they sold a year ago rather than in this year's first quarter.  
Yet what if these quarter-to-quarter comparisons are not trustworthy, since so much depends on the average length of time that sellers owned their property? That is a fair objection.  But consider this: Attom Data Solutions also publishes a quarterly report that calculates the average time sellers held their property. For the nation as a whole, the average tenure of ownership for sellers in the first quarter of 2019 was eight years. A year earlier, it was 7 ¾ years. We can reasonably conclude, then, that many sellers in the first quarter of 2019 bought their home around 2011.  
For most major metros, average prices in 2011 were lower than in 2010, when many who sold in 2018 bought their home. You might then assume that the average gross profit for the sellers in 2019 should have been greater than those who sold a year ago. Yet as the table shows, that did not happen in 10 of the highlighted 12 metros.
Five other key measures suggest that housing markets could be topping:
•     Home sales have been declining in many major metros
•      Listings of homes for sale have soared in the hottest markets
•      Reductions in asking prices have been increasing
•      Bidding wars in hot metros a year ago have all but disappeared
•     Standards for underwriting mortgages have plunged in the past year
Real estate brokerage Redfin's most recent housing data is revealing. According to Redfin, the volume of home sales has been declining in major metros for almost a year. For example, many hot California metros showed double-digit sales declines in February and March from a year earlier.  In affluent Orange County, first-quarter home sales fell 20% from a year earlier and were the lowest since the housing collapse began in 2008.  Though not dangerous by itself, the weakness in home sales is a red flag.
Worse, the number of homes for sale is soaring in some of the hottest markets.  In March 2019, for example, listings were up 104% in San Jose from a year earlier, 83% in Seattle, 30% in Portland, and 24% in San Francisco.
Tumbling home sales along with substantial growth in the number of listings is a dangerous combination. If this trend continues, many sellers will be forced to lower their asking price.  This has already occurred in more expensive parts of Los Angeles and Fairfield County, Conn. Reductions in asking prices have also increased in New York City. Grant Long, senior economist at New York City online real estate marketplace StreetEasy, predicted in March: “When the inevitable wave of new inventory hits the [New York City] market this spring, interested buyers should expect to see an uptick in price cuts as the market forces ambitious sellers to accept reality.”
A fourth warning sign: In early May, Redfin reported that bidding wars — where sellers receive multiple offers on their property — have plunged across the U.S. in the past 12 months. In April 2018, Redfin agents had multiple offers on 60% of the homes they were showing. That figure collapsed to 15% by April 2019. Even the hot San Francisco Bay Area market saw a sharp drop in multiple offers, to 22% from 75%.  
Fifth, the standards for underwriting mortgages have sunk almost as low as what existed during the height of the property bubble madness in 2005-07. Because of these relaxed underwriting standards, about 3.3 million mortgages were originated between 2014 and 2018 that would have been denied under the tighter standards, the Urban Institute reports. Perhaps Fannie Mae and Freddie Mac, the dominant players in U.S. mortgage markets, decided that unless they lowered their standards, some housing markets might suffer due to a lack of qualified buyers.
Advice for home sellers and prospective sellers
A seller with an active listing do should consider that their local market is softer than they believe and that their asking price is too high. If the traffic of prospective buyers has been slow and the home has not sold for several months, they should talk with their broker about a price reduction. In a weakening market, this may be the only way to sell the house.
What about homeowners who postponed listing their house as prices rose? They need to reconsider this decision. If they believe that home prices may be heading lower for more than a brief period, the prudent action may be to put the home on the market now — before their market weakens further.  
Keep in mind that I am not saying home prices are about to plunge as they did in 2008-2011. Yet prudence would suggest that wise homeowners adjust their expectations and plans, in order to deal with any changes in their local housing market.

Sunday, June 2, 2019

9 US Housing Markets Where Home Prices Have "Likely Peaked"

Earlier this month, the real estate research team at Zillow published a report that showed U.S. home prices dropped from March to April 2019. That was the first month-over-month drop in home values since February of 2012.
According to the company’s data, a typical home in the U.S. now costs around $226,800. That was the median value, nationwide, at the time this report was published. (Of course, some real estate markets are much more expensive than that.) 
As of summer 2019, home prices in many housing markets across the country are now slowing, leveling off, or even dropping.

