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2014 Silicon Valley Real Estate Market Forecast

To know where the market is headed we first have to look at where we’ve been.  In the past two years we have seen a rise of more than 15% per year in home prices. Although this may seem like good news for homeowners, too much of a good thing can easily turn into a bad thing.

So when the Federal Government saw the real estate market getting red hot in the summer of 2013, they simply ANNOUNCED that they would soon scale back on buying mortgage bonds, and that sent mortgage rates shooting up from 3.5% to 4.5% . This put a lid on the rise in home prices and prices stabilized in Q4 2013.

What I expect in 2014: Inventory will be at historic lows. With only 25% of the supply we need to satisfy current buyer demand, there will be upward pressure on prices. I do expect inventory to rise as we reach the summer, but even so, this will only be half the inventory needed to match the demand. Mortgage rates will likely rise from our current 4.5% to 5.3% or 5.5% so the longer you wait to buy, the higher your monthly mortgage payment will be. The sooner you buy, the better.

As for the Silicon Valley economy, 2014 should provide good job growth and also increase demand for housing.

Low Supply + High Demand + Slight Rise in Rates = Steady appreciation of 3-6% in 2014

•    These conditions will create opportunities for both buyers and sellers in Silicon Valley but if you are considering buying, buying sooner will save you money.

Thanks again for reading, and I'll see you soon for another Silicon Valley Market Minute.

And of course, if you have any questions, call us at (408) 807-4541 or email brett@bjrex.com.

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