It may only be the middle of March but for Silicon Valley real estate, spring has sprung.
Overall, the housing market is on the rise. Available homes for sale or inventory continue to be very low, which has fueled housing price appreciation for the past several years. Historically, inventory rises as the weather warms and we enter the spring selling season. One benchmark comparison that can provide a deeper understanding of the housing market is the overall health of the stock market.
At Intero, we chart the S&P 500 as it relates to home prices in Santa Clara County and San Mateo County. Historically, we find that the two indices are closely correlated. If you examined the chart a few weeks ago, you’d observe a widening gap between the S&P 500 and the average price in our local real estate markets. The unending stock market rally seemed to be marching continuously upward while the real estate market took a breather in 2019, causing a gap between home prices and S&P 500. Then as news of the Coronavirus dominated headlines, the gap narrowed as the current stock market correction began to take hold.
It makes sense local housing prices should chart the S&P 500; many of our buyers in Silicon Valley are employed at companies like Apple, Google or Facebook and use their stock options as down payment capital to purchase homes.
So, when prospective buyers or sellers ask the perennial question:
What do you say? I suggest that now is a good opportunity to get involved with the housing market no matter what side of the fence you’re on, buyer or seller. Why? Presuming the stock market decline did not wipe out your down payment, now is the best mortgage interest rate environment in 50 years! The uncertainty in the stock market has pushed yields on treasury bills as well as mortgage bonds to all-time lows. Your money buys you more house than it did just a few weeks ago.
Is now a good time for prospective home sellers? The continued low inventory of homes for sale has caused prices to firm over the past six months and in many cases, we’re seeing multiple offers on attractive, well-priced properties. When supply is low and demand is strong, prices tend to rise. Stay calm and sell!
So, while our hearts go out to those affected by the Coronavirus and we should all take necessary precautions to stay healthy, this is not the time for you or your clients to retreat from the real estate market. Savvy buyers and sellers will stay calm and proceed with plans to buy and sell.