San Jose finds itself in a difficult dilemma.
Housing inventory remains relatively low, and the region just ranked number one in the nation in home values.
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WATCH HERESan Jose Mayor Matt Mahan concedes the city is way behind. The city needs to build at least 8,000 units per year for the next seven years to meet the demand.
Mahan said the city is partly to blame, with all the fees and red tape for housing projects. Add tariffs to the mix, plus the high cost of lumber and other building supplies, and developers like the Hanover Company were staying away.
"All of these projects take institutional equity," said Scott Youdall with the Hanover Company. "They take large construction loans. So these projects have to make financial sense. Even if we wanted to go ahead, we can’t do that and developers can’t do that without equity and without construction lending."
The city slashed the one-time fees, which can be in the millions, and eliminated a lot of the red tape to get housing projects going. The hope is to lure more developers back to San Jose.
"If you remove them and get the unit in the ground, the ongoing property and sales tax revenue will make up for those one-time fees in a handful of years," Mahan said.
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More homes on the market could lower prices. The National Association of Realtors reported that the Santa Clara County metro area has the highest median price per home in the nation by far at just over $2 million. The Anaheim-Santa Ana area is a distant second at almost $1.5 million.
In the South Bay right now, only a few people are able to afford a down payment.
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SIGN UP "These are people that have been saving their money in the stock market," Compass realtor Cristina Gonzalez said. "The Bay Area is very driven as to the stock market's performance."
Strategists predict home prices should come down with new housing projects, but it still could take years.