Home Prices Have ‘Likely Peaked’ in These Cities

The report also stated that house values in 14 real estate markets across the country — including Philadelphia, Boston, San Francisco and Seattle — have already reached their price peaks. 
According to the press release that announced these findings:
“Home values have likely peaked in Los Angeles, Philadelphia, Houston, Miami, Boston, San Francisco, Seattle, San Diego, St. Louis, Tampa, Baltimore, Pittsburgh, Portland and San Jose.”
It’s not surprising to see some of these cities singled out in the report. Back in March, we mentioned that home prices in Seattle appeared to be coming down from a peak. And Seattle was one of the cities mentioned in the Zillow report.
In fact, cooling trends can be seen in many of the other housing markets on this list. A couple of examples: Following a year of steady gains, home prices in Philadelphia have pumped the brakes. The median house value in San Jose, California (another city on the list above) has dropped as well.
A Closer Look at These Housing Markets
We looked at some of the major cities where Zillow said home prices had peaked, to get a better sense of what is happening in those housing markets. Here are some highlights:
Houston, Texas
According to a recent report, most of the homes listed for sale in Houston end up selling below their original list prices. This shows how much the local housing market has cooled, since its red-hot days a few years ago. Home-price growth in the area has slowed down as well. 
But it might be a bit premature to say that the Houston housing market has peaked. Current conditions will likely produce smaller home-price gains in 2020, compared to the past couple of years. But significant population growth in this metro area could put upward pressure on house values well into next year.
Los Angeles, California
Following a year of modest growth, home prices within the Los Angeles real estate market have screeched to a halt. According to a May 2019 update from Zillow: “Los Angeles home values have gone up 2.2% over the past year and Zillow predicts they will fall -0.1% within the next year.” 
Similar cooling trends can be seen in other parts of Southern California. In this part of the country, housing affordability is a major contributing factors. 
In many of these California real estate markets — particularly the major coastal cities — a person earning an average income for the area can scarcely afford to buy a median-priced home. This has reduced housing demand and, in turn, led to smaller price gains.
Miami, Florida
According to an April 2019 report from Knock (the home trade-in company), Miami’s housing market had the highest percentage of homes sold below the original listing price during Q1 2019. At that time, “88% of homes sold below original list prices,” the report said. 
This is just one indicator that suggests the Miami real estate market is cooling — and starting to favor buyers over sellers. Home prices in the area are expected to level off between now and 2020. 
Inventory has a lot to do with this. The Miami housing market currently has more supply (homes listed for sale) than most other major cities across the country. This gives buyers more options to choose from, but it also takes some of the steam out of home-price appreciation.
Portland, Oregon
Portland was one of the western housing markets that appreciated rapidly after the recession. Limited inventory and strong demand drove home prices up at a rapid pace. 
But a lot has changed since then. Portland was also one of the first western real estate markets to go through a cooling phase, which you can see clearly in the chart below.
House values in this market began to level off in 2017, and the median home price has actually declined a bit since then. So it’s safe to say that the Portland housing market has already peaked — at least in terms of pricing.
San Diego, California
As a former resident, I can tell you that San Diego is a nice place to live. The weather’s great almost year-round, and there’s plenty to see and do. That’s why the city’s population continues to grow at a steady pace.
But the San Diego real estate market is expensive, and it has only gotten pricier over the past few years. 
Consider the evidence: The median home value in San Diego rose from around $370,000 in 2012 to $633,000 in 2019. As a result, there are fewer home buyers with the means to make a purchase. And this had led to a slowdown in price growth. So it’s no surprise to see the San Diego mentioned among the housing markets that have “likely peaked.”
San Francisco, California
Will one of the nation’s most expensive real estate markets actually depreciate between now and 2020? It seems possible. 
After years of steady home-price gains, the San Francisco housing market has cooled down. Some forecasters are now predicting that house values in the city will level off, or even drop a bit, over the next year.
But don’t let that fool you. The San Francisco real estate market is still highly competitive right now. (Is it ever not?) Properties in the city are selling fast, due to limited inventory and steady demand from buyers.
San Jose, California
What can we say about San Jose? This real estate market is an anomaly in more ways than one. Here’s the short version: Tech workers have flocked to the Silicon Valley for high-paying jobs at places like Apple, Facebook and Google. And home prices in the area have skyrocketed as a result.
A lot of residents outside the tech industry, however, have been priced out of the housing market. For instance, a recent report from Trulia showed that San Jose is the toughest market in the US for educators.
Over the past few years, inventory shortages within the San Jose real estate market led to bidding wars and offers well above the asking price. The city’s median home value shot up to $1.1 million in October 2018. 
But prices can only rise so far before buyers start to pull back. And that’s exactly what is happening in San Jose and surrounding areas. Home prices there are now falling, as inventory accumulates. It seems that the bubble has burst.
Seattle, Washington
The housing market in Seattle suffered from a severe inventory shortage from 2015 to 2017, one of the worst in the country. And while inventory has increased since then, it’s still pretty tight. 
This supply shortage — combined with strong demand from investors — sent prices soaring. Seattle’s median home value shot up from a fairly affordable $350,000 in 2011, to a whopping $750,000 in 2018. As you might have guessed, this has led to affordability issues for a large segment of the populace. 
A predictable pattern followed: Buyers pulled back, and this drop in demand had a cooling effect on house values. The median home price in Seattle has dropped over the past few months, and the team at Zillow predicts a continuation of this downward trend into 2020.
Tampa, Florida
The Tampa real estate market has also seen an increase in the number of homes selling below the original list price. According to the Knock report mentioned earlier, about 78% of properties sold during the first quarter of 2019 went for less than the list price. 
The Tampa housing market is also experiencing much slower price growth today, compared to recent years. Following a gain of 5.5% over the past 12 months, Zillow predicts the median home value for Tampa “will rise 1.6% within the next year” (into May 2020).

