"A Tale of Five Cities"-Silicon Valley, California
Thursday, May 08, 2008PAUL KANGAS: Congress is closer to passing a bill to help at-risk homeowners. Late today, the House of Representatives approved a homeowner aid plan to refinance $300 billion in troubled mortgages. The legislation calls for new loan guarantees, tax credits and financial regulation to help fix the ailing housing market. The measure now heads to the Senate, but President Bush has already vowed to veto it.
SUSIE GHARIB: Speaking of housing, our real estate series, "A Tale of Five Cities," heads west tonight with a look at California's Silicon Valley. It's one of the nation's most expensive housing markets, but prices are beginning to show some signs of softening. As Oanh Ha of PBS station KTEH reports, while there are deals to be had, affordability is still a big problem. OANH HA, NIGHTLY BUSINESS REPORT CORRESPONDENT: After years of saving and scrimping, Steve Rodriguez and his wife Norma Salazar, are looking for a home for their growing family. But without the help of financing from a housing nonprofit, this three bedroom town home -- at $545,000 -- would still be out of their reach.
NORMA SALAZAR, PROSPECTIVE HOMEOWNER: Impossible! There's just no way -- no way, because banks nowadays require higher incomes for a higher loan and us, we don't have. We're just moderate income family, so we wouldn't get a higher loan and now with - thanks to neighborhood housing, we got a great loan and we're ready to buy a house.
HA: Home prices in Silicon Valley dropped 9 percent in March alone, but the median price is still $620,000. Economist Stephen Levy says that's making home ownership just a dream for many families.
STEPHEN LEVY, ECONOMIST, CENTER FOR CONTINUING STUDY OF THE CALIFORNIA ECONOMY: At the very worst point, only one in six households in the valley could afford a median home. Now it's up to about one in four, but that's still only 25 percent. Three out of four households in the valley cannot afford a median-priced home right now.
HA: Still, Silicon Valley real estate hasn't been hit as hard as the rest of California, where prices have fallen sharply since 2006. In Santa Clara County, the hub of technology and innovation, the median price year- over-year only began to drop in December.
LEVY: The Silicon Valley economy is still growing. Around the state, most other regions are losing small numbers of jobs and we're adding jobs. And were adding rising amounts of venture capital, so that we have a small but sizeable number of very affluent people who are able to afford these higher median prices.
HA: But there are signs of a softening market. Sales in Silicon Valley in March dropped 46 percent from a year ago, the lowest in two decades. And the number of foreclosures is at a record high. But the overall picture looks rosier because in a few communities, home prices are being pushed up to all-time highs, says Nina Yamaguchi. She manages a Coldwell Banker office of 80 realtors.
NINA YAMAGUCHI, MANAGING BROKER, COLDWELL BANKER: This is one of our brand new listings. It's in one of the hottest neighborhoods of Silicon Valley. It's a three bedroom, two bath. The owners are asking just under $1.3 million and we already have four confirmed offers on it.
HA: Typical buyers of homes like this one have high paying tech jobs, want good schools for their kids and sometimes pay for million-dollar homes in cash.
YAMAGUCHI: The sweet spot of the market tends to be for sure between $1 million and $2 million because those buyers typically are not affected by the credit crunch and if you can afford it, you want to live in that neighborhood.
HA: At the same time, the hardship is growing for families who are priced out of the housing market and are forced to rent. Silicon Valley is the most expensive rental market in California and the rents are going up. Joshua Howard heads the California Apartment Association's tri-county division and says foreclosures and the credit crunch are sending more people into rental housing.
JOSHUA HOWARD, DIRECTOR, CALIFORNIA APARTMENT ASSOCIATION: We have an interesting conundrum or interesting circumstances coming together. You have more people chasing the same number if not fewer, number of housing units.
HA: Rents declined after the tech bubble burst in 2000, but are now heading back up. The average rent in Silicon Valley is $1,660 a month. For Norma Salazar and Steve Rodriquez, that's even more reason to buy. Their landlord has told them their rent is going up. I'm Oanh Ha, NIGHTLY BUSINESS REPORT, San Jose.
GHARIB: Tomorrow, we wrap up our series "A Tale of Five Cities" in Cape Coral, Florida's foreclosure capital.
