We are already at the end of another year and quite a year it has been ... A new president, lots of back and forth between the Democrats and Republicans and yet the economic picture improved both nationally, internationally and here in Silicon Valley.
Here we were blessed with almost 8 percent growth, with technology stocks moving to new heights and with a real estate market that appreciated at double digits. Of course we still had very low inventory and buyers were offering multiple offers in the trending areas in order to find a home to purchase.
The statistics show that now the average price in San Francisco close to #1.5 million and the income needed to purchase a home is $218.000. In addition in the trendy areas like Cupertino, Menlo Park, Redwood City and Burlingame we have only one month inventory versus 6 months that is normal. Listings are going 10-25% percent over the list price in many cases. In less trendy areas there is about 2 months of inventory and offers are going 5-10% over the asking price. The only market that is struggling is the non trendy areas like Ruby Hill and Black in the East Bay. Their homes stay on the market for 50-70 days and usually end up being reduced in price.
So what about 2018?
The biggest thing will be what the tax cut bill looks like. In all cases California will have to adjust to some changes. The first one will be the mortgage interest deduction now capped at $1.1 million. In the final bill it will either be reduced to a cap of $500, 00 down from the 1.1 million allowable now or stay the same. The second big change will be in how to apply state taxes including state income taxes, property taxes, sales taxes, and DMV taxes. In one version we will not get any deductions from our federal returns except for $10,000 in property taxes. In another version we will get no deductions at all. We should know within the next two weeks what will be the final version as the House and Senate meet to finalize a joint bill.
What will this new tax bill do to our real estate market?
In the short term, it will probably be a factor but the market will remain strong. Any negatives in the tax structure will be offset by appreciation in the market as we will continue to have a shortage of inventory. Add to the fact that the millennial are now in house buying mode and the attraction for real estate will not ebb. As for the economy, it will continue to get better and better, and growth nationally in 2018 should be close to 3 percent GDP. The stock market will continue its ride and could be 25,000 by year end. Here our economy will continue at the 8 percent GDP range which means that 2018 will be another banner year for the San Francisco East Bay and Silicon Valley.
It will be an exciting year, expect some bumps in the year, but overall we are experiencing a golden economy and a great real estate market. So Enjoy!