Thursday, May 9, 2019

Silicon Valley Real Estate Market Begins to Cool...A Little

In Silicon Valley, the country's most notoriously overheated real estate market, things are starting to cool off ... a little. 
The area saw the biggest decline in median home prices in the country last month. Homes are also taking longer to sell, with inventory of available homes for sale slowly increasing over the past year, Realtor.com found. 
But the sky is hardly falling. Silicon Valley and the larger Bay Area still remain among the hottest real estate markets in the country, says Danielle Hale, chief economist for Realtor.com. "Time on the market is still relatively short compared with the rest of the country." 

Still, there is a demographic churn that seems to be pushing more homes onto the market in Silicon Valley. Longtime residents who have seen the tech hub grow up around them, inflating their cost of living, are looking to cash out while they can still get top dollar. 
"People who live here are leaving in droves," says local Realtors "I'm going on three listing appointments a week -- people in their 50s and 60s -- who are sitting there going, 'Why should I stay here?'" 
Their money can go a lot further in Arizona, Colorado, Oregon, New Mexico -- or just about anywhere.
That doesn't mean Silicon Valley is anywhere near becoming affordable, though.
"Affordability? It just doesn't exist here," she says. "You have to remember a condo in Cupertino is still $1.1 million."

Boomers cashing out

Pat Williams, 68, has lived her whole life in Silicon Valley. Williams raised her daughter as a single parent and for years commuted to San Francisco, where she worked as a commercial glass estimator. She loves the area. 
"I think this area has one of the best climates in the US," says Williams. "Lots of friendly people. And all the amenities, culture, libraries, hospitals. There are pretty green hills most of the year. It is a great place to live."
As home prices and other costs rose around her, though, it became increasingly more difficult to afford gas, food and going out. She felt her quality of life was going downhill. 
But the alternative -- moving farther out to a more affordable area -- was not something she wanted to consider. "If I moved to some nowhere town in California that is more affordable, and I'd have to drive hours back and forth to the Bay Area, I felt it wouldn't be worth it. It wouldn't be living." 
When she retired in March, she made the tough decision that it was time to leave San Jose and California altogether.
So Williams put her three-bedroom, 1,100-square-foot bungalow on the market. She had bought it in 1997 for $245,000. Last month she sold it for $1.1 million.
Williams will leave California and move to Las Cruces, New Mexico, where she says she doesn't know a soul, but finds the lifestyle, culture and amenities appealing and lively.
And her money will go a lot further.
Based on her sale, she's able to build a larger home with almost all the available upgrades for $280,000 in cash and still have money left over for traveling and enjoying her retirement.
She's looking forward to the new adventure, but leaving is bittersweet. "When you live in Silicon Valley, there are expectations that you make a lot of money," she says. "People don't take into account the people with moderate incomes, who paid their bills and lived here their whole lives."

