San Jose Real Estate Market: Is it a Good Place to Invest in 2020?

San Jose is part of Silicon Valley, a place where $100,000 a year or higher salaries from competing tech firms has driven up the cost of real estate. But what about the San Jose housing market itself? San Jose is the third largest city in California, home to roughly a million people. It has the highest cost of living of any area in the U.S., and it is one of the most expensive housing markets in the country.

If you’re keen to invest in your future in the San Jose real estate and buy before prices become out of reach, you must read till the end. California keeps hitting the news as a figuratively toxic market spiraling down. If it wasn’t for legal and illegal immigration, the population would decline because so many natives are leaving.

San Jose Real Estate Market
Pic Credits: Pixabay.com | Photographer – Egor Shitikov

The business exodus is propping up Seattle’s real estate market. The state hits the news for bleeding edge political mandates while the public debates their cost. Why on Earth would anyone want to buy a home here? Quite a few, actually, despite housing prices in the state of California. If you are a real estate investor, San Jose real estate has a track record of being one of the best long term investments in the country through the last ten years. Let’s look at the state of the San Jose housing market 2020 before discussing why you’d want to invest in real estate over other growth markets.

San Jose Real Estate Market Forecast 2020

What are the San Jose real estate market predictions for 2020? Is San Jose housing market 2020 shaping up to continue the trend of the last few years as one of the hottest & expensive markets in the nation.

The latest real estate data from Zillow shows that the current median home value in San Jose is $1,002,873. San Jose is currently a buyer’s market – which means there are less no. of qualified buyers and more homes for sale. This trend is pushing the home priced down in the market. San Jose real estate appreciated 77.36% over the last ten years, which is an average annual home appreciation rate of 5.90%, putting San Jose in the top 10% nationally for real estate appreciation. However, in the last twelve months, the home prices have declined by 6.4%. Looking forward in this year, the San Jose real estate market forecast is that home prices will increase by 1.1%. 

Here is the San Jose, CA real estate price appreciation graph by Zillow. It shows us the current home price appreciation forecast of 1.1% till Dec 2020.

San Jose Real Estate Market Forecast
Graph Credits: Zillow.com

The median list price per square foot in San Jose is $609, which is lower than the San Jose-Sunnyvale-Santa Clara Metro average of $651. Zillow reports that 5.9% of the listings in San Jose had a price cut in Dec 2019, which is a good thing for buyers. The median price of current listings in San Jose is $918,500. Homes are selling either below or near asking prices. The median price of homes that have been sold out is $918,900. The median rent price in San Jose is $3,400, which is lower than the San Jose-Sunnyvale-Santa Clara Metro median of $3,500.

San Jose home prices are among the most expensive in the state of California. Here is a snapshot that shows the median home values in the some of the neighborhoods of San Jose.

Neighborhoods in San Jose
Graph Credits: Zillow

San Jose Housing Market Forecast 2019 – 2021

Here is a short and crisp San Jose housing market forecast for the 3 years ending with the 3rd Quarter of 2021. The accuracy of this forecast for San Jose is 77% and it is predicting a positive trend. The LittleBigHomes.com estimates that the probability for rising home prices in San Jose is 77% during this period. If this price forecast is correct, the San Jose home values will be higher in the 3rd Quarter of 2021 than they were in the 3rd Quarter of 2018.

Check this page each quarter for updates to the San Jose Housing Market Forecast.

San Jose Housing Market Trends

We shall now discuss some of the most recent housing trends in the San Jose area and compare it with past couple of years. We shall mainly discuss about median home prices, inventory, economy, growth and neighborhoods, which will help you understand the way the local real estate market moves in this region.

San Jose Real Estate Market Trends
Graph Credits: Trulia.com

2019’s Data – The median sales price for homes in San Jose for Mar 1 to May 29 was $995,000 based on 1,707 home sales. Average price per square foot for San Jose was $679, a decrease of -8% compared to the same period last year. The median rent per month for apartments in San Jose for May 4 to Jun 4 was $3,500.

Trulia has currently 614 resale and new homes for sale in San Jose, CA, including open houses, and homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The median price of sold homes in San Jose is $975,000 and home are selling for about $656/sqft.

As per the real estate company called Neigborhoodscout.com, the median house price in San Jose is $909,850, which indicates that home prices in San Jose are well above the national average for all cities and towns in the United States. Three and four bedroom single-family detached homes are the most common housing units in San Jose. Other types of housing that are prevalent in San Jose include duplexes, row houses and homes converted to apartments.

