DeLeon Realty’s 2015 Quarter One Mountain View UpdateApril 3, 2015
As we look back over the past quarter of Mountain View’s housing market, several factors have been the most impactful in shaping the marketplace. The dominant among those is stagnant inventory coupled with increased demand.
As discussed in my first quarter update on the overall Silicon Valley housing market, there has been a continuing decline of inventory due to three main factors: 1) the increased capital gains rates; 2) the subsidy provided to long-time home owners by Proposition 13, where the elderly owner is paying 1/10 the property tax their new neighbor is, disincentivizing them to sell; and 3) sellers’ optimism that housing will continue to appreciate, and if so, many feel it does not make sense to sell, pay capital gains taxes, then earn 1% on the reduced sum in a money market account and then have nowhere to move to. Mountain View itself has not seen as much of a drop in inventory that Palo Alto and other cities with higher price points have, but inventory is still off from past years. While supply has slightly declined, the market’s surge is from a strong increase in demand, driving up the median price by 27% from last year. I project that the inventory will continue a steady decline in Mountain View as appreciation continues coupled with increasing demand, furthering the pressure on the market.
As one of the core cities of Silicon Valley and home to the tech giant Google, who continues to expand, demand for housing in Mountain View continues to rise, and shows no sign of abating. While Google has been expanding its real estate holdings in other cities, it has not neglected Mountain View. In January, it purchased another 30,000 square feet of space in North Bayshore, which very likely will add more jobs to the already bustling neighborhood. In March, Google proposed plans to the City of Mountain View to develop some of the remaining land in North Bayshore with 3.4 million more square feet of space. While the proposal is under review, it would be amiss to believe anything of a small scale will result. LinkedIn is also aggressively seeking to grow its footprint in the North Bayshore area and has its own expansion proposals for its headquarters. This will bring even more workers to the neighborhood and many of these new employees will want to live close to work. It is without a doubt that this will have a substantial impact on the housing market, likely increasing demand dramatically once this new office space is completed.
Besides jobs, lively Castro Street continues to gain popularity as one of the best downtowns in Silicon Valley. With young high-tech employees wanting a place to dine and party on the weekend, Mountain View is the place to be if they are not heading to San Francisco. The premium to be close to Downtown can be observed on a micro-level, with the homes in Downtown Mountain View and the walkable Shoreline West selling after intense multiple offer situations. For instance, 341 Mercy Street in Downtown, listed for $1.6 million, likely received about 25 offers and sold for over $1.85 million. The following week, 604 Mariposa Avenue which was listed for $1.4 million, and located in the formerly less-desirable neighborhood of Shoreline West, received multiple offers and sold for over $1.8 million, or at least $1,273 per square foot.
DeLeon Realty projects Mountain View will continue to be a competitive marketplace with a somewhat lower appreciation rate of about 5% this quarter, as housing has already seen a huge jump and the inventory should be at its highest in quarter two, even though it is still relatively low. I forecast that long-term Mountain View will continue to see increased demand and appreciation due to its strong allure to young, high-tech buyers as its dynamic downtown and redeveloping El Camino Real are part of the wave of gentrification that is hitting Mountain View. This is why I personally continue to own investment property in Mountain View. If you want to learn more about the overall market dynamics of Silicon Valley, please watch my first quarter update, or reach out to me or my Mountain View Specialist for more information.