January is over, the super bowl 2020 is behind us and it is time for the real estate market to shift into high gear. What should we expect? The predictions from the leading economists vary quite a bit.

Realtor.com expects home prices to grow by only 0.8 percent this year, National Association of Realtors put the growth at 4.3%, Zillow forecasts 2.8% increase of the median home sale price. These are national numbers, but real estate is local, every neighborhood market is different. Let me share with you our 2020 vision based on the data available to us so far this year.

We expect local Bay Area home prices to grow in 5% to 7% range ending 2020 slightly higher than 2018, the previous peak. If you would look at home price growth during the recovery years, starting at 2011, you will notice that 2018 housing market produced an unusually high price jump. Then the market compensated for it in 2019 and the median sale price decreased by 4.8% in Santa Clara and San Mateo Counties combined. Looking at the trend-line starting at the beginning of the recovery in 2011 and continuing it into this year, it suggests that the 2020 median home sale price will end up in $1.27 to $1.3 million range. It will set a new record for our area!

A similar price adjustment and recovery cycle happened in 2016, but it was limited to the luxury markets of Palo Alto, Los Altos and Menlo Park. The prices fell by 3.4%, 4.3% and 4.7% respectively before returning to the growth pattern observed in the earlier years. The latest data also support this prediction – January median home sales price here in Silicon Valley increased by 1.8% comparing with January of 2019. The number of the new listings decreased by 11.2% while the number of sales decreased by only 0.8% tightening the supply even more than in previous years. We expect this trend to continue all the way through 2020. The economic fundamentals remain extremely strong. The unemployment rate in Santa Clara County was only 2.2% at the end of 2019 and in San Mateo County even lower – 1.8%.

The interest rates are currently hovering around 3.6% according to Freddie Mac’s Mortgage Market Survey and is expected to stay below 4% for the rest of the year. Remember that 2019 started with interest rate at 4.5% and back in year 2000 the rates were around 8.5%. All these factors as well as the reduced economic uncertainties (like recently signed trade deals with China, Mexico and Canada ending the trade wars fears) definitely motivated the buyers to take a closer look at the market and all available opportunities. Most of the homes coming to the market found new owners and the number of homes available for sale at the end of the month fell by more than 45% comparing with January of 2019.

As always, if you have any questions or concerns please reach out! Before you make any big or costly decisi...

Bay Area Real Estate Predictions 2020