Silicon Valley

The shock of Silicon Valley housing costs: how little you can buy on a huge income

If you’ve just been hired as a high level executive at Apple, Google, Microsoft or any other high tech or biotech firm in Silicon Valley, you may be coming to the San Francisco Bay Area and Silicon Valley from an enormous home (5000+ square feet) on an enormous lot (1 acre +).  You are a raging success.  You are highly regarded.  You are on the top of your game.  Your house “back home” displays your accomplishments.

You’ve heard that prices are bad here, but how much worse could they really be? Surely you could downsize a bit to a 3000 to 3500 square foot house on a half acre with a 20 minute commute, right?  And you’d still have great schools for “resale value”, right?   You are prepared to give up the full basement, the pool and tennis court and the 4 car garage.  That is enough of an adjustment, isn’t it?

No, I’m sorry to say, it isn’t.

That house you are leaving behind in the suburbs of New York, Connecticut, Massachusetts, Chicago, Denver, Miami, Seattle, San Diego, or wherever you’re coming from is a super high end luxury home.  It’s probably worth $1,500,000 to $2,000,000.  But guess what?  Here, in a nice area, that’s a 2000 SF house on a 10,000 lot in a good area that’s a tear down.  And in traffic, it’s a 40 minute commute.  Want an acre in an area with really good public schools at all levels? Think $3 million plus.  And that doesn’t mean that the house will be turn-key.  You will very likely have to remodel or personalize so that you are happy with it, as most of our houses were built between the 1960s and 1980s.  (Here a 25 year old home is considered relatively young.)

Why make the sacrifice to live in Silicon Valley?

Why on earth should you move here to the San Jose area when real estate prices are so insanely high? Santa Clara County is bad, and San Mateo County is worse.  Why would anyone make that kind of sacrifice in living space and prestige?

First, because this is a great place to live because of who’s here.  Great minds have coalesced here.  The spirit of entrepreneurship is alive and well and imbues much of the culture here.  Diversity reigns – fabulous people have converged here from all corners of the earth, bringing with them a richness and vibrancy that is appreciated across the area.  Want Ethiopian food? No problem.  Thai? Easy.  Korean, French, Honruran? Check, check, check.  You name it, we seem to have it, whether it’s middle eastern, African, Asian or European, there’s something for everyone. (OK I haven’t yet seen an Australian restaurant, but I’m not sure that food from there is any better regarded than that from England. But generally, you get my drift.)

Additionally, and part of who’s here, we have a number of great universities in the region: Stanford, UC Berkeley, UCSF (for medical), Santa Clara University, San Jose State, UC Santa Cruz (math, marine biology, astronomy and more).

Second, this is a fantastic place to live because the weather encourages a life where you’re not confined to your house and dependent on a big basement.  Listen: 300 sunny days a year.  As I write this in late January 2015, we had a 75 degree day.  Back in the midwest or northeast, they have beautiful snow. Snow for months and months and months. Yes, it’s lovely, but doesn’t it get old?  Here people are golfing, sailing, biking, hiking year round.  Want snow? No problem, drive to Yosemite, Bear Valley or Tahoe.  Enjoy the snow for the weekend – then drive home to the land of palm trees!

Third, this is an exceptional place to live because of what’s nearby.   Within an hour or two we have San Francisco, the Monterey Peninsula and Carmel, Napa and Sonoma Valleys (wine country).  Within 3-5 hours we enjoy Yosemite, Lake Tahoe, Santa Barbara and much of the California Coast.  (California has an incredible array of climates and a diversity of agriculture and economy seldom seen anywhere.)

Moving here means giving up the palatial house and garden and realizing that your accomplishments are simply not going to be reflected in a ginormous house and yard.   The house and yard are often more reflective of when you bought rather than how you were able to buy.

The good news is that Silicon Valley continues to expand and be in demand.  Hiring is strong.  Economically, tech is leading the way and this area was one of the first to emerge from the Great Recession.   Prices are tough to swallow, but as long as huge companies continue to hire, there’s no reason to think that real estate won’t be a wise investment.

