Silicon Valley luxury home market heats up amid AI boom

31 May, 2024 - 00:05 0 Views
Silicon Valley luxury home market heats up amid AI boom Glafkides’ previous listing in Silicon Valley was sold for $14 million — Sia Glafkides

eBusiness Weekly

Artificial intelligence companies’ explosive growth is boosting the San Francisco Bay Area’s luxury real estate market.

Sales of homes priced at US$5 million or more in Santa Clara County — the most populated county in the Bay Area and home to Silicon Valley — spiked in April. The median home price is nearly US$1,8 million, according to real estate agency Compass.

Local analysts and agents attribute the bull run to the success of tech companies, most notably in the AI industry.

“There’s been a huge increase in value in stock markets, especially in the Nasdaq (^IXIC), [which] is especially important for the Bay Area because we have so much high tech,” said Patrick Carlisle, chief market analyst for the San Francisco Bay Area at Compass.

“When households see their household wealth increasing by leaps and bounds so quickly, it increases their confidence, and of course, it just increases the amount of money they have to purchase homes.”

Bay Area is no stranger to tech-led market tailwinds

Silicon Valley’s real estate market has always risen and fallen with the technology sector.

“Home prices are very highly correlated with the tech industry,” Ken Rosen, a retired professor at the Berkeley Haas School of Business, told Yahoo Finance.

The dot-com bubble started around 1995 and peaked in 2000. Investment in the World Wide Web flooded Silicon Valley. The Nasdaq index reached 5 000 for the first time.

Compass data shows that Santa Clara County median home prices grew by double digits from 1997 to 2000, reaching a 30 percent annual gain and climbing over the US$500 000 threshold for the first time in 2000.

“I think the Bay Area in San Francisco in particular is more susceptible to booms and busts because of how high tech has become such a dominant industry over the last 30 to 40 years,” Carlisle said.

“Because of the dot-com boom, which was very localised . . . (home price appreciation) in San Francisco and Silicon Valley was very, very dramatic. When that crashed, we saw a decline in (home) prices.”

The rise of social media after the financial crisis brought another wave of massive wealth to the Bay Area.

The Nasdaq — where Microsoft, Google, Meta, and Apple are listed — increased around 260 percent between 2010 and 2020.

Median home prices grew by double digits in seven of the 10 years during that decade in Santa Clara County, with Bay Area prices surpassing US$1,6 million.’

The luxury market boom

So far this year, local agents have seen a growing demand for luxury homes.

“Thirty to 40 groups coming through on an open house day” is typical, said Dave Walsh, vice president of the Compass office in Santa Clara County.

“So by the end of the week, most of our new homes that have just come on the market at that higher end are going to be under contract.” —

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