City of San José Produced by City of San José Department of Housing Housing Market Update Sparq, is a 105 unit, mixed use, transit-oriented, market-rate project in downtown San Jose. It will be developed by CORE and broke ground in July 2017. Sparq offers residents creative social amenities and the latest in apartment technology, including electronic package lockers and automated car parking systems. Second Quarter 2018
2018 San José Housing Market 622 residential permits issued none for affordable housing Accessory Dwelling Unit permits issued on track to surpass 2017 levels Average effective rent grew 4% Quarter-over-Quarter (QoQ); Overall vacancy is at 4.8% 1 Renters must earn $53/hour ($110,120/year) to afford the average effective monthly rent for a 2-bedroom apartment of $2,753 2 Median single-family home price was $1,225,000, down 2% QoQ Residents must earn $121/hour ($251,300/year) to afford a median priced single-family home 3 1. Costar July 16, 2018. 2. Based July 16, 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, June 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. 2 San José Housing Market Update : 2018
Units Permitted 2018 San José Residential Permit Activity 1600 1400 63 135 1200 1000 Quarterly RHNA Goal is 997 total units permitted 800 933 600 1,287 2018 Total Permits 622 84 400 200 0 54 54 16 15 311 538 45 399 233 42 234 180 17 94 124 81 5 30 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Multi-family Affordable Multi-family Market Single-family/Second Units/Other 2014-23 RHNA - Quarterly Goal SOURCE: City of San José Housing Department, June 2018. 3 San José Housing Market Update : 2018
2018 Second Unit Permits On Track to Surpass 2017 Levels 100 90 92 86 80 70 60 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 and in 2018 to conform with new State Legislation and to encourage ADU development. SOURCE: City of San José Monthly Permit Reports as of June 2018. 4 San José Housing Market Update : 2018
2nd Qtr-2001 2nd Qtr-2002 2nd Qtr-2003 2nd Qtr-2004 2nd Qtr-2005 2nd Qtr-2006 2nd Qtr-2007 2nd Qtr-2008 2nd Qtr-2009 2nd Qtr-2010 2nd Qtr-2011 2nd Qtr-2012 2nd Qtr-2013 2nd Qtr-2014 2nd Qtr-2015 2nd Qtr-2016 2nd Qtr-2017 2nd Qtr-2018 Average Effective Market Rents for SJ Average Rent Up 4% Quarter-over-Quarter (QoQ) & 5%YoY $3,800 $3,500 $3,200 $2,900 $2,600 $2,300 $2,000 $1,700 $1,400 $1,100 $800 $3,379 $2,753 $2,479 $2,213 $1,927 Studio 1Bdrm 2 Bdrm 3 Bdrm Average SOURCE: Costar July 16, 2018. 5 San José Housing Market Update : 2018
Average Vacancy at 4.8%, lower for larger unit sizes Quarterly Vacancy Rate % for SJ 2nd Qtr-2001 2nd Qtr-2002 2nd Qtr-2003 2nd Qtr-2004 2nd Qtr-2005 2nd Qtr-2006 2nd Qtr-2007 2nd Qtr-2008 2nd Qtr-2009 2nd Qtr-2010 2nd Qtr-2011 2nd Qtr-2012 2nd Qtr-2013 2nd Qtr-2014 2nd Qtr-2015 2nd Qtr-2016 2nd Qtr-2017 2nd Qtr-2018 12 11 10 9 8 7 6 5 4 3 2 1 0 2018 Vacancy Rates Studio 5.8% 1 Bdrm 5.1% 2 Bdrm 4.8% 3 Bdrm 3.5% Average 4.8% Studio 1 Bdrm 2 Bdrm 3 Bdrm Average 5% Healthy Vacancy Rate National Rate 4% 3% SOURCE: Costar, July 16, 2018, National Rate US Census Bureau Current Population Survey/ Housing Vacancy Survey 7/26/18. 6 San José Housing Market Update : 2018
Average Vacancy lower for older buildings (81% of total rental stock) Quarterly Vacancy % for SJ 25 20 2018 Rental Stock % Vacancy % Class A 18.8% 7.1% Class B 35.2% 3.4% Class C 45.9% 3.2% Class F 0.1% 3.5% 15 10 5 0 2001 2002 2002 2003 2004 2005 2005 2006 2007 2008 2008 2009 2010 2011 2011 2012 2013 2014 2014 2015 2016 2017 2017 Class A Class B Class C Class F SOURCE: Costar, August 21, 2018 Class A refers to highest quality construction, Class B refers to more utilitarian space, Class C refers to a no-frills older building and Class F refers to a functionally or economically obsolete building, per Costar Building Ratings. 6 San José Housing Market Update : 2018
