View from Silicon Valley- Santa Clara County Statistics released.
(c) copyright, View from Silicon Valley, 2004. All rights
reserved.
The latest Santa Clara county statistics are
out and it's more of the same:
Year-over-year total jobs shows
a decline. Both jobs and total population are down year-over-year but,
since jobs are declining more slowly than people,
the unemployment rate continues to plummet. Do not assume Silicon Valley's 27%+
decline in the unemployment rate is good news.
Despite fewer people
working and fewer total people, Santa Clara housing continues to spike ever upward. (Although compared to southern
California, our housing spike is tame.)
While shopping the rental market, I've
spoken to a number of prospective landlords who complain
they just can't rent charge what they used to get last
year or two years ago, not to mention in 1999 -2000. Several are holding out with vacant properties rather
than drop the rent another 5% -10% and get a tenant moved in. They blame
low interest rates and think increased rates will allow them to charge increased rents. A
belief that higher rates will hurt the housing market is in direct contradiction real
estate agents who assure clients house prices will be unaffected.
Along the same lines, a guy in apartment investing businesssays they are getting by on cap rates of 2% -3%. He
grumbles this is down from their usual 8% -9% but still better than treasury
bonds. (No mention of how treasuries always return 100% of the
principal when held to maturity.) He is "optimistic" housing has topped and his apartment cap rates will soon
start to improve (since they will be able to raise rents) .
(Notice his "optimism" is also in direct conflict with the average real estate
agent's "optimism. ")
One
rental property we considered was newly acquired for $1.92M in July'04 and available for rent at $2,690 per month. What's the cap rate on that "investment"?
San Jose International Airportpassengers are up Y-o-Y, and since the Sep'02 "bottom,"
but hotel room occupancy is down. This suggests the airport traffic
is tourists, not business people. Judging by atiny
Y-o-Y decrease in hotel room prices in the face of a 23% occupancy decline, hotel management is willing to endure vacancies rather than droprates . (Or maybe business is so bad that lowering the room rates wouldn't
help?)
New business applications are down, although this figure is
volatile. A recent news report breathlessly told us a foundation to nurture entrepreneurs
is very strong and has stayed strong throughout the downturn. Even so, VC numbers are dramatically below the peak and
Silicon Valley continues to lose share nationally. A couple VC's predict it will be another 10+ years before new VC-funded
companies drive employment back to peak levels.(*) (One even says it will be 15 years.)There are a lot of people trying
the entrepreneur route because salaried jobs are just not available.
Office R&D space is in an uptick for the last couple months but
the rate is still in the 23% -24% range. Commercial real estate
brokers claim their vacancy rate is "only" 17 -18%. Either set of numbers
suggests a lack of activity in office leasing...
June Jun'04
v. Jun'04 11-mo
Avg. Y-o-Y Sep.'02 Res Employed (Ku) 819.9 836.3 -3.10% -7.11% Unemployed (Ku) 54.4 61.4 -31.9% -34.7% Total Workforce 874.3 897.7
-5.58% -9.49% Unemployment Rate 6.2% 6.8% -27.9% -27.8% Total
Jobs 852.5 854.1 -2.60% -5.66% Med Home Sale (K$) 599 537 15.2% 19.8% Homes Sold 2450 1937 49.1% 108% Bankruptcies filed 654 676 -4.53% -1.95% New Business App.s 808 996 -17.3% -14.2% Air Passengers (Ku) 1018 903 3.50%
21.1% Air Freight Tonnage 9973 9479 7.70% -17.27% Total
rooms (Ku) 54.0 59.1 -23.5% -24.8% Avg room rate ($) 108.6 110.7
-0.40%-14.7% Avg hotel occupancy 43.6% 48.1% -22.90% -15.94% Hotel
room rev(K$) 5,862 6605 -23.8% -35.8% Ofc/R&D
lease (Ku) 51.8 53.7
-2.70% 10.3% % office for lease 23.8% 24.7% -3.49% 8.56% App'vd bldg(Ku)192557 171071 -8.70% 3.04% Non-res
(Ku) 74246 67881 15.2% -25.9% Residential
(Ku) 118311 102110
-19.3% 33.2% Non-res/Res split 38.6% 39.8% 26.2% -28.1% New
housing units 361 411 -54.8% -15.1%
Bottom line: Something is still "not right" in Santa
Clara county. Either employment or housing figures to change direction--
soon. Send me your vote on which you think it will be.
