City of San José Produced by City of San José Department of Housing Housing Market Update First Quarter 2018
Q1 2018 San José Housing Market 812 residential permits issued - 83 were for affordable housing Accessory Dwelling Unit permits climbed significantly since 2016 Average rent growth was 4% Year-over-Year (YoY); vacancy rate was 5% 1 Average effective monthly rent for a 2-bedroom apartment was $2,626; Renters must earn $51/hour ($105,040/year) to afford this rent 2 Median single-family home price was $1,251,000, up 28% YoY; Residents must earn $122/hour ($253,500/year) to afford a home 3 Condos/Townhomes sold twice as fast as single-family homes 4 1. Costar April 9, 2018. 2. Based on April 9, 2018 Costar average rents; income calculation assumes rents are 30% of income, 40-hour work week and a single income household. 3. Based on Santa Clara County Association of Realtors, March 2018 median prices; income calculation assumes monthly payments are 30% of income, 20% down, 4.4% interest rate, 1.25% property tax, 40-hour work week and a single income household. 4. Santa Clara County Association of Realtors, March 2018. 2
Q1 2018 San José Residential Permit Activity 1000 Quarterly RHNA Goal is 997 total units permitted 24 Q1 2018 Total Permits 812 800 61 35 Units Permitted 600 400 17 122 107 438 599 696 1,009 694 565 41 200 0 256 164 74 70 83 37 4 31 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Multifamily Affordable Multifamily Market Single family/second Units/Other 2014 23 RHNA Quarterly Goal SOURCE: City of San José Housing Department, March 2018 3
2017 Second Unit Permits Up 140% YoY 100 90 92 80 70 60 54 50 40 38 30 20 10 3 10 10 13 14 21 17 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 To Date Zoning code updated in December 2016 to conform with new State Legislation. SOURCE: City of San José Monthly Permit Reports as of April 2018. 4
Average Rent Up 4% Quarter-over-Quarter (QoQ) & YoY $3,800 $3,500 $3,200 $2,900 $2,600 $2,300 $2,000 $1,700 $1,400 $1,100 $800 SOURCE: Costar April 9, 2018. 5 $3,257 $2,626 $2,376 $2,126 $1,858 1st Qtr-2001 1st Qtr-2002 1st Qtr-2003 1st Qtr-2004 1st Qtr-2005 1st Qtr-2006 1st Qtr-2007 1st Qtr-2008 1st Qtr-2009 1st Qtr-2010 1st Qtr-2011 1st Qtr-2012 1st Qtr-2013 1st Qtr-2014 1st Qtr-2015 1st Qtr-2016 1st Qtr-2017 Average Effective Market Rents for SJ 1st Qtr-2018 Studio 1Bdrm 2 Bdrm 3 Bdrm Average
Average Vacancy at 5% 11 Q1 2018 Vacancy Rates Studio 5.3% 1 Bdrm 5.4% 2 Bdrm 4.9% 3 Bdrm 4.4% Average 5% 10 9 8 7 6 5 4 3 2 1st Qtr-2001 1st Qtr-2002 1st Qtr-2003 1st Qtr-2004 1st Qtr-2005 1st Qtr-2006 1st Qtr-2007 1st Qtr-2008 1st Qtr-2009 1st Qtr-2010 1st Qtr-2011 1st Qtr-2012 1st Qtr-2013 1st Qtr-2014 1st Qtr-2015 1st Qtr-2016 1st Qtr-2017 1st Qtr-2018 Quarterly Vacancy Rate % for SJ Studio 1 Bdrm 2 Bdrm 3 Bdrm Average 5% Healthy Vacancy Rate National Rate 4% 3% SOURCE: Costar, April 9, 2018, National Rate US Census Bureau Current Population Survey/ Housing Vacancy Survey 4/26/18 6
Housing is Out of Reach for Many San José Workers SOURCE: Employment Development Department (EDD) First Quarter 2017 Wages; Costar April 9, 2018. Average Rents; Income to rent calculation assumes rent at 30% of income and a single income household; Santa Clara County Association of Realtors Q1 2018 median prices; Income to mortgage calculations assume payments at 30% of income, 20% down, 4.44% interest, 1.25% Property Tax, $375 HOA dues for condos and a single-income household/ 7
San José s Renters Spend Higher % of Income on Rent 50% Median Rent as a % of Median Income 40% 30% 20% 10% 36% 29% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 San Jose Metro United States SOURCE: Zillow Rental Affordability Index 2017 One Quarter Lag. 8
