The value of taxable properties in San Jose skyrocketed last year thanks to demand for luxury homes and new construction. Experts and county officials say the growth won’t last.
At the heart of wealthy Silicon Valley, the assessed value of all property grew by $15 billion over the last 12 months—a jump from $215.9 billion to $231 billion. In Santa Clara County, the value has reached a record-breaking $619.9 billion, according to county data. That’s a $43 billion increase over the prior year, demonstrating the COVID-19 pandemic’s economic impact has limited reach.
Changes of home ownership and new commercial construction continue to be the greatest drivers of growth in the region, Santa Clara County Assessor Larry Stone told San José Spotlight. New construction in the county contributed $5.9 billion to the total increase last year. Changes in home ownership contributed $24.5 billion—nearly half of the total increase—in the region. In San Jose, residential assessments accounted for $9.9 billion of the total increase, while commercial properties contributed $5.1 billion.
The county’s assessment roll, which contains nearly 500,000 properties ranging from boats and airplanes to commercial buildings, is revalued every year.
“In Silicon Valley, the luxury home market has been on fire particularly,” Stone said. “On the commercial side, it was primarily new construction and major (tech) companies building and leasing spaces.”
The assessment roll reflects the housing market and high demands from tech workers in 2021, real estate broker Trung Lam told San José Spotlight. Many buyers are after bigger housing lots where they can later build backyard homes.
“A couple of months ago, the market was very hot and homes were selling like hot cakes,” said Lam, owner of TE Real Estate Group in San Jose, noting he often sees offers come in $100,000 to $300,000 higher than the asking price.
All 15 cities in the county saw the value of taxable properties increase in the last year. Sunnyvale, Mountain View and Santa Clara—where new tech offices are popping up—all saw growth in assessed value of property of at least $3.4 million.
Assessed property value increases in California are capped at 2% annually, according to the 1978 state law Prop. 13. But once a property is sold, it can be reassessed and taxed based on its most recent market value. With many residents selling their homes during the pandemic, Santa Clara County was able to collect a much higher tax rate on homes.
The growth in assessed property values also comes as Silicon Valley is teeming with unprecedented numbers of new developments, including the Google Downtown West project in San Jose, the new Google campus in Mountain View and the Nvidia campus in Santa Clara.
While the county braces itself for an economic downturn similar to the 2008 Great Recession and 2000 dot-com crash, tech companies such as LinkedIn, Apple, Google, Nvidia and Adobe continue to thrive. Prices of products—including gas—have risen significantly as supply chain issues continue following more than two years of COVID-19.
The tech industry invested $3.5 billion in office and commercial building acquisitions last year, the report said. Business property including machinery, equipment, computers and fixtures also saw its value increase by 6.6% to $42.9 billion.
Tech companies expanding their offices and bringing in more workers have helped the region avoid some impact from the pandemic, Stone said. He also credited the availability of the COVID vaccine and a $3 trillion federal economic stimulus package.
But not all businesses are weathering the impact of the pandemic. Retail stores, restaurants and entertainment facilities suffered because of surges in COVID infections last year. The assessor’s office reduced the assessed value of 2,595 properties to reflect drops in market value—18% of which were commercial properties, Stone said.
Growth expected to flatten
With interest rates rising and stock income dropping, Lam said his business has lost 80% of homebuyers—the majority of whom were tech workers. Many are waiting for their stock income to come back, as others hope to score a home at an even lower price.
“Right now it’s a buyers’ market,” Lam said.
The median home price in Silicon Valley is more than $1.7 million—up more than 17% from last year, the assessor’s report says. A recent report from Zillow found mortgage payments in San Jose top $9,000 a month, though some realtors say that’s reasonable.
“The trend can be seen at all levels of residential properties, from single-family and multi-family homes to townhomes and condominiums,” Santa Clara County Association of Realtors President Lisa Faria told San José Spotlight, adding the prices of condos and townhomes are now more than $1 million in San Jose.
With inflation, soaring gas prices and other economic uncertainties playing out, Stone expects Santa Clara County to see more moderate growth in property values next year.
“Silicon Valley and technology has a special kind of resilience from wide swings in economic activity, but we’re not immune to that,” Stone said. “I don’t project a disaster for 2023, but I think it’ll be much more stable and common economy.”