Newcomers keep coming

Even as people are leaving Silicon Valley, newcomers are still arriving thanks to the deep-pocketed tech firms that continue to hire. 
"Buyers are almost 100% people coming in from outside," says Wyss. "They make a lot of money here and that is keeping the prices high. It is shifting down, but down very little. It is a slight correction." 
Wyss says she sees a steady stream of buyers who earn anywhere from $200,000 to $500,000 a year "even without IPO money." "They aren't bothered by a $1.5 million mortgage because they can handle the high payments," she says.
When Sarah Sarra, 26, and her husband Chris, 31, both landed jobs in Silicon Valley -- she as an electrical engineer for NASA, he as a software engineer with Google -- they set about weighing the pros and cons of buying a home.
The prices were shocking to them, even though they were relocating from the relatively expensive Washington, DC, area. 
"We decided if the housing market changes and prices go up, it would it be worth it to buy now, rather than throw away rent for a year or more and then pay more for a house in a year," said Sarah Sarra.
They bought a three-bedroom bungalow in San Jose for $973,000. The house had been on the market for two weeks so they got it for less than the list price of $988,000. 
    They were just happy they spent less than $1 million. 

    Sunday, April 28, 2019

    California Rent Control Returns to the Front Burner

    Rent control is back on the front burner in California as lawmakers consider a bill that would cap monthly increases statewide and Gov. Gavin Newsom weighs in to support a "renter protection package".

    The push in Sacramento for rent control comes as a new effort is underway to put a rent-control measure on the California ballot. Developers and landlord groups, who helped defeat a rent-control initiative last year, are preparing for another fight.

    “We are adamantly opposed to this proposed ballot initiative and will spend whatever it takes to defeat it,” Daniel Yukelson, executive director of the Apartment Association of Greater Los Angeles, said. “It is a re-tread of Proposition 10, which California’ voters soundly rejected in November 2018.”

    More than 17 million Californians live in rental properties, and it isn’t unusual for tenants to pay more than 50% of their incomes toward housing. Some also have linked the state’s growing homeless population to the housing affordability problem.

    “The California Dream is in peril if our state doesn’t act to address the housing affordability crisis,” Newsom said in a statement Thursday.

    he Democratic governor has a goal for California to add 3.5 million housing units by 2025. He released his statement after the California Assembly’s Housing and Community Development Committee voted 6-1 to advance Assembly Bill 1482 a statewide rent-control bill.

    However, some have suggested recent rent stabilization proposals from state legislators could worsen the Golden State’s housing problem by creating disincentives for builders to invest in rental units.

    Authored by Democratic Assemblyman David Chiu, AB 1482 would limit rent increases at 5% annually plus inflation. It also would expand protections to nearly 15 million Californians who do not live in units subject to any local rent controls.

    “We have millions of tenants who are one rent increase away from being able to put food on the table, get health care, or at the risk of becoming homeless,” Chiu, the housing committee chair said Thursday during a legislative hearing on the measure. “Our anti-rent-gouging bill is a critical protection that will help renters while still allowing landlords to make a healthy return.”

    Landlord groups charge that some local rent-control ordinances in California started with inflation-adjusted standards similar to AB 1482 but then made it tougher for property owners to recapture rising expenses since as utility rates, trash and recycling fees, as well as property taxes and special assessments.

    “Placing blame, of course, on the rental housing industry is an easy answer,” Debra Carlton, a senior vice president at the California Apartment Association, said Thursday at the hearing.

    She added: “Our concerns have always been to make sure that, whatever we do, we are not going to make a bad situation worse. We certainly don’t want to scare off development.”

    Meantime, there’s also a push to get a measure on the 2020 statewide ballot in California that would allow local jurisdictions to put rental control ordinances on properties at least 15 years old. The state’s Costa Hawkins Act currently limits the ability of cities to apply rent control to older units.

