San Francisco and Silicon Valley housing markets vomit huge price drops, as startups, crypto, tech and social media create a total mess

Across California, prices fell year over year as sales plummeted, supply more than doubled. No honey, it’s not just a seasonal dip.

By Wolf Richter to WOLF STREET.

San Francisco and Silicon Valley are now playing a solid leadership role in California’s housing slump, with sales plummeting and prices heading south from April’s peak at an astonishing pace.

Pretty much everything that could come together has come together. After a two-year influx of workers due to work from anywhere, there was the collapse of the startup and crypto scenes, starting in 2021 and continuing unabated, leading to the first entries in my pantheon of Imploded stocks. In early 2022, the mortgage rate spike took place. In mid-2022, the employment slowdown at Big Tech took place. At that time, the Fed had raised its key rates relentlessly and Quantitative tightening had started. This has been punctuated over the past two months by the chaotic dismantling of Twitter’s workforce and its ecosystem.

Local budgets have fallen into deep deficits — though most are still teeming with cash from pandemic funds received from the federal and state governments.

Vacant office space that is on the rental and sublease market continues to swell, while landlords have started to seek huge reductions in assessment values ​​to reduce their property taxes, which will further reduce income.

This is peppered with articles from The New York Times that Twitter has stopped paying rent for its rented offices and has been instructed not to pay vendors. At least one of those unpaid vendors — a Silicon Valley company whose Twitter software was licensed — filed a lawsuit court case last week in San Francisco Superior Court for nonpayment. He said, “Shortly after the closing of Musk’s purchase of Twitter, Twitter declined to pay the outstanding quarterly invoice, which was due November 30, 2022, and Twitter disclaimed any obligation to pay future invoices… “

These are all signs that the housing market is going to get a lot messier. Prices fell the most in San Francisco, followed by the Silicon Valley counties of San Mateo and Santa Clara.

In San Francisco.

The median price of single-family homes sold in November in San Francisco plunged 11.4% from October to $1.50 million, and 27% from the April peak, according to the California Association of Realtors. A table that looks mean:

Condominium prices have plummeted up 4.3% from the prior month to $1.15 million, and up 9.5% year-on-year. Since April’s peak, the median condo price has fallen 15.5%. Condo sales in November plummeted 49%.

Seasonally, the lowest months are December and January. So it’s still to come.

But who will buy in the spring? Prices normally increase as demand picks up in the spring; but who will be the exuberant tech workers who want to overpay for a house by borrowing against the collapsed value of their stock options? Those lucky ones who still have jobs and stock options?

The housing markets in San Francisco and Silicon Valley are tied to the boom and bust cycles of the startup scene – now combined with the crypto scene and cryptos – and they are tied to the stocks of startups and big corporations of technology and social media in the region, work that needs to be done locally, and the value of stock options. Everyone vomits.

Year-over-year, the median price of single-family homes in San Francisco fell 21%, the sixth straight month of year-over-year declines. This was the biggest year-over-year drop since Housing Bust 1 peaked:

Silicon Valley, San Mateo County.

The median price of single-family homes in San Mateo County, which forms the northern part of Silicon Valley, fell 6.2% from October to $1.78 million, and 26% from its peak in October. ‘april.

Year-over-year, the median home price fell 20%.

Silicon Valley, Santa Clara County.

Santa Clara County, which forms the southern part of Silicon Valley and includes the Bay Area’s largest city, San Jose, is lagging behind but making progress. The median single-family home price fell 1.5% in November from October to $1.60 million, and 19% from the April high:

Year-over-year, the median home price fell 5.5%, the first significant year-over-year decline of this cycle. Prices had already suffered significant year-over-year declines in 2018 and 2019 and were on a downward trajectory until the trillions of money printing, the stock market surge and the crackdown on interest rates are starting to drive up prices again.

Currently, Santa Clara County is a few months behind San Francisco and San Mateo, it seems.

All over California.

Sales of single-family homes in California plummeted 47.7% in November from a year ago, the biggest drop since 1980, according to the California Association of Realtors. Condo sales have collapsed by 46%.

Unsold inventory more than doubled year-on-year to a 3.3-month supply, and days on market also more than doubled – before sellers pulled stocks again. unsold houses from the market.

For California as a whole, the median single-family home price fell another 3.0% in November from October, pushing the price down year-over-year (-0.6% ). The median condominium price fell 2.1% in November from October, reducing the year-over-year gain to just 2.7%.

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