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There are signs that the explosive growth of the AI boom is driving the hustle and bustle of the luxury real estate market in the San Francisco Bay area.
Sales of homes selling for $5 million or more in Santa Clara County, Calif., where Silicon Valley is located, surged in April, according to real estate agency Compass. Many local analysts and real estate agents attribute the lively scene to the recent success of technology companies, the most striking of which is undoubtedly the AI industry.
Patrick Carlisle, chief market analyst for the Compass San Francisco Bay area, said, "when the stock market value rises sharply, especially when the NASDAQ rises, this is especially important for the Bay area (real estate market) because we have so many high-tech companies. When families see the rapid growth of their family wealth, it will boost their confidence. Of course, it will also give them more money to buy houses. "
Silicon Valley house prices are closely related to the rise and fall of the technology industry.
Historically, the real estate market in Silicon Valley has been rising and falling with the ups and downs of the technology industry. Ken Rosen, a retired professor at Berkeley Haas School of Business, says the correlation between [local house prices] and the technology industry is very high.
The most representative example is undoubtedly the period of the dotcom bubble. The dotcom bubble began around 1995 and peaked in 2000, when investment in the Internet flooded Silicon Valley and the NASDAQ hit it for the first timeZyngapokerfreebillionchips2022It's 5000 o'clock.
From 1997 to 2000, median house prices in San Francisco also grew by double digits, rising by nearly 30% a year, and exceeded the $500000 threshold for the first time in 2000, according to Compass.
In addition to the dotcom bubble, the rise of social media brought another wave of wealth to the Bay area property market in the wake of the financial crisis. Between 2010 and 2020, the Nasdaq composite index rose by about 260%. During this decade, the median local house prices have also increased by double-digit percentage for seven years.
"I think the San Francisco Bay area is particularly vulnerable to booms and busts in the technology industry, because in the past 30 or 40 years, the high-tech industry has become a leading industry there," Carlisle said. Because the prosperity of the network economy is very local. San Francisco and Silicon Valley will be very, very eye-catching. And when the boom collapses, we will also see prices fall. "
AI craze becomes the New engine of Bay area property Market
So far this year, local agents have also seen a growing demand for luxury homes.
Dave Walsh, vice president of the Santa Clara County Compass office, said, "there are usually 30 to 40 groups coming to see the house on an open day. So by the end of this week, most of our newly listed high-end new houses will be signed. "
It is reported that the median length of stay in the local market for listed homes in Santa Clara County is currently about 9 days, nearly a month shorter than the national median of 35 days. According to Redfin, nearly 80 per cent of home buyers pay more than the asking price. According to a Compass report in May 2024, the number of homes worth more than $5 million sold in Santa Clara County rose to 34 in April from 19 a year earlier.
Sia Glafkides, a senior real estate agent at Compass, said that even luxury homes that had been on the market for months began to be snapped up at the beginning of the year. Many home buyers are in the technology industry, and they have a lot of stocks to cash out.
Silicon Valley employees usually receive shares as part of their compensation. In recent months, with the take-off of artificial intelligence and technology companies, the soaring share prices have also benefited these employees who own part of the company. "many of them have become millionaires or billionaires within a year, which affects the dynamics of the market," Carlisle said.
Representatives of the Santa Clara-based tech giant include the biggest winner in the AI wave, Nvidia, whose share price soared 239% in 2023 and has become the world's third-largest stock by market capitalization this year. AMD is another semiconductor company in Santa Clara that invests in advanced AI chip technology, and its share price has also achieved double-digit growth this year.
"the same is true of other artificial intelligence companies in the Bay area," Carlisle said. Nvidia and its ecosystem have created a lot of wealth for Silicon Valley. "
Santa Clara's most expensive homes are reported to be concentrated in Palo Alto, Los Altos Hills, Los Altos and Saratoga, which are surrounded by the world's largest technology companies such as Meta, Google and Hewlett-Packard. Median house prices in these areas range from $3.5 million to nearly $5.6 million, according to Compass.
Walsh says there are few homes available for sale; high-end buyers "have a maximum of 25 to 50 options".