2017: Year in Review
By Ken DeLeon, ESQ. and Michael Repka, ESQ.
It started off with the area—and the nation as a whole—adjusting to the notion of a Trump presidency. During the latter half of 2016, the market was quite lethargic as voters remained cautious due to the uncertainty of the election. Generally, many buyers sat on the sidelines because of a common concern that a Trump victory could result in chaos. However, once Trump won the presidency, the real estate and stock markets took off, to the surprise of many commentators. Towards the end of 2016 and in the first few months of 2017, we saw an increase in buyer demand in Silicon Valley real estate, and as a result, sales prices soared, with many cities experiencing strong appreciation.
Although not anticipated, many commentators believed that the buoyancy of the stock market and the real estate market after the Trump victory was a direct result of people’s optimism regarding the new administration’s perceived pro-business policies. Specifically, the hope was that a reduction in taxes and an easing of regulations would result in a more vibrant economy. This area in particular benefitted from the belief that a stronger overall economy would be disproportionately beneficial to the companies and financiers of Silicon Valley. As a result of this optimism, many potential buyers got off the fence and started buying homes.
As we moved into late spring and through most of the summer, a bit more pessimism set in. Late July saw President Trump and the Republican Congress receive their first major political blow when their promised repeal of the Affordable Care Act, also known colloquially as “Obamacare,” was defeated. This, coupled with other political issues that arose, made many wonder if the promised tax cuts and easing of business regulations would ever come into fruition. Simply put, irrespective of any promises made or plans announced, many worried that none of these benefits would be achieved if the administration was unable to garner support from the Republicans and Democrats in Congress. As time went on, the perceived tensions between the White House and key members of both parties exacerbated the situation.
Fortunately, throughout this time, we have seen continued investment from buyers coming from overseas—most notably from China and India. Although the types of homes desired have changed significantly, the actual demand has remained steady. In particular, we have seen Chinese demand shift away from inexpensive investment properties, and towards upscale homes and trophy properties. In informal discussions with many of the agents representing these buyers, we have heard that a desire for political and economic stability, coupled with the appeal of other factors such as the fine weather and preferable air quality, has driven this shift. Fortunately, this strong demand has resulted in some very favorable sales prices for several high-end DeLeon Platinum properties.
While the swings of the market may have made for an interesting ride, the overall results paint a relatively positive picture. The only exception seems to be the slower market for ultra-elite properties, which generally include homes in the $12 million-and-up range. The overall number of homes sold was down slightly year over year, but there was a significant amount of variation between the cities (see charts; all data per MLS). Partially as a result of the continued demand, we have seen the average price per square foot increase in all of our cities, with the exception of Woodside.