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….

Cupertino real estate prices by value tier

 

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).

What does a million dollars buy you in Los Gatos 95030, Los Gatos 95032, and nearby areas: Saratoga, Almaden, Cambrian, Campbell, Cupertino?

What does it cost to buy a house in Santa Clara County? And San Mateo County? Both are home to “Silicon Valley”!

Silicon Valley is a large area, with much of it in Santa Clara County (where San Jose is the largest city with almost one million residents) and most of the rest is in San Mateo County along the San Francisco Peninsula.   So what does it cost to buy a house in these areas? Today I spent some time on MLSListings.com, our local multiple listing service, and pulled the data, which I hope that newcomers will find very helpful.

Below is a chart of single family homes purchased between October 1 2013 and the end of January 2014 by price point.

Santa Clara County sales of single family homes:

Santa Clara County home prices Jan 2014

As you can see, only a tiny fraction of homes sell for less than $400,000.  Most people pay between quite a lot more, with many sales happening in the $600,000 to $1,000,000 range (and it’s more in the areas with best schools and short commutes, generally, so many are much higher, too).  The average Santa Clara County home sales price was $1,002,119 and the average price per square foot was $526.

How about San Mateo County prices?  As you may know, The Peninsula is pricier than it’s warmer neighbor to the south. But how much more will it cost you?

Santa Clara County sales of single family homes:

San Mateo County home prices Jan 2014

The average sales price was in San Mateo County for the last three months was $1,254,114 and average price per square foot was $625 (all sizes of houses and lots throughout SMC).  This is about 20% than Santa Clara County.

Guest Article by Vivek Ranadivé: “Discrimination in Silicon Valley is a Myth”

Florence Il Duomo Santa Maria eli FioreA few days ago I read the article below in the San Jose Mercury News, penned by Vivek Ranadivé, on the topic of discrimination in Silicon Valley.  I loved his striking analogy to Florence, Italy, during the Renaissance – a place where I studied in college – and thought that this piece had a lot of merit.  The one caveat, though, is that in my experience there is certainly a very pronounced, impossible to miss age discrimination in Silicon Valley among the high tech companies.  Anyone more than 50 or 55 years old may feel that his or her job may be cut at any time and handed to a younger, less expensive employee.  Once this last holdout of bias is gone, then perhaps the correlation with exquisite Florence will be exact. The article below is republished with permission. – MPH

Discrimination in Silicon Valley is a Myth, by Vivek Ranadivé

Lately, I’ve been hearing criticism about diversity in Silicon Valley that deeply saddens me. Some people seem to think that gender and race discrimination in the Valley are still roadblocks to career advancement, preventing some people from pursuing opportunities given to others.

I disagree with this completely.

It’s no secret why scores of foreigners flock to Silicon Valley each year. It’s home to some of the best universities, some of the world’s most innovative companies and some of the brightest minds in history. It’s a region that prides itself on disrupting the status quo and pushing the envelope.

What I’ve witnessed in my 30 years in the valley contrasts starkly with recent criticisms.

Since day one, it has welcomed me, and many other Indians, with open arms. And not just Indians — any ethnic group willing to pour their hearts and minds into developing the “next big thing.” Take a walk through the hallways of any business in Silicon Valley and you’re likely to witness a melting pot of young intellectuals from every corner of the world. Silicon Valley not only embraces ethnic diversity, it highly encourages it. That’s what has made this region so successful.

I like to compare Silicon Valley to Florence during the Renaissance. Led by some of history’s brightest and most progressive minds, Florence was the world’s epicenter for art, music, politics and technology. If you wanted to make a name for yourself in the early Renaissance, Florence was where you had to be. The parallels to Silicon Valley are clear — from the Traitorous Eight to the late Steve Jobs to the Google and Facebook guys, so many of the most innovative and intelligent people of the past half-decade have lived and flourished here. As a result, the valley continues to attract the best and brightest from all over the world. Continue reading

Is it better to rent for awhile, or purchase a home when you first move to Silicon Valley?

