Post-Election Silicon Valley Real Estate 2025 Forecast

Well then!

Now that the election is behind us, it’s time to look forward and start thinking about the future. As I counseled clients before the election, I didn’t see much of an impact in our local real etate market regardless of the outcome, at least, not very soon. However, real estate sector stocks have been skyrocketing – Compass and Zillow notable among them.

From a financial perspective, the outlook for 2025 reflects a cautious optimism, with a few key trends and market drivers likely to shape the landscape. Here are a few trends that we’re seeing now and that I expect to continue into 2025:

Continued Demand for Luxury Properties

The luxury market’s momentum is expected to carry forward into 2025. The concentration of high-paying tech jobs and recent growth in AI-related jobs will likely maintain strong demand in this segment. High-end properties, especially in neighborhoods which are traditionally the most expensive, may continue to outperform other parts of the market if stock market performance holds steady or improves further.

Inventory Constraints and Price Pressure

Inventory is presently on its way down, as is typical in the 4th Quarter. This reduced housing supply is expected to continue into 2025, sustaining a relatively high level of demand and possibly further pushing prices up early in the new year. The start of 2025 could see a highly competitive environment with increased price pressure until new listings enter the market in the back half of spring and tip the balance of supply and demnad more in favor of buyers.

Interest Rate Impacts and Buyer Sensitivity

Interest rates reamain are a wildcard for 2025. While the Federal Reserve did just cut the Fed rate another 0.25%, mortgage rates remain high as bond yields stay high. If rates remain high or increase further, they may dampen demand across certain segments, particularly entry-level and mid-range properties where buyers are typically already maxed out when it comes to their debt-to-income ratios, much more so than in the upper tiers of the market. Rising mortgage costs could make the already pricey market more challenging for first-time buyers and may shift demand toward cash buyers and those with substantial liquidity.

Tech Sector Influence and Population Trends

Santa Clara County’s real estate market is closely tied to the tech sector’s performance. While there have been numerous job cuts in the Bay Area over the past couple of years, it is anticipated that demand in the high-tech job market, bolstered by AI and other innovations, will stay strong, especially in tech-heavy cities like Palo Alto, Mountain View, and Cupertino.

Shifts in Buyer Preferences

Homebuyers’ preferences have evolved, with more emphasis on larger spaces, home offices, and outdoor areas. These preferences are likely to continue influencing the types of properties in demand for 2025, with homes that meet these criteria seeing higher-than-average appreciation. Properties with limited outdoor space or smaller living areas – such as condominniums, and, to a lesser extent, townhomes – are expected to underperform vs. single-family homes in 2025.

Opportunities for Buyers and Sellers in Early 2025

The beginning of the year often sees fewer listings, which can drive competition among buyers. However, it also presents an opportunity for sellers looking to capitalize on early-year demand from buyers hoping to secure a home before the anticipated spring surge in listings.

In summary, Santa Clara County’s real estate market remains in good shape but faces an uncertain set of drivers going into 2025. Buyers can expect competition to stay strong, particularly for well-priced homes in prime locations, while sellers may continue to enjoy favorable conditions, especially early in the year when traditionally inventory remains tight.

Whether buying or selling, understanding these trends will be crucial to making the most of the opportunities in the coming year.