SAN JOSE, CA—Apartment properties in Silicon Valley are benefiting from strong job growth in the technology sector and high home values continue to soar, according to a recent report from Marcus & Millichap.
San Jose is the first large metropolitan area to record a median household income above $100,000 per year, a major milestone and testament to how much tech firms are willing to pay for talented workers. Despite elevated incomes, monthly mortgage obligations on a median-priced home are more than $2,000 above rents at 2000s-vintage apartments, leaving many residents in the renter pool. Additionally, young tech workers gravitate toward the lifestyle that rentals offer, particularly the new complexes that focus on community and include the latest technology.
Marcus & Millichap says these trends are facilitating some of the strongest rent growth in the nation, and that it “should continue unabated into 2015 when potential headwinds emerge.”
Already, the lowest-priced submarkets are facing tenant pushback as rents climb beyond what residents can afford. Additionally, a wave of new units will come online over the next two years, lifting Class A competition.
Some other findings of the Q4 report:
¦ In year-long period ending in the third quarter, employers in San Jose have added 31,500 jobs, lifting payrolls by 3.2%. The pace of hiring is down from the previous year, when 44,700 positions were created. Part of the slowdown can be attributed to a lack of available high-tech workers.
¦ The job market in San Jose is approaching full employment and could reach that milestone in early 2015. In the third quarter, the unemployment rate was 5.4%, down from the peak of 11.6% in 2009.
¦ The current housing construction boom is showing few signs of slowing. In the third quarter, an annualized 2,600 single-family permits were issued, up 45% from the same period last year. Multifamily developers pulled 7,200 permits, up 27 percent year over year.
¦ The median home price in the third quarter was $875,400, up 12% in the past 12 months. The median household income jumped 4% to $105,000 annually. Despite the rise, median household income remains sig