Following the housing market decline in 2007, single family rental properties became favorable options for investors, saving in construction or refurbishment prices. The quick turnaround for an owner to rent out their property means cash flow is almost immediate. Single family rental homes have grown up to 30% within the last three years. Almost all the housing demand in the US in recent years has been filled by single family rental units.

Currently, there are 272 single family homes for sale in San Jose, CA on Zillow. Additionally, there are 390 single family homes for rent in San Jose, CA. Under potential listings, there are about 1 Foreclosed and 177 Pre-Foreclosure homes. These are the delinquent properties that may be coming to the market soon but are not yet found on a multiple listing service (MLS).

In the past month, 567 homes have been sold in San Jose, CA on Redfin.com. In addition to houses in San Jose, there were also 261 condos, 109 townhouses, and 38 multi-family units for sale in San Jose last month. The median listing price is around $950,000. According their statistics, the San Jose housing market is very competitive. Homes in San Jose receive 1 offers on average and sell in around 38 days. The average sale price of a home in San Jose was $950K last month, down 1.0% since last year. The average sale price per square foot in San Jose is $620, down 0.16% since last year. A hot listing in San Jose can sell for about 2% above list price and go pending in around 16 days.

Here is the latest San Jose housing market data for the month of Jan 2020 from Redfin.com. The sale to list price ratio shows us that it was a trending more like a seller’s market in the past month.

San Jose Real Estate Market Trends

Median List Price $928,000
Avg. Sale / List 100%
Median List $/Sq Ft $617
Median Sale Price $960,000
Median Sale $/Sq Ft $637

Analyzing real estate data from multiple sources gives us a much broader perspective of the direction in which a market is moving. There are currently 1,053 homes for sale in San Jose, CA on Realtor.com. Recently homes on the market have been stacking up in San Jose. The asking price of single family homes can start from $399,000 and can go up to $12.5M for a luxury property located in Evergreen neighborhood in the city of San Jose, CA. The median home price in Evergreen neighborhood is $950,000. This neighborhood was a seller’s market in Dec 2019.

San Jose is also a big rental property market. It has a mixture of both renter-occupied and owner-occupied housing units. There are currently 511 rental properties in San Jose and their rent prices range from $790 to $330K per month. There are only 28 new construction homes for sale in San Jose within a price range of $1.09M to $5.3M. The lower end (in terms of pricing) new construction homes can found in Evergreen and Hellyer neighborhoods in the city of San Jose, CA.

According to Realtor.com, in December 2019, the San Jose housing market was a seller’s market, which means there were roughly more buyers than there were active homes for sale. Ideally a buyer would prefer a sale to asking price ratio that’s closer to 90%. In San Jose, the sellers have held good leverage in these negotiations in the past month. On an average, they could sell homes for 99.83% of the asking price. A seller would always prefer scenarios which can yield a ratio of 100% or higher.

San Jose Housing Market Trends
Graph Credits: Realtor.com

In December 2019, the median list price of homes in San Jose, CA was $950K, flat year-over-year. The median listing price per square foot was $622. The median sale price was $960K.

The median list price in San Jose is $988,750 on Movoto.com. The median list price in San Jose was less than 1% change from January to February. San Jose’s home resale inventories is 350, which decreased 5 percent since January 2020. The current median list price per square foot in San Jose is $626.

San Jose Home Prices Trends
Median Price Per Sq Ft | Movoto.com

As you can see in the graph, the median price per sq ft in San Jose rose to its peak value in Mar 2019, when it was $651. In January 2020 it was $625. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in February.

San Jose is a moderately walkable city in Santa Clara County with a population of approximately 942,788 people. If you are looking to invest in the San Jose real estate, you should that three most important factors when buying a real estate anywhere are location, location, and location. Location creates desirability. Desirability brings demand. There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your San Jose investment real estate and you should be able flip it for a lump sum profit.

The neighborhoods in San Jose must be safe to live in and should have a low crime rate. The neighborhoods should be close to basic amenities, public services, schools and shopping malls. Almaden Country Club has a median listing price of $1.8M, making it the most expensive neighborhood in San Jose. Fruitdale is the most affordable neighborhood, with a median listing price of $550,000.

