THE DELEON INSIGHT
PANDEMIC TRENDS By Ken DeLeon
The pandemic ushered in unforeseen consequences that are impacting consumer tastes and housing market valuations with unprecedented celerity. This article explores the trends caused by the pandemic that will have both positive and negative ramifications upon the Silicon Valley housing marketplace. While it is too early to tell how these trends will impact local housing prices in the long run, they boosted both home values and the number of sales in 2020. As we enter 2021, we are in a period of greater uncertainty than ever before, but we are hopeful that the resilience of Silicon Valley home prices will allow our market to continue holding up as the following housing trends unfold: 1. The pandemic has made technology companies become more valuable. Many experts have hypothesized that the pandemic accelerated technological adoption by as much as a decade. New societal norms now include Zoom meetings, Netflix movies, DoorDash dinners, and overall, more time for social media and internet searches. Tech separating itself from all other industries is evidenced by the Nasdaq gaining 44% in 2020 versus just a 6% increase in the Dow. Many prime Silicon Valley stocks fared
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even better in 2020, with Apple gaining over 80%, Tesla gaining an unprecedented 700%, and IPOs such as DoorDash and Airbnb also doing well. The greatest predictor of future appreciation in Silicon Valley historically has been the Nasdaq's rise or fall, so rising stock prices in 2020 bode well for rising home prices here in 2021. Note that this is a bifurcated recession. While unemployment is relatively high at 6.7% and could go higher, those who are losing their jobs are generally not techies in Silicon Valley, but rather those concentrated in the retail and hospitality sectors. The continued success of tech workers has helped California tax revenues, which were $26 billion above projected levels due to increased stock prices and capital gains taxes received. The increase in unemployment paradoxically coupled with rising tax revenues from stock sales illustrates the bifurcation of this downturn. 2. Residential real estate as an asset class will appreciate in value, whereas commercial and retail real estate will decline. Think of real estate in sectors. Commercial real estate values are already declining as
