The for-sale housing supply in San Jose has become smaller and less affordable while renters may have seen a small reprieve during the Covid-19 pandemic that has rocked every part of residents’ lives over the past year.
San Jose officials recently released the city’s Housing Market Updates report, a spotlight on both apartments and single-family homes in 2020. The fifteen-page report compares last year’s trends to the past decade. The data show even as pandemic made it easier for workers and companies to uproot from the region, for-sale home prices continued to climb, pushing home ownership of a median-priced home out of reach for nearly 80 percent of the city’s residents.
While the number of homes on the market dipped by 40% in the last quarter of the year alone, single-family median home prices jumped by 14% to an average cost of $1.225 million. That means prospective buyers must earn at minimum $98 per hour, or $203,497 per year, San Jose data show.
“The Silicon Valley is unique because we have a high concentration of highly skilled and highly paid labor and with that comes higher salaries and potentially higher prices,” said Sandy Jamison, owner of brokerage Tuscana Properties and former board president for the Santa Clara County Association of Realtors. “Everything is going to continue to rise together—the challenge is that people’s salaries don’t always rise as the cost of things rise.”
Jamison says many of her clients—particularly those older than 55—want to sell their homes, but have put the process on pause as the pandemic and related lockdowns ebb and flow. That has only further diminished the available housing stock, contributing to the rising costs.
But as for-sale housing got more expensive and scarce, many renters saw an opposite trend. Lease costs dipped last year as landlords scrambled to stymie rising vacancy rates, the data show.
Average San Jose rents dropped by 7.3% compared to the end of 2019, while the average residential vacancy rate in San Jose hit 8.7%—a sizable jump compared to past years and a notably higher rate than the 6.5% national average national vacancy rate.
How fast rents bounce back upwards or vacancies dip downwards to pre-pandemic levels remains to be seen, but the key deciding factor, Jamison says, will be how fast city and county officials approve new homes in the near future.
As of last year, building permit numbers were on the decline—potentially a symptom of the oscillating lockdown orders that slowed the pace of business, particularly near the beginning of the pandemic in March and April.
Last year, San Jose issued 1,375 residential building permits, approving 663 affordable apartments in that lot. Another 378 were issued for accessory dwelling units (ADUs), or a small second home that homeowners often build in their backyard.
But those numbers represent a significant dip from 2019, when 2,425 residential building permits were granted, including 853 new affordable units. A total of 416 ADU permits got the green light in 2019 as San Jose officials approved new ordinances and programs to make building the backyard homes a little easier.
Jamison is hopeful the downward trend will reverse course—and fast.
“We’re going to continue to face these challenges until we can solve the supply problem,” she said. “It always comes down to supply. We do need to build as much as we can, but we’re so far behind it will take years to catch up.”
Read more of the city’s findings here.