The California Association of REALTOR’s 2015 survey of recent California home buyers reveals that they plan to live in their newly-purchased home for 200 years. No, I made that up. It’s really 20 years, up from 6 years in 2013 and 8.8 years in 2014, but it might as well be 200 for all the sense it makes, at least here in Silicon Valley.
Because 20 years fits perfectly with the Silicon Valley lifestyle:
- get married early
- get a job at the local feed lot, steel mill or defense contractor, and
- stay put and keep your head down until they give you a gold watch
Okay, so maybe more than a few of the survey’s 1700 respondents do live in places where people can do this and afford a house. But I regularly run across first-time buyers here in Silicon Valley who think they’ll live in the first home they own for 10 years–and more happens in Silicon Valley in 10 years than happens in most other places in 20.
I think what’s driving this need for what I’ll call a “forever house” is sticker shock, or perhaps more accurately, market shock. We’ve been in this boom market for so long that annual price increases of 10 or 20% are the “new normal”, at least for the current crop of home buyers, who have the shortest collective memory of Silicon Valley real estate. “If I don’t get my forever house now, I’ll never be able to afford it.”
But this thinking has at least three drawbacks:
- it assumes that this boom market will go on forever, and that’s not likely
- it assumes that a young home buyer’s income won’t increase significantly, and that’s not likely either, and
- forever houses start at well over $1M in this area and, depending on your need for the latest and greatest remodel and a short commute, they start at over $2M
Forever house thinking is also curiously un-Silicon Valley, because it negates the promise that draws so many here, the opportunity for sudden wealth: the great new job with what turns out to be the Next Big Thing, the stock options, selling a start-up or taking it public. It doesn’t happen to everyone, but it happens to enough people here to keep the dream alive. Removing this from Silicon Valley turns it into Buffalo.
The great thing about the Valley is that it’s always re-inventing itself, but the downside to this constant regeneration is that the collective memory of so many here goes back a few years instead of a few decades. I remember the dot-commers thinking that Silicon Valley, which got its handle in the early 1970s, didn’t exist until they blessed us with their presence twenty years later. Many of today’s participants in the real estate market–buyers and agents alike–don’t know that the history of Valley real estate goes back much before 2008. They either reject today’s market as an aberration, or embrace it as the new normal. Time will tell them it’s neither.
So don’t hold out for your forever house unless you can afford one, and most first-time home buyers can’t. And don’t assume that you can–or need to–predict the next ten years. Be like Silicon Valley’s self-image: stay loose, stay spontaneous, put your hope in the future, and above all else, don’t assume.
copyright © John Fyten 2015