"The Peak Is Behind Us" - Silicon Valley Real Estate Bubble Has Now Also Burst

Not long ago we pointed out that the second tech bubble had officially burst, and the extent of the layoffs is increasingly significant.

 

 

It's taken a few months, but the economic slowdown and downshift in the once bustling Silicon Valley jobs front has now worked its way into the real estate market. As Bloomberg reports, the most expensive U.S. housing market is now seeing a pullback by the wealthiest home buyers after a four-year real estate boom...

In Palo Alto, home to many Google and Facebook executives, homes costing more than $5 million were on the market for a median of 16 days in April, up from 11 days in the same month in 2015, and up from 10 days in April 2014. While that figure is low relative to the 67 day median time across the U.S., it's a significant increase from recent years.

 

 

"The seemingly inexhaustible well of very high-end buyers has proven exhaustible after all. The peak is behind us, and that's becoming clearer and clearer to builders and buyers" said Dean Whrli, a senior VP at John Burns.

Venture capital investments in Silicon Valley fell almost 20 percent in the first quarter from a year earlier to $4.9 billion. Chinest funds coming into the real estate market are being reduced by government restrictions on how much money can leave the country, and have slowed purchases after being a key driver in the market.

The story is the same across the entire state for luxury real estate, with homes costing more than $3 million sitting on the market 52.5 days in the first quarter, compared with 40 days the year prior. In Santa Clara County, home to Palo Alto, there were 13 sales of homes costing more than $5 million in the first quarter, down from 20 a year earlier, and in nearby Los Altos, there were six active listings of homes costing more than $5 million on the market for a median of 25.5 days as of May 14, while 25 listings in Atherton were on the market a median of 100 days.

Given that a larger proportion of the $3 million-plus category is purchased with cash, or folks use some of their other assets to make those kinds of purchases, I think they’re more susceptible to stock-market volatility than your entry-level buyer would be. That’s one of the big drivers of the current slowdown." Economist Jordan Levine said.

 

With the continued global slowdown, and the likes of Yahoo having to continue to take measures to increase shareholder value, the situation in Silicon Valley will only continue to deteriorate, and it is only a matter of time before we start to learn of developer bankruptcies, similar to those starting to occur in Manhattan and elsewhere.