Economic Driven
Changes in the economy, both local and national, have caused significant changes in Los Altos real estate trends. In 2000, the dot-com boom, driven primarily by local innovation rather than governmental intervention, fueled a surge in demand for upscale Silicon Valley residences. Conversely, the subsequent subprime mortgage crisis of 2008 led to a decline in the value of homes that had minimal equity. This downturn was largely attributed to national government policies aimed at broadening homeownership among individuals with limited financial means. Unfortunately, inadequate regulation and exploitation of these policies by certain investment tactics precipitated an economic downturn.
Health Concerns and Government Measures
In 2020, the Covid-19 pandemic combined with government policies to disproportionately affect condo prices. The pandemic led to business disruptions and increased remote work. Due to their lower cost, condos are often purchased as a first step into home ownership. Owners are less tied to their first step and, thus, more open to changes in their housing. Opportunities for remote work driven by pandemic health concerns disproportionately affected the demand for condos.
Government initiatives to increase affordable housing availability have targeted multifamily dwellings. Accompanied by low interest rates, these efforts facilitated the construction of more multifamily units. Incentives and mandates were implemented to include units specifically designed to lower housing costs, often requiring them to be sold below market value, thereby contributing to a downward pressure on average prices.
Despite governmental efforts to expand the construction of Accessory Dwelling Units (ADUs) and secondary residences on R1-zoned lots, the impacts on selling new, independently owned, lower-priced homes has been minimal. Furthermore, the potential deceleration in the appreciation of single-family home prices resulting from expanding construction options on a lot is limited if these additions cannot be separately sold as standalone residences.