Some of the most popular neighborhoods in San Jose are South San Jose, Milpitas, Evergreen, Berryessa, Willow Glen, Cupertino, Silver Creek, Blossom Valley, West Valley, Santa Teresa, North San Jose, Almaden Valley, Downtown San Jose, Cambrian Park and Los Gatos.

San Jose, CA Foreclosures And Bank Owned Homes Statistics

As per the San Jose foreclosure data provided by Zillow, in San Jose 0.1 homes are foreclosed (per 10,000). This is the same as the San Jose-Sunnyvale-Santa Clara Metro value of 0.1 and also lower than the national value of 1.2. The percent of delinquent mortgages in San Jose is 0.3%, which is lower than the national value of 1.1%.

With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of San Jose homeowners underwater on their mortgage is 1.6%, which is higher than San Jose-Sunnyvale-Santa Clara Metro at 1.5%.

Total No. of Foreclosures in San Jose 251 (RealtyTrac)
Homes for Sale in San Jose 266
Recently Sold  4863
Median List Price  $929,000 (2% drop vs Nov 2018)

There are currently 251 properties in San Jose, CA that are in some stage of foreclosure (default, auction or bank owned) while the number of homes listed for sale on RealtyTrac is 266. In December 2019, the number of properties that received a foreclosure filing in San Jose, CA was 21% higher than the previous month and 11% higher than the same time last year.

In San Jose, the zip code with the highest foreclosure rate is 95148, where 1 in every 2042 housing units is foreclosed. 95138 zip code has the lowest foreclosure rate, where 1 in every 3079 housing units becomes delinquent.

Is San Jose a Good Place For Real Estate Investment?

San Jose Real Estate Investment
Pic Credits – Pixabay.com | Photographer Javier Alamo

Is San Jose a Good Place to Invest In Real Estate? Investing in real estate is touted as a great way to become wealthy. Is buying an apartment in San Jose a good investment? Many real estate investors have asked themselves if buying a property in San Jose is good investment? You need to drill deeper into local trends if you want to know what the market holds for the year ahead. We have already discussed the San Jose housing market 2020 forecast for answers on why to put resources into this sizzling market.

Although, this article alone is not a comprehensive source to make a final investment decision for San Jose, but we have collected ten evidence based positive things for those who are keen to invest in the San Jose real estate in 2020. Here is the list of 10 positive things going on in the San Jose real estate market which can help investors who are keen to buy real estate in this city.

1. Job Growth in San Jose

Wherever there are jobs, there will be people going there to seek work. As of this writing, San Jose has an unemployment rate of less than 2.5%, while California’s hovers around 4%. The very high average pay rate for any job in San Jose is simply another reason for people to move here. Note that the average salary is $84,000 a year. You can make twice that or more if you have the right technical expertise. This is the biggest factor driving the San Jose real estate market.

2. Big Tech Isn’t Going Anywhere

San Jose may have seen housing prices soften somewhat in 2018, but the high paying jobs that led to the incredible San Jose real estate market valuations haven’t gone anywhere. Businesses like Samsung, Qualcomm, Netgear, Cisco, Paypal and others are still located here. In fact, Samsung opened a new campus here in 2015. Apple’s new San Jose campus is under construction. People who want to work for these firms will either move to San Jose or try to find a cheaper market and commute in.

3. San Jose is a Big Rental Market For Students

Any housing market will see a large and generally well-funded population of renters if there is a university in town. San Jose has several that attract students from around the world. Investors in the San Jose real estate market could buy up properties to rent out to the thousands of engineering and computer graduate majors attending the University of California Berkley campus, UC Santa Cruz, Stanford University, Santa Clara University and California State University. The students are coming to these schools in the hope of working for Big Tech, so they’re not going to leave if they have a choice.

4. Home Prices Have Softened but Demand Really Hasn’t

In January, 2018, Redfin ranked the ten hottest neighborhoods in the United States. Nine of the ten were in San Jose. When single home prices fall from 1.2 million to 1 million, homes now sit on the market for several days instead of being snapped up immediately. The median price for a new home or condo was $750,000 in 2018, down from a record of nearly $800,000 a few months prior. If you want to invest in the San Jose housing market, you should do it now while things are – relatively speaking – affordable.

5. San Francisco Is Still Relatively Expensive

We mentioned San Francisco tech firms moving jobs to Seattle to reduce labor costs or pay the same rate while giving workers a higher standard of living. However, the less often mentioned trend is San Francisco and Palo Alto firms moving to the South Bay because it isn’t as much of an inconvenience. After all, many of their own workers are moving to the South Bay to be able to afford a home. Smaller firms are starting up in San Jose instead of Mountain View because it is what they can afford.

