It can be really challenging for people moving to Silicon Valley to get a sense of pricing for home buying. So to compare “apples to apples,” let’s take a hypothetical case of a 4 bedroom, 2 bath home of approximately 2,000 SF house (appx 185 square meters) and see how the cost looks in one area versus another.
Today I compared several areas and cities using the same formula: homes of 1800 – 2200 SF, 3-5 bedrooms, 2-3 bathrooms, on lot sizes of 6000 SF to 10,000 SF that have sold within the last 90 days (120 days when there’s less inventory, 60 when there’s more). Here’s how it shakes out in the “west valley areas” along the Highway 85 corridor. What areas are most affordable? One way of analyzing this is the “price per square foot” figure. How competitive is it? Have a look at the DOM or “Days on Market” figure. All of these days on market are short, but they range from low to heart-skipping fast. Please also note that while most of these numbers are working on a handful of sales, Mountain View and Saratoga had only two each over the last 3 months that fit the criteria, so the data may not be as accurate in that row as others, like Cambrian in San Jose which had 23 sales in the same time. Now let’s have a look.
How much have prices changed? I’m trying a different approach this time to arrange the chart, showing areas that have moved up on the chart in white and those which have moved down in the darker rows. While that shows how prices have changed in relation to other areas, and for the most part the rankings don’t change very much. Compare each individual market to where it was last July and you’ll see that prices everywhere are up from summer 2017.
This chart was from last July.
Below is another flashback to March 2017. Do you notice the difference in ordering? A couple of markets have switched places, Sunnyvale and Saratoga, but there’s not too much different. For the most part, rankings have changed very little.
This next chart was from last March.
In most cases, the most expensive and desirable places have either the best schools or shortest commute location. Had I ranked these for school scores, you’d find that Cambrian is fairly high up and a good “bang for the buck” location – though not a super short commute for folks who work in Mountain View (though not so bad for people working in Cupertino). None of these is especially close to North San Jose (Cisco).
What about a little longer term? What did this look like in 2013? Click through to see. Continue reading
Edit: I originally wrote this post on August 12, 2013, but it is still accurate today, January 25, 2018, and probably will be for years to come.
- Palo Alto (very costly)
- Cupertino (less expensive for the school scores compared to other areas up to #5 on this list)
- Saratoga (very expensive)
- Los Altos & Los Altos Hills
- Los Gatos & Monte Sereno (95030 & 95032)
- Parts of San Jose in Cambrian 95124 and Almaden 95120 (very good value)
- The Los Gatos Mountains (zip code 95033)
- Parts of Fremont (Mission San Jose area)
You’ve probably heard that buying a home in Silicon Valley is a bit like purchasing real estate in Manhatten, London, Tokyo, Paris, or other regions where the prices are in the stratosphere. It’s true. It’s a strong seller’s market.
And yet, every day, homes are bought and sold in the San Jose – Palo Alto – Foster City area. They aren’t all cash; perhaps 20-30% are bought without any loan or mortgage, but the rest of the properties are sold with some sort of financing.
Here’s a quick summary of what is needed to buy a house, condominium, or townhouse in Silicon Valley (this list applies MOST of the time and with few exceptions):
- A large down payment is needed – usually 25% or more – to win in the multiple offer situations which are the norm right now.
- Nerves of steel: it’s scary to buy a house, but here, many homes are purchased without the normal contingencies for loan, appraisal or inspection. (But home sellers do provide a full battery of inspections that you can review before making your offer in most cases.)
- The ability to move quickly and decisively as the best homes sell very, very fast – often in a week to nine days. In the last 30 days, there were 385 houses which sold and closed in the city of San Jose. Of those, 282 went under contract and became pending sales in 14 days or less. That’s 73%. In Sunnyvale the numbers were 47 and 47, so 79%. Here you need to be 110% sure. If you give off signals that you are hesitant, your offer is unlikely to be accepted.
- It’s a big help if you have a really good Realtor who’s known, liked and respected in the local real estate community. Listing agents will prefer to work with an agent who’s trusted. In some areas, like Palo Alto, many homes sell “off market” and then the full inventory tends to be known only by those local and trusted agents.
- A strong lender, especially if you are coming from abroad, who’s experienced in tracking work history, credit, etc. in other countries (and in some cases other languages). Don’t just walk into a bank and pick someone. Get a good recommendation, either from someone at your company who’s had a similar experience or from your Realtor, who should be used to working with international home buyers.
- Being clear on priorities and being able to put them in order is crucially important. It’s usually not possible to get everything on the wish list and also get it in budget. So decide which is most valuable to you: schools, commute time, home type (perhaps you can get what you want, where you want – but only if you buy a condo?), commute time or?
Those are the key ingredients. Perhaps the hardest one, when getting started, is the last one. Let’s talk about that.