Annual Income Housing is Out of Reach for Many San José Workers $260,000 $250,000 $240,000 $230,000 $220,000 $210,000 $200,000 $190,000 $180,000 $170,000 $160,000 $150,000 $140,000 $130,000 $120,000 $110,000 $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 Retail Salesperson Annual Income to Own a Median Priced Single-Family Home ($251,296) Annual Income to Own a Median Priced Townhome/Condo ($184,240) Annual Income to Afford Average Rent for a Three-bedroom Apartment ($135,160) Annual Income to Afford Average Rent for a Two-bedroom Apartment ($110,120) Annual Income to Afford Average Rent for a One-bedroom Apartment ($88,520) Janitor Healthcare Support Occupation Construction Laborer Elementary School Teacher Fire Fighter Police Officer SOURCE: Employment Development Department (EDD) First Quarter 2018 Wages; Costar July 16, 2018. Average Rents; Income to rent calculation assumes rent at 30% of income and a single income household; Santa Clara County Association of Realtors 2018 median prices; Income to mortgage calculations assume payments at 30% of income, 20% down, 4.57% interest, 1.25% Property Tax, $375 HOA dues for condos and a single-income household. 8 San José Housing Market Update : 2018
Median Rent as a % of Median Income San José Renters Spend Higher % of Income on Rent 50% 40% 36% 30% 29% 20% 10% 0% 2000 2001 2002 2003 2003 2004 2005 2006 2006 2007 2008 2009 2009 2010 2011 2012 2012 2013 2014 2015 2015 2016 2017 2018 San Jose Metro United States SOURCE: Zillow Rental Affordability Index 2018 One Quarter Lag. 9 San José Housing Market Update : 2018
Median Single Family Home Price ($) San José Single-Family Median Home Price Down 2% QoQ, but Up 23%YoY $1,500,000 $1,390,000 $1,400,000 $1,280,000 $1,170,000 $1,225,000 $1,060,000 $950,000 $840,000 $730,000 $620,000 $510,000 $400,000 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 San José Santa Clara County SOURCE: Santa Clara County Association of Realtors, June 2018. 10 San José Housing Market Update : 2018
Median Townnhome Price ($) San José Condo/Townhome Median Prices Up 8% QoQ and 25% YoY $1,000,000 $900,000 $800,000 $930,000 $825,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 San José Santa Clara County SOURCE: Santa Clara County Association of Realtors June 2018. 11 San José Housing Market Update : 2018
Ratio of Median Home Price to Median Income San José Metro Area Median Home Prices 10x Median Income - Triple the National Average 12.0 10.0 10.6 8.0 6.0 4.0 3.5 2.0 0.0 San Jose Metro United States SOURCE: Zillow Price to Income Index 2018 One Quarter Lag. 12 San José Housing Market Update : 2018
Mortgage Payments as a % of Median Income San José Owners Spend More than Half their Income on Mortgages, 3x National Average 60% 50% 51% 40% 30% 20% 17% 10% 0% 2000 2001 2002 2003 2003 2004 2005 2006 2006 2007 2008 2009 2009 2010 2011 2012 2012 2013 2014 2015 2015 2016 2017 2018 San Jose Metro United States SOURCE: Zillow Mortgage Affordability Index 2018 One Quarter Lag. 13 San José Housing Market Update : 2018
% of Homes Affordable to Families Earning Median Income San Jose Housing Affordability Remains Low Relative to the Nation (6 th least affordable) Less than 1 in 8 families in San José can afford to own a median priced home 90 80 70 60 50 57.1 40 30 20 10 11.6 0 2018 2016 2015 2013 2012 2010 2009 2007 2006 2004 2001 2000 San Jose, Sunnyvale, Santa Clara Metropolitan Area HOI National HOI SOURCE: National Association of Home Builders, Housing Opportunity Index 2018. 14 San José Housing Market Update : 2018
Jun-05 Oct-05 Feb-06 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 San José Single-Family Data Single-Family Inventory (Total Listings) Doubles QoQ, Up 16% YoY; Sales Up 18% QoQ & Down 11% YoY 4500 4000 3500 3000 2500 2000 1500 1000 500 666 592 533 0 New Listings Total Listings Sales SOURCE: Santa Clara County Association of Realtors, June 2018. 15 San José Housing Market Update : 2018
Days on Market in San Jose Two Week Turnaround Time for Home Sales in San José 140 120 100 80 60 40 20 15 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 Jun-17 Jun-18 14 Days Single Family Condo/Townhomes SOURCE: Santa Clara County Association of Realtors June 2018. 16 San José Housing Market Update : 2018
Interest Rate Interest Rates Inch Upwards 8.00% 7.00% 6.00% 5.00% 4.00% 4.57% 3.82% 3.00% 2.00% 1.70% 1.00% 0.00% Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 30 Year Fixed Rate 5/1 Hybrid Adjustable Rate Federal Funds Rate SOURCE: Federal Reserve, Freddie Mac Primary Mortgage Market Survey, 2018. 17 San José Housing Market Update : 2018
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 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