Buy or rent firstIs it a good idea for newcomers to Silicon Valley to rent for a year, or smarter for them to purchase right away?  Normally, I would suggest deciding where you want to live generally (example, Almaden area of San Jose 95120) and renting there for a bit first just to make sure it’s where you want to be.  This is especially true if you have children who will be in public schools, as it can be rough on them if they change again once you’ve been here for awhile.   Renting first enables you to learn the area and takes some pressure off.  Also, it can take some time to move money from overseas for your down payment, so the little extra time can help there, too.

However, many people want to buy immediately and will make several trips here before the move to find and purchase a home.  Often this is because they see the value in owning (tax benefits, getting kids into certain schools).  I’ve had many people tell me that it helps them to establish themselves in their new community faster if they buy rather than rent.

Right now interest rates are very favorable.  Lawrence Yue, the chief economist for the National Association of Realtors, recently stated at our annual conference in San Francisco that he’s expecting interest rates to go as high as 5.4% by the end of 2014 (as of right now, it’s hovering between 4.125 and 4.25%).

What does this rise in interest rates mean in terms of housing affordability?

$500,000 mortgage, 30 year fixed at 4.25% = monthly payment of $2459

$500,000 mortgage, 30 year fixed at 5.4% = monthly payment of $2807

Difference = $348, or a 14% increase in the monthly payment

Or, let’s look at it in terms of buying power.

$2500 mortgage payment, 30 year term at 4.25% = loan amount of $508,192

$2500 mortgage payment, 30 year term at 5.4% = loan amount of $445,211

If the interest rate goes up to the 5.4% that the NAR chief economist expects, that cuts into the buying power of a $2500 payment to the tune of almost $63,000.

For most people, the cost of waiting is a significant factor in this buy vs rent decision.  My concern is that many people who elect to lease or rent for a year do not understand the risk that may accompany waiting. For most folks relocating to the San Jose or Peninsula area, the hardest thing to manage is the cost of housing.  This could become substantially worse by putting off the purchase for a year, so right now I cannot recommend doing that.  The low interest rates are a gift that won’t be around forever.

Want more info?  Please see my Valley of Heart’s Delight blog, with the related article
How will rising interest rates impact your home buying power?

Celebrating Halloween in Silicon Valley

Halloween HouseIf you are new to Silicon Valley, you may wonder what the customs are around Halloween, which is always October 31st.   It’s pretty simple.  Kids get to dress up in costumes and go door-to-door in residential areas (houses, usually, but also condos, townhouses and apartments) and say “Trick or Treat” and receive the treat, which normally is candy.

People in homes are expected to have candy of some sort to give away if they have their lights on, a jack-o-lantern burning or any Halloween decor. If the house is dark or unlit, it should be skipped. Most houses will have a jack-o-lantern, meaning a carved pumpkin with a candlelight (or something similar) in it.

In some areas, such as the Almond Grove area of Los Gatos, homes may get as many as 200 kids in an evening!  In other areas, where homes are spread out or for some other reason it’s not so popular, there may be 20 or less.

Finally, parents should accompany children as they go door to door.  Candy is not given to adults – it is tacky for grownups to come with a bag or even in costume to collect sweets. Don’t do it, you’ll appear greedy and uncouth. It is also uncool for trick or treaters to expect candy if not in costume.

Have fun and be safe!

Happy Halloween!

Where do people in Silicon Valley go for snow skiing, snow boarding, and cross country skiing?

SnowboardSnow sports are very popular with Californians, whether it’s downhill skiing, cross country, snowboarding or snowmobiling.  If you move to Silicon Valley, or anywhere in the San Francisco Bay Area, where is the nearest ski resort?  The closest sites are all in northern California, of course – but there are more in SoCal, so if your travels bring you closer to LA or Palm Springs, you will want to research southern California ski resorts.