    The proposed initiative follows nearly 60% of California voters in November rejecting a controversial ballot measure known as Proposition 10 that would have expanded local government authority to enact rent-control laws, including on single-family homes, townhouses and condominiums.

    The real estate industry, including major landlords operating in California such as Blackstone, led the fight against Proposition 10.

    “We agree steps should be taken to address housing affordability in California, but virtually all independent economists agree this measure would exacerbate California’s existing shortage by discouraging new construction and reducing new investment in affordable housing,” said a Blackstone spokesperson in an email statement.

    Monday, April 22, 2019

    San Francisco Rents Hit New Meteoric Heights for One Bedroom

    The median monthly rent in San Francisco for a one-bedroom unit is now $3,700.
    Yeah, really. This means San Francisco is still the most expensive rental market in the world.
    According to the April national rent report from apartment search site Zumper, the dwindling supply in the area’s real estate market paired with the continued net migration to the Bay Area is driving up the median rent. The median rent price for a one-bedroom unit increased $10 from last month, reaching a new high of $3,700.
    “As we get into the spring months and the beginning of the hot moving season, we only expect this number to continue to rise,” Zumper said in its report.
    The bright side? Median rent for a two-bedroom unit in the city fell 0.6% to $4,600.
    Elsewhere in the U.S., rents remained relatively stable, according to the report. The nationwide median rent for a one-bedroom unit increased a half percent to a median price of $1,214, a 2.8% boost from 2018. The median rent for a two-bedroom unit rose 0.6% to $1,445, a 2.5% increase from this time last year.
    From the report:
    The top 10 markets had no change to the rankings and there were mostly flat monthly growth rates overall with a small handful of cities seeing change of more than 3% either up or down. Year-over-year growth rates saw a similar trend as the number of cities with double digit year over year growth rates have decreased substantially from previous months.

    Monday, April 1, 2019

    California Home Sales Begin Upward Rise

    California home sales bounced back in February after hitting the lowest sales level in more than 10 years the previous month. According to the California Association of Realtors, February’s annual sales level was the highest in six months, and the monthly growth in sales was the highest since January 2011.
    According to information collected by C.A.R. from more than 90 local Realtor associations and MLSs statewide, sales of existing, single-family detached homes in California totaled 399,080 units in February, up 11.3 percent from the revised 358,470 level in January and down 5.6 percent from home sales in February 2018 of 422,910. February’s decline was the smallest since July 2018.
    “Lower interest rates and stabilizing home prices motivated would-be buyers to get off the fence in February,” said Jared Martin, C.A.R. president. “With mortgage rates reaching their lowest point in a year, housing affordability improved as buyers’ monthly mortgage payments became more manageable. Instead of the double-digit growth rates that we observed a few months ago, monthly mortgage payments increased by 2.7 percent, the smallest increase in the last 12 months.”

    The statewide median home price dipped 0.6 percent to $534,140 in February from a revised $537,120 in January. The median was up 2.2 percent from $522,440 in February 2018.
    In the San Francisco Bay Area, home sales in six of the nine Bay Area counties fell from a year ago, while Alameda, Marin and San Francisco counties recorded annual sales gains. Santa Clara County home sales were down 10.6 percent from February 2018, but up 12.7 percent from January 2019.

    Home prices in Marin, San Francisco, San Mateo and Santa Clara counties remained above $1 million, but all of the counties recorded annual price declines. The February 2019 median price for a single-family home in Santa Clara County was $1,170,000, down 1.3 percent from the January median of $1,185,000 and down 15.4 percent from the median of $1,383,500 in February 2018.
    All major regions recorded an increase in active listings, with the Bay Area posting the highest increase at 41.9 percent. Active listings increased in three of nine Bay Area counties by 50 percent or more, with Santa Clara County leading the way at 62.9 percent, followed by San Mateo (59.7 percent) and Alameda (50 percent).  Santa Clara County’s Unsold Inventory Index was 3.1 months in February, compared with 3 months in January and just two months in February of 2018.

    “Indicators point to a promising spring home buying season for both buyers and sellers. Buyers have this great window of opportunity with more homes on the market, lower interest rates and home prices stabilizing,” said Alan Barbic, president of the Silicon Valley Association of Realtors. “Sellers will benefit from this historically busy time in the market with renewed buyer interest after last year’s waning activity.”

