Tech Boom Makes Housing Prices Soar in Silicon Valley

Rise in stock values flood the market with money

U.S. home values are currently at an eight-year low, but in Silicon Valley, it appears that the recent tech bubble could be creating a housing bubble, too.

Money from the recent boom in tech IPOs and private stock sales is spilling over into the real estate market in the cities south of San Francisco, where newly wealthy tech employees are bidding up home values, Bloomberg News reports.

In Palo Alto, home of Facebook, the median selling price of single-family houses climbed to $1.63 million in May—a 20 percent increase from a year earlier and the biggest jump since 2008. In Mountain View, where LinkedIn is based (not to mention Google), home prices rose 3.1 percent to $957,500, the ninth year-over-year gain in 12 months. Meanwhile, last month the median price in Cupertino gained 12 percent over May 2010, to $1.08 million, and in Saratoga, values are up 4.7 percent to $1.62 million.

While prices soar, the average age of Silicon Valley home buyers is dropping. “You’ve got young people with real money, and it’s not surprising they want to have a house,” said Kenneth Rosen, an economist from UC Berkeley. In Palo Alto, where traffic at open houses has tripled in the past few weeks, the average age of potential buyers has dropped from about 50 to the mid-30s.

Sales of tech stock such as LinkedIn and Facebook’s expected IPO could fuel this real estate boom into 2013, says Rosen. “It’s just the beginning of the story, and I suspect we’ll see an explosion in the next couple years,” he told Bloomberg. And with companies like Groupon and Zynga helping to grow Silicon Valley by about 20,000 workers in 2011, there should be no lack of buyers willing to pay above asking price for a new million-dollar home.