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Silicon Valley’s luxury home market heats up amid AI boom
The explosive growth of artificial intelligence companies is driving San Francisco’s luxury real estate market.
Sales of homes valued at $5 million or more in Santa Clara County — home to Silicon Valley — soared in April. The median home price is nearly $1.8 million, according to real estate agency Compass.
Analysts and local agents attribute the rise to the success of technology companies, most notably in the AI industry.
“There has been a huge increase in value in the stock markets, especially the Nasdaq (^ IXIC), [which] “It’s especially important for the Bay Area because we have a lot of high technology,” said Patrick Carlisle, San Francisco Bay Area chief market analyst at Compass. “When families see their family wealth increasing by leaps and bounds so This quickly increases their confidence and of course just increases the amount of money they have to buy houses.”
Glafkides’ previous Silicon Valley listing sold for $14 million. (Sia Glafkides) (Sia Glafkides)
San Francisco is no stranger to technology-led market tailwinds
Silicon Valley’s real estate market has always risen and fallen along with the technology sector.
“[Home prices] are highly correlated with the technology industry,” Ken Rosen, a retired professor at the Berkeley Haas School of Business, told Yahoo Finance.
The dot-com bubble began around 1995 and peaked in 2000. Investment in the World Wide Web flooded Silicon Valley. The Nasdaq index reached 5,000 for the first time.
Compass data shows that median home prices in San Francisco grew by double digits between 1997 and 2000, reaching an annual gain of nearly 30% and rising above $500,000 threshold for the first time in 2000.
“I think the San Francisco Bay Area in particular is more susceptible to booms and busts because of the way high-tech has become a dominant industry over the last 30 to 40 years,” Carlisle said. “Because of the dot-com boom, which was very localized… [home price appreciation] in San Francisco and Silicon Valley it was very, very dramatic. When that dropped, we saw a decline in [home] prices.”
The rise of social media after the financial crisis brought another wave of enormous wealth to the Bay Area. The Nasdaq – where Microsoft, Google, Meta and Apple are listed – increased by around 260% between 2010 and 2020.
Median home prices grew by double digits in seven of the 10 years of that decade, exceeding $1.6 million.
The luxury market boom
So far this year, local agents have seen increasing demand for luxury homes.
“Thirty to 40 groups stopping by on an open house day” is typical, said Dave Walsh, vice president of Compass’ Santa Clara County office. “So by the end of the week, most of our new homes that have just hit the market in this higher-end segment will be under contract.”
The story continues
The median house in Santa Clara County remains on the market for nine daysalmost a month shorter than the national median of 35 days. According to Redfin data, nearly 80% of homebuyers pay above the asking price. The number of homes sold over $5 million in Santa Clara County increased in April to 34 from 19 a year ago, according to May 2024 Compass Report.
Sia Glafkides, a veteran agent with Bay Area Compass, said even luxury homes that had been on the market for several months began being snapped up earlier this year.
“People are in the technology business,” Glafkides said, “and they have a lot of stocks they can cash out.”
Silicon Valley employees often receive stock as part of their compensation. As AI and technology companies have taken off in recent months, equity wealth has spread to workers who own parts of the companies.
“Many of them became millionaires or billionairesliterally over the course of a year, and that affects how the market dynamics work,” Carlisle said.
Nvidia (NVDA), O “poster boy of the AI boom“based in Santa Clara, saw its market capitalization soar 239% in 2023 and is up to $1 trillion by now in 2024. Advanced Micro Devices, Inc.OMG), another Santa Clara company investing in advanced AI technology, has seen double-digit growth this year.
Nvidia’s global headquarters located in Santa Clara. (wellesenterprises via Getty Images) (wellesenterprises via Getty Images)
“This is happening with other AI companies throughout the Bay Area,” Carlisle said. He added that Nvidia and its ecosystem have created immense wealth in Silicon Valley.
Santa Clara’s most expensive homes are concentrated in Palo Alto, Los Altos Hills, Los Altos and Saratoga – suburbs surrounded by the world’s largest technology companies, such as Meta, Google and HP.
Homes available for sale are rare; high-end buyers have “maybe 25 to 50 options at most,” Walsh said.
Median home prices in these cities range from $3.5 million to nearly $5.6 million, according to Compass.
“People who are lucky enough to have the right stocks right now are taking advantage of that,” Walsh said. “They are converting [wealth] from stocks to real estate and securing the dream home they’ve always wanted.”
However, one expert says it’s too early to attribute the Bay Area’s real estate boom to AI.
“The number of jobs in AI is still not very large,” Enrico Moretti, a professor at the University of California, Berkeley, told Yahoo Finance, noting that less than 1% of employment in the Bay Area is currently in AI. “It may have an effect, but I don’t think it’s a huge effect.”
But that could change as the industry continues to expand. As AI becomes increasingly intertwined with everyday life, employment opportunities could increase significantly.
“So we could expect an effect not just on luxury but also on average consumption. [housing market]”, Moretti said.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
Read the latest financial and business news from Yahoo Finance
The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.
Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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