Silicon Valley Property Values in Freefall : In a surprising turn of events, Santa Clara County is on the brink of experiencing one of its most substantial property value declines in 15 years. According to recent data from the Santa Clara County assessor’s office, a considerable number of properties have seen a drop in value, with the count jumping from 2,595 last year to a staggering 19,325 this year. Except for a brief uptick in 2020 during the onset of the COVID-19 pandemic, this marks the first time the county has witnessed such a significant decline since the 2008 financial crisis, as County Assessor Larry Stone revealed.
Stone, with 29 years in his role as county assessor, commented on the local economy and real estate trends, emphasizing their strength over the past nine years, aside from the unique circumstances of the COVID year. He remarked, “I don’t believe the Fed’s definition of a recession applies at this point, but this year presents a strong possibility of being the worst year for assessment roll growth that we’ve seen.”
The sharp increase in the number of properties losing value this year translates to a countywide reduction of $4.7 billion, primarily attributed to residential properties. Interestingly, although the number of residential sales decreased by 29% in the 2022-23 fiscal year compared to the previous year, the median sale price of single-family homes has increased.
Stone explained that as interest rates rise and inflation takes hold, housing values tend to decline. The current high interest rates, hovering around 8%, deter property owners from selling, given that they would be purchasing at much higher rates. However, Silicon Valley has seen consistent job growth and rising incomes, even amid the challenges of the COVID era. Stone noted, “The lack of inventory is driving sales prices up, which is unusual. It’s a situation that deviates from the norm – too much money chasing too few homes.”
The ongoing decline is a cause for concern for Stone, particularly regarding its potential impact on funding public education. A significant 51% of all property tax revenue goes to school districts, and public schools, alongside local governments, are nearing the end of COVID stimulus funding that provided millions to schools. Stone expressed his worries, saying, “Education has yet to fully recover from the impact of COVID, and the situation for public education and school children is more challenging than it is for the business and individual sectors.
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Despite these challenges, the overall value of real estate and business property in Santa Clara County saw a remarkable increase of nearly $41.2 billion in the previous year, marking a 6.6% rise compared to the prior year.
The report also unveils the top 10 commercial taxpayers in the county for the 2022-23 period. Leading the pack is Google, contributing $117 million in taxes, which accounts for 1.5% of its assessed property value of $9.5 billion. Pacific Gas and Electric takes the second spot, contributing $86.8 million in taxes. Notably, the report highlights an unprecedented 9.6% increase in business property value, largely driven by rising acquisition costs and continued inflation.
As Larry Stone aptly summarized, “Inflation played a surprising role in moderating the decline of 2022, with business property values substantially exceeding expectations. It was a twist of fate, and inflation played its part in elevating the assessed values of business properties we were scrutinizing.