For the home buyer, San Jose is the kind of market where the silver-looking lining of the dark cloud is really just aluminum.
Take, for example, the one bright appearing spot in Zillow’s latest housing report for San Jose. It shows the share of low-end, or starter, homes in the local sales inventory — which is 39.4 percent — is nearly double the 22 percent share of low-end homes in the national inventory.
Time for the kids to move back to Silicon Valley?
“I would caution you that the median home value in San Jose is almost $1.3 million,” Svenja Gudell, Seattle-based Zillow’s chief economist, said in an interview. “So a low-end home is probably around $500,000, $600,000. Even a low-end home in San Jose is not a cheap home.”
At the start of the year, Zillow named San Jose its hottest housing market for 2018.
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Zillow predicts San Jose will be the nation’s hottest housing market in 2018. Here’s a closer look at the top 10, with all data via Zillow.
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Zillow’s definition of what low, middle and high-end homes cost varies with local markets. The middle of the low-end range in the San Jose area is $796,000 while the mid-point of high-end homes is $2.2 million. In the middle of the middle, homes cost $1.25 million.
So there’s really no leavening in the depressing news for home buyers here that says San Jose led all cities in decline of housing inventory over the past year, which further drives up prices.
Inventory is drying up across the United States — Washington, D.C., Dallas-Fort Worth and Kansas City being the rare exceptions — by 9 percent, according to Zillow. Here it’s more than 26 percent.
“San Jose, in particular, has the problem that we’re seeing a fairly good job market and home buyers who are relatively well-off,” Gudell said. “It’s also that San Jose is not the easiest market to build in. All of California is a tricky place to actually have large-scale, quick building happen, much different than, for example, Texas.”
In Dallas, for example, where the housing inventory grew almost 21 percent since March 2017, only 9 percent of the inventory is what Zillow considers, by Dallas standards, entry-level homes. Sixty-two percent of the homes in the Dallas inventory are considered high-end homes but the median-priced home there is only $227,395, a little less than what a first-time buyer here has to scrape up for a down payment.
The city where the share of local home inventory is shifted most heavily toward what, in that market, is considered a high-end home is Las Vegas, with almost 69 percent of homes in the upper tier. But the middle of Las Vegas’ middle is just $260,000.
San Jose led all cities in decline of its housing inventory over the past year at 26%.