City of San José. Housing Market Update. Second Quarter Produced by City of San José Department of Housing

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1 City of San José Produced by City of San José Department of Housing Housing Market Update Second Quarter 2016

2 Q San José Housing Market In Q2 2016, 368 residential permits were issued - 81 affordable, 233 multi-family market and 54 single-family/other permits The San José, Sunnyvale, Santa Clara Metro Area is the third most expensive jurisdiction in the nation for fair market rents 1 Donner Lofts received 1,515 applicants for its 81 available affordable apartments in two weeks 19 applicants per apartment SJ Average Rents up 4% year over year (YoY) 2 Average monthly rent for a 2 bedroom apartment is $2,847; Renters must earn $55/hour ($113,880/year) to afford the average rent for a two bedroom, two-bath apartment 3 SJ Median single-family home price is $920,000, up6%yoy 4 1 Out of Reach 2016, National Low Income Housing Coalition: 2 realanswers, Q Based on Q realanswers average rents, income calculation assumes rents are 30% of income, 40 hour work week,and a single income household. 4 Santa Clara County Association of Realtors, June

3 Q Residential Permits Up 24% from Q and Doubles YoY 1600 City of San José Second Quarter Residential Permit Activity Units Permitted , Q Q Q Q Q Q Q Multi family Affordable Multi family Market Single family/other SOURCE: City of San José Housing Department, Q

4 Average Rent Growth Slows, Up 1% from Q and 4% YoY $3,800 $3,500 $3,200 $2,900 $2,600 $2,300 $2,000 $1,700 $1,400 $1,100 $800 SOURCE: realanswers Q Data only includes rental developments with 50 apartments or more 4 $3,397 $2,847 $2,503 $2,258 $1,810 2nd Qtr nd Qtr nd Qtr nd Qtr nd Qtr nd Qtr nd Qtr nd Qtr nd Qtr nd Qtr nd Qtr-2015 Average Monthly San José Rents 2nd Qtr-2016 Studio 1bd/1bath 2bd/2bath 3bd/2bath Average

5 SJ Q Vacancy at 5.1%, Close to Natural Rate, Up 11% from Q & Up 8.5% YoY 9% 8% Percent Vacant Rental Housing Units 7% 6% 5% 4% 3% 2% 5.1% 5 % 4.7% 1% 0% 2nd Qtr nd Qtr nd Qtr nd Qtr nd Qtr nd Qtr-2010 San Jose Vacancy Rate SCC Vacancy Rate Natural Vacancy Rate SOURCE: realanswers Data Q2, 2016 Note that data only includes rental developments with 50 apartments or more; demand for affordable housing far exceeds the supply and the vacancy rate for affordable housing is nearly 0% as evidenced by long wait lists at most developments. 2nd Qtr nd Qtr nd Qtr nd Qtr nd Qtr nd Qtr

6 Rents in Some San José Areas Trend Higher Project 1BR 2BR Avg. Citywide Rents (Q realanswers) $2,258 $2,847 Domain (North SJ) $2,650 - $2,777 $2,938 - $3,094 Crescent Village (North SJ) One South Market (Downtown SJ) Centerra (Downtown SJ) Ascent Apartments (Edenvale SJ) $2,540 - $3,350 $3,275 - $4,165 $2,423 - $3,499 $3,728 - $6,168 $2,474 - $5,686 $3,564 - $4,909 $2,305 - $2,745 $2,895 - $3,940 One South Market SOURCE: Zillow.com, July 20, 2016 Domain 6

7 Q Market Rents Significantly Out of Reach for Many San José Workers $130,000 $120,000 $110,000 $100,000 $90,000 Annual Income to Rent Three-bedroom Apartment ($135,880) Annual Income to Rent Two-bedroom Apartment ($113,880) Annual Income to Rent One-bedroom Apartment ($90,320) $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 Retail Salesperson Janitor Healthcare Support Occupation Construction Laborer Elementary School Teacher Fire Fighter Police Officer SOURCE: Employment Development Department (EDD) First Quarter 2016 Wages; Income to rent calculation assumes rent at 30% of income and a single income household 7

8 SJ Renters Spend Greater % of Income on Rent than Renters Nationwide 50% 40% 30% 20% 10% 42% 30% 0% Median Rent as a % of Median Income San Jose Metro United States SOURCE: Zillow Rental Affordability Index Q

9 San Jose s SF Median Home Price Up 1% from Q and Up 6%YoY $1,060,000 $1,050,000 Median Single Family Home Price ($) $950,000 $840,000 $730,000 $620,000 $510,000 $920,000 $400,000 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 San José Santa Clara County SOURCE: Santa Clara County Association of Realtors, June

10 Taken as a multiple of Median Income, SJ Metro Area Median Home Prices are 3 Times the National Average Ratio of Median Home Price to Median Income San Jose Metro United States SOURCE: Zillow Price to Income Index Q

11 SJ Housing Affordability Remains Low Relative to the Nation (6 th least affordable) Less than 1 in 5 families in San José can afford a median priced home % of Homes Affordable to Families Earning Median Income Q2 92 Q3 94 Q4 96 Q1 99 Q2 01 Q1 05 Q2 07 Q3 09 Q4 11 Q1 14 Q % 17.5% San Jose, Sunnyvale, Santa Clara Metropolitan Area HOI National HOI SOURCE: National Association of Home Builders, Housing Opportunity Index Q

12 SJ Homeowners Pay Almost 3 Times the Mortgage Costs of the Average US Homeowner 70% 60% 50% 40% 30% 20% 10% 42% 15% 0% Mortgage Payments as a % of Median Income San Jose Metro United States SOURCE: Zillow Mortgage Affordability Index Q

13 SJ Townhome/Condo Median Prices Up 2% from Q and Up 10% YoY $650,000 $680,000 $603,000 Median Townnhome Price ($) $550,000 $450,000 $350,000 $250,000 $150,000 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 San José Santa Clara County SOURCE: Santa Clara County Association of Realtors, June

14 SF Total Listings & Sales Up 40%,New Listings Down 2% from Q1 2016; 4,000 3,500 3,000 San José Data 2,500 2,000 1,500 1, Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 New Listings Sales Total Listings SOURCE: Santa Clara County Association of Realtors, MLS Listings March

15 SF Days on Market Rises 10% from Prior Quarter and 16% YoY 140 Days on the Market in San José Days 16 Days 0 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Single Family Condo/Townhomes SOURCE: Santa Clara County Association of Realtors June

16 Interest Rates Remain Low 8.00% 7.00% 6.00% 5.00% Interest Rate 4.00% 3.00% 2.00% 3.57% 2.78 % 1.00% 0.00% Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun % 30 Year Fixed Rate 5/1 Hybrid Adjustable Rate Federal Funds Rate SOURCE: Federal Reserve, Freddie Mac Primary Mortgage Market Survey, June Note that going forward the City will use the 5/1 Hybrid Adjustable Rate instead of the One-Year Adjustable Rate Mortgage used in prior reports. 16