6. Group Living/Working Arrangements Are the New Hot Housing Option

Co-working space allow small businesses and individuals to share work space at a lower overall cost per head. Co-living spaces bring the same economies of scale to individuals. You may have a bedroom to yourself or share it, but amenities like the laundry room, kitchen and entertainment are shared. It is hard to think of a more profitable opportunity for investing in the San Jose real estate market. Buy a building and convert it into a co-living space, charging several hundred dollars a month per bed for students starting up their own company or working for a Big Tech firm. If the dorm-like residence is next to co-working spaces, it is a marriage made in heaven.

7. Micro-housing Is Making a Comeback

Co-living spaces maximize personal space and quality of life by minimizing the size of bedrooms while having people share living rooms, bathrooms and gyms. However, not everyone wants to live in one of these “dorms for grownups”, but they can’t afford the $2500-3500 a month rent for a conventional apartment. San Jose is meeting demand by authorizing construction of new micro-apartments and renovation of existing structures to create micro-apartments. San Francisco is considering amending their building code to reduce apartments from a minimum of 290 square feet of livable space to 150.

San Jose is ahead of the curve with the 150 square foot minimum. If you want to buy and renovate single family homes or apartment buildings to carve up into many smaller and profitable units, now is the best time to invest in the San Jose real estate market. In fact, hotels are being converted to micro-apartments already to meet this newly affordable option in the San Jose housing market.

8. The Incredible ROI of RV Parks

RV parks have always been a potentially profitable venture for real estate investors. The tenant owns the home. The main requirements are land, zoning permission, and utility hookups for each trailer or RV parking spot. Laundry facilities and a small “store” can become profit centers. This is true of RV parks in moderately busy areas, but the return on the investment is incredible in San Jose.

A “cheap” RV spot in the city costs $1500 a month, a price you pay elsewhere for a three bedroom single family home. If you buy one, you’ll receive significant cash flow. If you can create legal RV parking spots, you’ll cater to the hundreds of people living in illegally parked RVs throughout town and be helping provide safe, affordable housing.

9. Demographic Momentum

Silicon Valley is dominated by young professionals, many of whom want to start families. If you can invest in housing that caters to their needs and fits their budget, they’ll pay a premium for it. And as long as Silicon Valley continues to generate so many high paying jobs, it will continue to attract people who will eventually start families. If families continue to be priced out of the San Jose housing market, you can still rent the property out to young tech workers willing to pay $2000 a month to rent a bedroom in a single family dwelling.

10. Company Provided Housing Is on the Rise

If you want to invest in the San Jose real estate, you may not need to buy and renovate. Instead, if you know of industrial or commercial properties near major employers they may need to convert to employee housing, you could buy now and hold until it sells. If that doesn’t happen, you could still turn it into co-working space.

Investing in San Jose Real Estate or Not: The Conclusion

Maybe, you have done a bit of real estate investing in San Jose, CA but want to take things further and make it into more than a hobby on the side. It’s only wise to think about how you can and should be investing your money. In any property investment, cash flow is gold. Should you consider San Jose real estate investment? If you are a home buyer or real estate investor, San Jose real estate investment has been generating one of the best long term returns in the U.S. through the last ten years. Big Tech makes San Jose one of the hottest real estate markets in the country.

While the intense pressure is driving some companies and people out, the strong financial numbers continue to make the San Jose housing market a good place to invest. The unique redevelopment opportunities should not be overlooked. A good cash flow from San Jose investment properties means the investment is, needless to say, profitable. A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt. Therefore, finding a good San Jose real estate investment opportunity would be a key to your success. If you invest wisely in the San Jose real estate, you could secure your future.

As with any real estate purchase, act wisely. Evaluate the specifics of the San Jose housing market at the time you intend to purchase. Hiring a local property management company can help in finding tenants for your investment property in San Jose. If it is your first time to invest in San Jose real estate, then you would have to be aware of common beginner’s mistakes. Beginners would usually follow the media, buy a property and wait for its value to increase. This could be risky. Real estate investing requires research. We recommend doing your own research or hiring a real estate investment specialist for guidance.

Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. If housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market area, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing and interest rates.

NORADA REAL ESTATE INVESTMENTS strives to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in the U.S. growth markets. We can help you succeed by minimizing risk and maximizing profitability.