San José s Single-Family Median Home Price Keeps Climbing - Up 10% QoQ and 28%YoY Median Single Family Home Price ($) $1,390,000 $1,280,000 $1,170,000 $1,060,000 $950,000 $840,000 $730,000 $620,000 $1,454,500 $1,251,000 $510,000 $400,000 San José Santa Clara County SOURCE: Santa Clara County Association of Realtors, March 2018. 9
San José Metro Area Median Home Prices 10x Median Income - Nearly Triple the National Average 12.0 Ratio of Median Home Price to Median Income 10.0 8.0 6.0 4.0 2.0 10.1 3.5 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 San Jose Metro United States SOURCE: Zillow Price to Income Index 2017 One Quarter Lag 10
San José s Mortgage to Income Ratio is 2.9x National Average 60% Mortgage Payments as a % of Median Income 50% 40% 30% 20% 10% 46% 16% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 SOURCE: Zillow Mortgage Affordability Index 2017 One Quarter Lag San Jose Metro United States 11
San Jose s Housing Affordability Remains Low Relative to the Nation (8 th least affordable) 1 in 6 families in San José can afford to own a median priced home % of Homes Affordable to Families Earning Median Income 90 80 70 60 50 40 30 20 10 0 2000 Q1 2001 Q3 2004 Q3 2006 Q1 2007 Q3 2009 Q1 2010 Q3 2012 Q1 2013 Q3 2015 Q1 2016 Q3 62 17 2018 Q1 San Jose, Sunnyvale, Santa Clara Metropolitan Area HOI National HOI SOURCE: National Association of Home Builders, Housing Opportunity Index Q1 2018 12
San José s Condo/Townhome Median Prices Up 11% QoQ and 20% YoY $895,350 $800,000 $765,000 $700,000 Median Townnhome Price ($) $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 San José Santa Clara County SOURCE: Santa Clara County Association of Realtors March 2018 13
Single-Family Inventory Up 70% QoQ, Down 45% YoY; Sales Up 30% QoQ & 4% YoY 4500 4000 3500 3000 2500 2000 1500 1000 500 0 595 453 259 Mar 05 Jul 05 Nov 05 Mar 06 Jul 06 Nov 06 Mar 07 Jul 07 Nov 07 Mar 08 Jul 08 Nov 08 Mar 09 Jul 09 Nov 09 Mar 10 Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12 Nov 12 Mar 13 Jul 13 Nov 13 Mar 14 Jul 14 Nov 14 Mar 15 Jul 15 Nov 15 Mar 16 Jul 16 Nov 16 Mar 17 Jul 17 Nov 17 Mar 18 San José Single-Family Data New Listings Total Listings Sales SOURCE: Santa Clara County Association of Realtors, March 2018 14
Condos/Townhomes Selling Twice as Fast as Single-Family homes 140 120 Days on Market in San Jose 100 80 60 40 20 17 Days 9 Days 0 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Single Family Condo/Townhomes SOURCE: Santa Clara County Association of Realtors March 2018 15
Interest Rates Continue Upward March 8.00% 7.00% 6.00% Interest Rate 5.00% 4.00% 3.00% 4.33% 3.65% 2.00% 1.00% 1.51% 0.00% Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 30 Year Fixed Rate 5/1 Hybrid Adjustable Rate Federal Funds Rate SOURCE: Federal Reserve, Freddie Mac Primary Mortgage Market Survey, Q1 2018 16
Data Sources and Definitions The City of San José selected Costar to supply rental housing statistics as of July 1, 2017. The City s previous vendor, RealAnswers, went out of business in 2016 The City has restated rents and vacancy data beginning January 2000, using Costar. The revised data will be posted in the Housing Market Updates beginning in Q2 2017 The source of the quarterly rents and vacancy data will be average, effective, marketrate apartment rents for the geography encompassing the City of San José, as reported in Costar s proprietary database Effective rent is the average rent paid over the term by a tenant adjusted downward for concessions paid for by the landlord (such as free rent, moving expenses, or other allowances), and upward for costs that are the responsibility of the tenant (such as operating expense pass throughs) The rents reported are average market rate rents charged by existing market-rate apartments; Costar updates rents data once a month for apartments with more than 30 units and once a quarter for apartments with less than 30 units For questions, please call the Housing Department at 408-535-3860