It's official: "Silicon Valley housing market is heating up fast."
Trends are never official until the major news outlets stumble over them, and by then they're old news. This rule of thumb is especially true of any reporting that requires real insight, which I'd like to think is all reporting, including even that abused step-child of reporting, real estate reporting.
So it is that you'll see breathless headlines like the above, in major outlets like USA Today. Headlines that are old news to people in the know, that is, to people in the trenches, which in this case includes local buyers, sellers, real estate agents, loan agents, escrow officers, home inspectors, contractors, landscapers, readers of my monthly newsletter and probably the more observant neighborhood dogs.
Which reminds me that the news media doesn't so much inform as bless. No real estate market can be hot until some reporter assembles enough quotes and stale statistics to say it is.
"Silicon Valley" reminds me of another truism: generals always fight the last war, except that now it's reporters and other amateur market observers looking at the current boom through the fish-eye lens of one recent, memorable and cliché-ridden event, the dot-com era.
The article starts out well enough with a quote from Kenneth Rosen, a UC Berkeley real estate economist who opines that this nascent boom is "just the beginning...I suspect we'll see an explosion in the next couple of years". Ken and I go so far back, at least on this website, that I can't locate when I first mentioned him, but the mention wasn't reverential, because during the dot-bust he announced that local real estate was down and out for a long long time. Of course, Lazarus soon rose from the dead and then some. Ken was astute enough to let this miracle convert him, and since then he's been careful not to make the mistake most of his colleagues make: lumping Silicon Valley real estate in with other Bay Area, California and even national markets, then selling it shorter than a bargain-table shirt.
So Ken is hip now, in the know, an initiate in the sacred rites, which is more than you can say for three other seemingly credible market observers quoted in the article. Here's one, an associate dean at Stanford Law School who's in the market for a Palo Alto home, reporting from the front lines that "in Palo Alto, traffic at home showings has tripled in recent weeks, with the average age of potential buyers dropping from about 50 to the mid-30s". Dean, Palo Alto buyers have been mostly under 40 since I got into real estate in 1998. Parents don't wait until their kids are in college to start thinking about their education. Traffic at "home showings" (usually called "open houses") may well have tripled, but in recent months, not weeks—since the market rose Lazarus-like in early February.
Dean might do well to stick to law and not wander into sociology, because his contention that "people at start-ups...want to manifest their wealth" is sooo 1999. It'll amuse all the "people at start-ups" who drive Priuses and VW diesels. Show-offs!
Here's another dubious proposition, advanced by a well-known and oft-quoted local "futurist", who claims to have seen downtown Palo Alto condos selling for twice what he paid in 2005. Let's compare downtown Palo Alto condo and townhome sales prices by year:
Note that not only is the average 2011 sales price not double that of 2005, but that 2005 wasn't the previous market's peak. But, of course, this person calls himself a "futurist", not a "pastist" or a "presentist".
Here's one final insight into today's free-spending buyers, from a "tech investor" who sold out to Yahoo in 2007: "Most people in their 20s who find themselves millionaires...they're typically not price sensitive". Proof is supplied in the form of 27-year-old Facebook founder Mark Zuckerberg, who's typical of Silicon Valley 20-somethings in that he bought himself a $7,000,000 house.
Got that deja vu feeling? Then you too were badly hosed by dot-com history/mythology as it was so sensationally recorded/fictionalized/demonized in the late 1990s. All the familiar, tried and trite stock characters and episodes are back, faithfully recorded by the myopic and by outsiders with their jaws on the floor. Wacko marketplace. Wacko "start-up people". Larger-than-life, out-of-control freaks, instead of the low-key moms and dads I'm working with and see going through open houses.
Not only is this un-history, it cheapens history, the market and its quietly remarkable participants, sets them up for ridicule now and in the future. Let the awe and revulsion begin.
It's official: Silicon Valley's hot-air machine is heating up fast.