Priorities list: pick any 2 out of 3
A request I often get is to find a nice sized home and yard in good shape with good schools and a commute to Palo Alto that’s under an hour. So far, so good. Then comes the desired price tag: under $1,200,000 or under $1,500,000. You can get the home, yard, schools, and commute, but it won’t be under $1.5 million for a good sized, remodeled house and a big yard with better schools. The price tag fitting that description is probably closer to $2 million due to our clogged commute routes.
One of the best areas in terms of schools and pricing is Cambrian, which is a part of San Jose, with either the Union School District or the Cambrian School District. You can get a Cambrian home with good schools for under $1.4 million and it will have a decent sized lot, be in good condition, etc. But the morning commute to Palo Alto will likely be a little more than an hour, and the evening commute perhaps 80-90 minutes, depending on where in PA or Cambrian you’re going and what time it is. A nice house in east Los Gatos with the same schools but more house and yard will probably run around $1,700,000 to $1,800,000 for 2500 SF on a 10,000 SF lot.
Cupertino has great schools but the houses there tend to start at around 1.5 million – so if you are ok with a townhouse or condo, that might work.
The upset as reality sinks in
Most home buyers, even if they’ve studied the market here intensely before arriving, go through some strong emotional stages as they learn the real estate ropes and what their budget can and cannot buy. Sometimes the main shock hits before arriving, though. Recently I got an email from someone moving here from the south, who lamented the situation with a question along these lines: “can you explain to me why home prices in Silicon Valley are 5-6 times more than they are in Atlanta?” It is that bad, yes, and I am sorry. It is upsetting. The faster you can move through the shock and upset, the sooner you’ll be able to clear the emotional clutter and buy that next home and really settle in.
Focus on the positive
The good news is, aside from the cost of housing and the traffic, San Jose – Sunnyvale – Los Gatos and whole Silicon Valley region really is a wonderful place to live. We enjoy 300 sunny days a year on average. San Jose has often been named the best place to raise kids. The intellectual climate cannot be beat as we have great minds from all over the world here. The coast is close, and so is San Francisco. If you do buy a home, appreciation may be substantial, far more than in most of the U.S., if you can “buy and hold“. (We’ve had a lot of real estate corrections and downturns since the 1940s, but look at some old Los Gatos real estate home prices then and see the buy and hold value at its best.)
If you’re moving to pricey Silicon Valley, your goal may not be to find the very most expensive places to live. However, if you are coming here and looking for great schools, it’s very likely that the list of places with fantastic public schools will overlap considerably with that of expensive real estate.
A couple of weeks ago, the Business Insider compiled a list of the 20 most expensive zip codes in the area, and also compared the median sale price in 2014 with that of the same zips in 2013 so you can see how much prices are rising. These are the median sale price and does not reflect cost per square foot. If you want a 2,000 SF house, you may not easily find it in the toniest areas!
Their 2014 Silicon Valley areas include zip codes within Atherton (94027 median sale price $3.9 million in 2014) , Los Altos Hills, Palo Alto, Portola Valley, Hillsborough, Saratoga, Cupertino, Los Gatos, Menlo Park, Sunnyvale, Mountain View, Redwood City, Belmont, San Carlos, and the Almaden Valley area of San Jose (95120, median sale price $1.177 mil in 2014). Since it’s by zip code, some towns or cities show up twice, for more and less costly parts of that community.
Surprising omissions are Woodside and Los Altos.
Not sure how Almaden could be more costly than those two areas, but this is the list they compiled. Read the whole article with the specifics here:
How do home prices compare between Los Gatos, Saratoga, Cupertino, Campbell, and areas of San Jose such as Cambrian, Almaden and West San Jose?
Yesterday on my Live in Los Gatos blog, I compared a number of “west valley” areas in Santa Clara County, or southern Silicon Valley, to provide a sense of how much home you can get for your money in Los Gatos, Saratoga, Cupertino, Campbell, and areas of San Jose such as Cambrian, Almaden and West San Jose. I used my Altos Research weekly newsletters, which provide a snapshot view of four real estate pricing tiers for various cities or areas. In these, you see the median list price per quartile with the type of square footage, lots size, beds and baths found for each one.
Let’s look at Cupertino first, since I get a lot of folks wanting to relocate to Silicon Valley for Apple employment, and many of the new recruits have heard about the wonderful public schools in that city – a major draw. A few years ago, it was very possible to purchase a small house in Cupertino for under a million dollars. But have a look at the chart below and check out the days on market as well as the other data….
In many areas, the most affordable homes are the ones that get gobbled up fastest. Why is it that in Cupertino, the lowest priced listings are on the market the longest? It’s not their size – I can tell you this from two decades of experience selling homes in the Bay Area. It is very likely that these properties are not too livable as a group. They probably need serious remodeling or rebuilding (and perhaps expansion as well). Most buyers do not have the cash to totally “rehab” a house, especially if they are starting at over $1,000,000. If you want to live in Cupertino and not throw a ton of money into the existing house, or tear down and rebuild, you’re most likely to need a budget closer to $1.3 or $1.4 million as a starting point. Want to be able to walk to Infinity Loop? Make that $1.5 or more – and you will still need to do some remodeling unless it’s very small!