The aim of this article was to educate investors who are keen to invest in San Jose real estate in 2020. Purchasing an investment property requires a lot of studies, planning, and budgeting. Not all deals are solid investments. We always recommend to do your own research and take help of a real estate investment counselor.

Other Good Markets To Invest in Real Estate in 2020

Another hot market for investors in 2019 is going to be the Seattle real estate market. The Seattle’s housing market has long been second to Silicon Valley, but its strong economy, diverse population, and better regulatory climate are bringing refugees from California and migrants from around the country and world to live here. Regardless of the area’s weather, the Seattle housing market’s outlook can only be described as sunny. Seattle has repeatedly hit lists as being among the top cities for real estate sellers to get the highest return on their investment.

Property values have gone up consistently for years. Rental rates are high and continue to rise, guaranteeing ROI for those who buy and hold properties. We’ve already addressed the fact that you can raise rents as necessary to match the market. This means you will certainly be able to profit from the large rental market in Seattle whether you buy and hold or buy and flip.

Similarly, the Phoenix real estate market trends show that it is going to be a hot investment destination for new real estate investors. Phoenix deals with a large retiree population, both permanent and seasonal. To accommodate aging in place, they’ve loosened the rules on building “accessory dwelling units”, commonly known as mother-in-law suites. The city also recognizes the need for affordable housing, and they allow people to build and rent out ADUs as affordable housing, especially if the property is within walking distance of public transit. Buy a house, rehab it and build a granny flat, and you have two rental properties for not much more than the price of one. And the city is almost certain to approve it, because they want denser development.


*Remember, caveat emptor still applies when buying a property anywhere. The information contained in this article was pulled from third party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, the Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.

References:

San Jose demographics and universities
https://en.wikipedia.org/wiki/San_Jose,_California

Big Tech isn’t going anywhere
https://appleinsider.com/articles/18/03/20/photos-apples-secretive-race-for-new-silicon-valley-office-space

Prices
https://www.sfgate.com/realestate/article/San-Jose-real-estate-hottest-market-Bucknall-12541044.php

Relative Deal
https://www.sfchronicle.com/business/networth/article/San-Jose-could-be-this-year-s-most-insane-12541492.php

San Francisco firms moving to San Jose
https://www.bizjournals.com/sanjose/news/2017/09/27/san-jose-tech-real-estate-boom-patterson-sheridan.html
https://www.sfgate.com/realestate/article/San-Jose-real-estate-hottest-market-Bucknall-12541044.php

Coliving / coworking
https://www.bisnow.com/san-francisco/news/multifamily/starcity-plans-massive-new-bay-area-co-living-projects-94057
https://www.sfchronicle.com/business/article/WeWork-s-Bay-Area-boom-extends-in-San-Jose-13038193.php

RV parks
https://www.sfchronicle.com/business/article/Battle-over-RVs-in-Mountain-View-is-latest-sign-9961268.php
https://www.ozy.com/fast-forward/the-trailer-parks-of-silicon-valley/40612

Overall job market
https://bluewatercredit.com/a-look-at-san-jose-cas-remarkably-low-unemployment-rate/
https://www.payscale.com/research/US/Location=San-Jose-CA/Salary

Company provided housing
https://www.cnbc.com/2017/06/14/google-spending-30-million-on-housing-for-silicon-valley-employees.html

Housing Market Data, Trends and Statistics
https://www.zillow.com/san-jose-ca/home-values
https://www.littlebighomes.com/real-estate-san-jose.html
https://www.trulia.com/real_estate/San_Jose-California
https://www.redfin.com/city/17420/CA/San-Jose/housing-market
https://www.movoto.com/san-jose-ca/market-trends
https://www.realtor.com/realestateandhomes-search/San-Jose_CA/overview
https://www.realtytrac.com/statsandtrends/ca/santa-clara-county/san-jose

Microapartments
https://qcostarica.com/downtown-san-jose-hotel-encouraging-people-to-return-to-live-in-the-city

San Jose Real Estate Market: Is it a Good Place to Invest in 2020?

Marco Santarelli

Marco Santarelli

Marco Santarelli is an investor, author, Inc. 5000 entrepreneur, and the founder of Norada Real Estate Investments – a nationwide provider of turnkey cash-flow investment property.  His mission is to help 1 million people create wealth and passive income and put them on the path to financial freedom with real estate.  He’s also the host of the top-rated podcast – Passive Real Estate Investing.

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