    The 30-year, fixed-mortgage interest rate averaged 4.37 percent in February, up from 4.33 percent in February 2018, according to Freddie Mac. The five-year, adjustable mortgage interest rate also increased in February to an average of 3.87 percent from 3.60 in February 2018.

    Thursday, March 7, 2019

    San Jose, CA Remains the Highest Priced Home Market

    SAN JOSE, CA -- In a long-awaited positive sign for home shoppers, the U.S. housing market began the year with more homes than the year prior for the first time in at least half a decade, Zillow reported. 
    Inventory rose 1.2 percent in January to a little more than 1.6 million homes. After falling year-over-year for 44 months straight, inventory has increased during four out of the last five months, the Seattle-based real estate analysis firm added. 
    The San Jose metro market remained the hottest, most valuable market in the United States. The Silicon Valley market median home value stayed high at $1.25 million -- over $1 million more than the national average of $223,900, despite the national figure seeing a half percent increase and San Jose's dropping about that much from November to December.

    The devil is in the details, with the market area covering the following cities:
    • Mountain View at $1.87 million
    • Sunnyvale at $1.82 million
    • Santa Clara at $1.38 million
    • Milpitas at $1.1 million
    • San Jose $1 million

    Zillow economist Jeff Tucker cites the law of supply and demand as the reason for prices staying high. There's a limited supply of inventory, so when that goes down, prices go or stay up. That's despite a slight leveling of prices dropping recently by 2.4 percent. Inventory plummeted last year to 1,600 homes in the San Jose metro area and has almost doubled this year.
    The softening has brought on more houses being listed -- signaling a leaning toward a buyer's market that provides more choices and less pressure among buyers.
    "It allows buyers to find the right fit," Tucker told Patch. "The change makes it more palpable for home shoppers."
    Market activity traditionally slows slightly in winter but is preparing to pick up in the spring.
    "San Jose remains the most expensive metro area in the country," Tucker said. 
    Is $1.25 million justified or is it a symptom of a bubble?
    Tucker explained it depends on whether someone is willing to pay -- it's as simple as that.
    As long as a whole crop of billionaires and millionaires rear their heads in tech land as a result of the latest and greatest invention, the houses will be sold for what the market will bear.
    "We've seen tech companies grow enormously in this market including the value of the employees in the last few years," he said.
    And consider the Silicon Valley lies in a market full of venture capitalists who will fund the ideas.
    The resounding trend shows an industry that not only innovates -- it matures. These are not the days when 10 to 20 young tech bucks would pile into a three-bedroom ranch house and work through the night with visions of IPO dreams.
    This young industry only decades old has come a long way. Case in point, that same $1.2 million home would have gone for $500,000 in 2000.
    For those who make their living in the South Bay every day, the justification is clear.
    "What is the average salary? Housing is directly linked to the job market," Santa Clara County Association of Realtors President Gustavo Gonzalez told Patch.
    It seems every day a tech firm is announcing an expansion. Take Google. The search engine giant hasn't stopped with expanding in its home base city of Mountain View. It has two projects in San Jose and more plans in New York City.
    "Certainly people are paid more here. We have a large population of individuals for whatever reason work and have all the money they need," he said, referring to tech workers seeing their company's stock surge from zero to $50 share in short timeframes.
    If anything, Gonzalez contends the cities have not kept up with the housing demand. He's unimpressed with the project calling for a 20-story building, when he knows deep down the demand is so great the area requires 100 floors of housing.
    "We need to build higher, and we need to go substantially bigger," he said.
    And even if buyers believe they can't afford the house, there are now new options. Both Gonzalez and Tucker view the advent of Airbnb home sharing as an option to help pay for extravagant mortgages.
    While some criticize the company for taking away inventory from long-term renters, Gonzalez sees the trade-off benefit to home buyers. As far as the sellers, he contends many have "unrealistic expectations" about how much to sell for.
    "I see that as a way for someone to buy in the (San Francisco) Bay Area," he said. Gonzalez is both a real estate agent and rental property manager.
    As for rents, Zillow's overview launching the year shows a market area able to command inflated rates as well. In the five cities encompassing the San Jose metro area, rents run from $3,394 to $4,122 a month in comparison to a national average of $1,460