What about other nearby Silicon Valley communities and neighborhoods? Please have a look at the full article with charts for a number of areas (plus one for all of San Jose).
Comparing real estate market conditions in Almaden, Los Gatos, Saratoga, Cupertino, Sunnyvale and Los Altos
For people relocating to Silicon Valley, often there’s not just one city, town or area which seems like a good fit. Sometimes it may come down to what your money can buy or how difficult it is to purchase in one area versus another. This is frequently the case with the “West Valley” areas where schools are good and the neighborhoods are tidy.
There are two statistics which are especially helpful in understanding the Santa Clara County real estate market. One is the “days on market” or DOM. The shorter this is, the hotter the market – and the harder it is to purchase. The second is the sale price to list price ratio, which hints at the existence of multiple offers, overbids, and buyers giving away all of their rights.
Today, then, we’ll have a look at these, starting with Almaden, the southernmost area, and working our way north along the coastal range. The charts below are all for single family homes (houses and duet homes, not condos or townhomes).
Almaden Valley is a district within the city of San Jose. Its boundaries roughly follow the 95120 zip code, though there are some parts of nearby zip codes which somewhat overlap into Almaden too. How’s the Almaden market? Red hot! Days on market is crazy low – a mere 16! And the average sale price is almost 104% of list price…and rising!
Almaden Valley, San Jose, 95120 days on market and sale price to list price ratio
The Silicon Valley real estate market is spread out over a few counties, primarily Santa Clara County but also much of San Mateo County and part of Alameda and Santa Cruz Counties. Santa Clara County is home to about 1.8 million residents, more than half of them in the big city of San Jose. The high tech companies such as Cisco, Apple, Google and more are spread out around the valley, and each neighborhood has a very different set of housing market conditions. Even so, we’ll take a broad view of the county today to give some general indicators on what you might expect when moving here.
As a whole, home prices in Santa Clara are rising due to a dire scarcity of listing inventory. On average, houses sold in December were overbid and the sales price to list price ratio was about 102%. Here are the numbers at a glance:
|Trends At a Glance||Dec 2012||Previous Month||Year-over Year|
|Median Price||$682,500||$685,000 (-0.4%)||$530,000 (+28.8%)|
|Average Price||$908,873||$885,921 (+2.6%)||$714,562 (+27.2%)|
|No. of Sales||899||903 (-0.4%)||903 (-0.4%)|
|Pending Properties||980||1,500 (-34.7%)||1,396 (-29.8%)|
|Foreclosures Sold||25||34 (-26.5%)||112 (-77.7%)|
|Short Sales Sold||154||138 (+11.6%)||229 (-32.8%)|
|Active Listings||534||782 (-31.7%)||2345 (-77.2%)|
|Active Foreclosures||22||27 (-18.5%)||173 (-87.3%)|
|Active Short Sales||39||52 (-25.0%)||980 (-96.0%)|
|Sales Price vs. List Price||102.6%||102.3% (+0.3%)||98.7% (+3.9%)|
|Days on Market||36||32 (+11.3%)||63 (-42.8%)|
Though there was a slight slippage in values from the prior month’s median sales prices, the average price was up 2.6%. More dramatically, though, prices were up 27-28% from the year before! Foreclosures and short sales are way down. Inventory is critically low, off 77% from a year earlier.
It is a very deep seller’s market in Santa Clara County. Some areas, such as Cupertino, are very difficult for buyers right now. Cupertino’s prices are already past the last peak pricing and have only about 2 weeks of inventory.
|Trends At a Glance||Dec 2012||Previous Month||Year-over Year|
|Median Price||$1,343,880||$1,325,000 (+1.4%)||$982,500 (+36.8%)|
|Average Price||$1,304,180||$1,373,820 (-5.1%)||$1,085,210 (+20.2%)|
|No. of Sales||26||27 (-3.7%)||24 (+8.3%)|
|Pending Properties||18||23 (-21.7%)||13 (+38.5%)|
|Foreclosures Sold||0||0 (N/A)||0 (N/A)|
|Short Sales Sold||0||0 (N/A)||0 (N/A)|
|Active Listings||13||26 (-50.0%)||31 (-58.1%)|
|Active Foreclosures||0||0 (N/A)||0 (N/A)|
|Active Short Sales||0||0 (N/A)||4 (-100.0%)|
|Sales Price vs. List Price||102.9%||104.4% (-1.4%)||96.4% (+6.7%)|
|Days on Market||31||33 (-5.8%)||52 (-40.7%)|
To get the full report with much more data and information for all areas within Santa Clara County, please see www.popehandy.rereport.com.