The shortest travel time for snow boarding, skiing and cross country seems to be Bear Valley, which is about 3 hours east of San Jose and Santa Clara County.  Not bad!

A more popular area, though, is a little further: Lake Tahoe.  This spectacularly scenic area straddles the states of California and Nevada and people speak generally of “north shore” and “south shore” Tahoe.  The resorts are spread around the region and include spots at Truckee and Donner as well as closer to the water.   There are 15  resorts in all!  Some have higher elevations (such as Mt. Rose), so they will be open later into spring than those closer to the lake.  If you want to gamble and see shows, you will likely find yourself drawn to either Reno or South Shore, since they are in Nevada and casinos abound.  Some of these resorts have shared season passes (such as Squaw and Alpine).  A good site which gives and overview of each one is: http://www.onthesnow.com/lake-tahoe/ski-resorts.html    This tends to be about a four to five hour drive unless there’s terrible traffic, an accident, bad weather – in which case, it can be many times as long a drive.

Yet another beautiful place to ski is Yosemite Valley’s Badger Pass. Yosemite, like Lake Tahoe, is a beautiful place to visit year round.  (For Tahoe, winter and summer are strong tourist months, and there are often great deals on hotels in the “in between” seasons – between skiing and golf or hiking.)

How long is the ski season in northern California? The weather varies from year to year but often snow skiing season begins in November and finishes in March, but it all depends on the snow levels and temps.

It’s not too soon to begin planning your snow adventures!  Have a great season!

 

Which Silicon Valley areas are the most European feeling?

Beckwith Building in downtown Los Gatos, California

The beautiful Beckwith Building in downtown Los Gatos, California

I have been fortunate to have made 5 trips to Europe, one of them lasting 9 months, and will be returning again before the end of 2013 (this time to Belgium).  It is so diverse, beautiful and compelling! Having experienced a little culture shock myself (when living in Florence, Italy, for one year of university), I’m very sympathetic about how hard an international move can be, and I understand that for Europeans moving to Silicon Valley, there can be an acute culture shock, particularly for those coming from more rural areas.

The bulk of Silicon Valley is located in Santa Clara County, which is at the southern end of the San Francisco Bay.  In this county, there are approximately 1.8 million people, almost a million of them in the city of San Jose.  Some areas, or districts, of San Jose have a distinctive character and are almost like towns or small cities themselves.  So in this article I’ll mention both cities and towns, but also areas or districts of San Jose, which might appeal to our European transplants.   Most of my comments will reference Santa Clara County or “south bay” locations, but I will also mention others on the San Francisco Peninsula and SF Bay Area too.

Architecture, Urban Centers and Charm

It is an unfortunate negative in Silicon Valley that much of our housing consists of ranch style tract homes, and truthfully, they are not exactly a work of art.  New or newer homes tend to be on very tiny parcels of land (or “lots”) and for many people may simply feel too congested or crowded. But there are beautiful residential neighborhoods – you just need to know where to look!  In many ways, the areas with higher charm can make our global home buyers feel more comfortable than if they were faced with only track, ranch neighborhoods.

Do you value unique, older architecture with Victorian, Craftsman, Tudor or other home styles? Then check out these areas:

