Silicon Valley’s hot market fuels bidding wars on US$4 million fixer-uppers
The housing market that includes much of Silicon Valley ranks as the most competitive in the US, according to a Zillow analysis of the 50 biggest metro areas
IN CALIFORNIA’S Silicon Valley, it often takes millions of US dollars just to score a fixer-upper.
High mortgage rates may be snuffing out demand for homes elsewhere in the US, but for the area’s many software engineers riding the tech stock boom, and crypto millionaires cashing in gains, none of that matters. Tracy Hsu, an agent in Cupertino, tells her clients that it’s about bidding high enough to win.
Last month, Hsu helped a buyer land a dated three-bedroom ranch in Saratoga – a short drive from Apple’s headquarters – for US$4.5 million, with plans to tear it down and start fresh. More recently, a bungalow hit the market in the same town for US$3.9 million and a client, against Hsu’s advice, offered only US$600,000 more. Someone else swooped in and put it under contract for US$4.6 million, she said.
“When we write an offer, we do not look at the asking price,” Hsu said. “It’s meaningless.”
The housing market that includes much of Silicon Valley ranks as the most competitive in the US, according to a Zillow analysis of the 50 biggest metro areas. With an economy turbocharged by the artificial intelligence (AI) boom, and a severely limited supply of listings, the San Jose region is also in the lead for home-value growth. And last month, properties went under contract at a staggeringly quick rate: just nine days after they reached the market, on average, Zillow said.
Even before the key spring selling season moves into high gear, house hunters are lining up early to secure something before the bidding wars get even more intense, according to interviews with a dozen agents.
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Buyers are not worried about overpaying because they expect prices to keep rising – and of course risk is relative, said Skylar Olsen, chief economist at Zillow. For many, it’s a matter of diversifying their financial exposure, she said.
Tech stocks make up a big chunk of the area’s employee compensation packages, and they have been on a two-year tear, led by Santa Clara-based AI chipmaker Nvidia, which soared 464 per cent in that time. Cryptocurrencies and shares of crypto-related companies also shot up in the months since President Donald Trump’s election in November, though they have taken a hit recently.
“For someone showing up with Coinbase, they would probably perceive real estate as among their safest investments,” Olsen said, referring to a major US crypto exchange.
Stock volatility itself is helping drive home purchases. Some buyers paused after Chinese AI firm DeepSeek shook up the industry in January with its advanced, cost-effective technology. But the standstill did not last long.
“I have a couple of Nvidia clients who have a lot of money and see the stock fluctuate every day,” said Steve Ahn, an agent at Legacy Real Estate & Associates. “That’s hundreds of thousands of US dollars fluctuating. Mentally they have trouble looking at that and they want to cash out and buy somewhere such as Los Altos, Mountain View, Saratoga or Palo Alto.”
Pickings are extremely slim, however. At one point in early February, Cupertino had just 16 active single-family listings in a market that would normally see 120, according to Rick White, a Realtor with Christie’s International Real Estate. For all of Santa Clara County, the supply was about a fourth of what it should be, he said.
A 1,100-square-foot (102-square-metre) house on a cul-de-sac in the city of Santa Clara recently sold for US$2.2 million, drawing 11 offers, said Vinicius Brasil, an agent with Keller Williams. It was an average home in a spot that’s not necessarily the most prestigious, but conveniently close to companies such as Apple and Nvidia, he said.
“Sure they overpaid,” Brasil said. “But they got a good location, and that’s what matters.”
That scene is in stark contrast to many markets across the US, where sales are sluggish as high borrowing costs and other affordability issues squeeze would-be buyers. At the same time, inventory in some areas has been rising from historically low levels as listings linger. Builders in the Sunbelt – from Florida and Texas to Arizona – have been especially active, boosting the available supply even as demand remains weak.
Meanwhile, expensive markets with little room for new construction, such as New York and Boston, have seen prices shoot higher, leaving little hope for budget-conscious shoppers.
That’s closer to what’s happening in the San Jose area, where supply remains constricted and better-than-average earners are routinely losing out in bidding wars.
“I feel bad for the doctors who live here because they do not make enough to compete with the tech money,” said Nick French, an agent in Los Altos. “One of my friends is a brain surgeon who struggles to compete for homes with an engineer who has been in the business for seven to 10 years.”
The battles are heating up now as parents with “pandemic babies” – the oldest entering kindergarten this fall – scramble to get their kids into the best school districts, French said.
Not every property type is getting bid up. Some older condos and townhouses at lower price points are sitting, partly because consumers in that range are more dependent on mortgages and sensitive to higher rates.
The high cost of insurance is a deterrent, if not a deal blocker, in many areas, particularly the parts of Silicon Valley adjacent to the Santa Cruz mountains, according to White, who works in the area from Santa Cruz to Cupertino. A 2020 fire destroyed more than 900 homes, and the so-called wildland-urban interface remains at risk. That’s left homeowners facing higher premiums, or having to turn to state plans if private insurers refuse to cover them.
“If they cannot get insured by a traditional insurer, they have to go to California FAIR plan, which is not a fair plan at all,” White said, referring to the state’s last-resort insurer. “It’s a rip-off.”
Many buyers with the money to spare are forging ahead. Hsu, who is also a custom homebuilder, said newly minted crypto millionaires have been sidestepping the usual progression of ownership, leaping straight from affordable condos to high-end single-family houses.
In early February, a young couple living in a townhouse in Fremont contacted her out of the blue, asking if they could purchase a US$5.5 million luxury home in Cupertino that her company, Mission Development Group, was three months from finishing. They wanted to buy it sight unseen for cash, she said, but she did not feel comfortable unless they had a look.
The couple arrived, and flashed a screenshot of US$5.6 million in a Coinbase account. The house was theirs. BLOOMBERG
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