As the seat of Silicon Valley, the city of San Jose has been at the heart of the technology boom, which has been the primary driver of its real estate boom. After San Jose took a hit following the Great Recession, job growth in San Jose has far exceeded the state and national rates. Job growth is expected to reach 4% in 2016 compared to the national average of 1.9%. As of April 2016, the city’s unemployment rate is 4.3% compared to the state’s rate of 6.3%.

Median household income has also been climbing since 2008, reaching $91,533 in 2015. However, housing prices in San Jose have been rising faster than incomes, making it one of the least affordable places to live in the country. San Jose residents spend 26.1% of their incomes on housing compared to 15.1% for the rest of the country. San Jose is the third most expensive housing market in the country behind San Francisco and New York City. As long as the real estate market continues to be driven by the fortunes of the tech industry, San Jose is likely to maintain that position.

Market Insights

As of April 2016, the median home value in San Jose was $828,000, up 11% year over year (YOY). Since 2011, homes have appreciated by an average of $314,322 as compared to the national average of $48,036. Home prices bottomed in August 2011 at $490,000 and have been on a steep trajectory since that time. Price increases are expected to moderate in the next year, with a one-year forecast of 2.2%.

Home sales increased by 11% in 2015, the biggest YOY gain since 2013. However, sales activity, in general, has been trending down since 2011 when nearly 2,300 homes were listed. As of the end of 2015, total listings were just 335. The downward trend appears to be a function of the sharp increase in home values, which has dampened affordability. With the exception of multifamily homes, new housing construction has trended down since 2011, grinding to a near halt in 2015.

Property and Transfer Taxes

Property taxes in San Jose vary from district to district, ranging from 1.165 to 1.292% per $1,000 of property value. Applying the highest tax rate to the median home price of $828,000 yields a property tax of $10,698. When selling a home, the seller pays a transfer tax totaling 2.2%, which consists of a county transfer tax of 0.55% per $500 of value and a conveyance tax of $1.65% per $500 of value.

Most Expensive Neighborhoods

With a median sale price of $1.44 million, the Almaden area of San Jose is the most expensive. Nestled against the foothills, just east of Los Gatos, Almaden stretches to the southernmost parts of San Jose. It was built up in the 1960s and 1970s with tract-home neighborhoods that housed many IBM engineers. Since then, the wealthy tech crowd from Silicon Valley has been building million-dollar homes on its hillsides.

The West Valley area of San Jose abuts the neighboring and more affluent towns of Los Gatos, Monte Sereno and Saratoga in the southwestern part of the city. West Valley is primarily a suburban area with a mix of tract and custom-built homes. The median sale price in West Valley is $1.172 million.

As one of the oldest residential sections of San Jose, Willow Glen has been described as a small town in the middle of a big city. Located just three miles south of downtown, Willow Glen is home to an eclectic mix of affluent people, including young, old and people of many ethnic backgrounds. The median sale price in Willow Glen is $1 million.

Top Real Estate Websites

Realestate.MercuryNews.com, which is the real estate section of the San Jose Mercury News website, has a mix of home search tools, local real estate news and market trends. For people interested in lofts and condos in and around downtown San Jose, SiliconValleyLofts.com is a good source for finding properties and learning more about loft-living in the various parts of Silicon Valley and surrounding areas.

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