  • Within San Jose: the Japantown, Vendome, and Naglee Park areas of downtown San Jose. Also in central San Jose are the Rosegarden, Shasta Hanchett and Burbank neighborhoods which all boast some lovely older homes.  Or, if you love classic Spanish Revival style homes with views, consider the old Alum Rock area of San Jose near the country club (golf course).  The Willow Glen area of SJ (zip code 95120) is full of lovely old established neighborhoods with historic homes and tree lined streets.  If your job takes you to downtown San Jose, all of these areas will be fairly close.
  • If you want a rural, eclectic atmosphere, check out the “New Almaden” area of San Jose.  This is actually a county pocket with a San Jose mailing address.
  • Other towns or cities with older, more interesting architecture include the “downtown” ares of Los Altos, Palo Alto, Los Gatos, Campbell, Mountain View, Saratoga and Menlo Park (in San Mateo County, just north of Palo Alto).
  • If work will be on The Peninsula, there are many areas nearby that may work.  San Mateo has some fantastic neighborhoods!  Also San Francisco, which is tiny but full of beautiful areas, may be a strong draw (I do not sell there – it’s too far for me).   Warning: the weather in San Francisco is very often COLD in summer!
  • Across the bay, Berkeley has some great Victorian and other homes and several really interesting pockets, as does parts of Oakland.  (I do not work these areas either as they are too far for me, but I did live in Berkeley in graduate school and can connect you with a great agent there.)
If what you want is a “walk to town“, urban experience, many of the areas above will work for you.  Additionally, there are a couple of more recently built areas that might appeal to you – Santana Row in San Jose (along the Santa Clara border) or the Rivermark area of Santa Clara off of highway 237, close to the bay.

How to find a rental home in Silicon Valley

Rentals from RealtorsFinding a rental home in Silicon Valley can be challenging.  Where to look?  Can a Realtor help you?  (Not very much.)

In many areas of the U.S., real estate agents actively work the rental market.  In those areas, owners are willing to pay a commission for the service, and houses and condos are listed in the local multiple listing service.

Not in Silicon Valley, though.  Instead, it’s a land of “for rent by owner”.  A few properties may be on the MLS (see link below), but hardly any. Far less than 5%.

Craigslist – http://sfbay.craigslist.org – houses, townhouses, condominiums (best resource)
MLSListings – http://www.MLSListings.com – very few listings of rentals, but all legit!
Trulia – http://trulia.com – click on “Rent” tab – mixed housing types
Zillow – http://www.zillow.com/ – click on “Rent” tab – mixed housing types
Padmapper – https://www.padmapper.com – apartments
Prometheus – http://prometheusreg.com – apartments
Please beware that there are many scams around rentals. Be extremely careful!  Some scams ask for money upfront, before you can even see the property.  Many of these homes are actually for sale, so Google the address to check.
Sometimes we Realtors have “courtesy rentals” where we share wants and needs without being paid (as a courtesy to our clients).  Don’t count on finding a property this way, but if you have a Realtor you’ve been chatting with, it’s not a bad idea to let him or her know what (specifically) you are wanting and if he or she hears of something, can get back to you with that match.  Odds of that working are less than 1% so use the list above, or drive around where you’d like to live!  If you’re a corporate relocation situation, your hiring company may be able to assist you with additional resources.
What do rentals cost?  One source of info is Rentometer.com.  I found it to be a little low in some areas but still a good starting point. www.Rentometer.com.

Related reading:

Why is it so hard to find a rental home in Silicon Valley now?

Finding Rental Housing in San Jose, Santa Clara County and Silicon Valley

Mary Pope-Handy
Realtor,
CIPS, CRS, ABR, SRES
Sereno Group
214 Los Gatos-Saratoga Rd.
Los Gatos CA 95030
[Silicon Valley, California, USA]
1-408-204-7673
mary (at) popehandy.com
CA BRE # 01153805

CIPS - Certified International Property Specialist
CRS - Certified Residential Specialist
ABR - Accredited Buyer Representative
SRES - Seniors Real Estate Specialist

Helping nice folks to buy and sell homes in Silicon Valley since 1993. Mary Pope-Handy, Realtor, Silicon Valley
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Listings by Price Range
Below please find a list of SOME of the popular Silicon Valley areas with listings offered by price range. This is not a complete list! Please use the "search" app to find ALL properties on the MLS.
Trends & Statistics

Click the link below to get real estate data for Santa Clara County, San Mateo County, and Santa Cruz County (together making up about 98% of "Silicon Valley").

Real Estate Market Statistics and Trends for Santa Clara County


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