Silicon Valley housing prices and the emotional stages they’ll put you through

Stages of Silicon Valley real estate sticker shockIt’s no surprise that housing prices in and around Silicon Valley are extremely high. So when moving to or purchasing a home in the area, know that getting over Silicon Valley real estate sticker shock happens in stages.

The 5 Stages of Housing Sticker Shock

First there is disbelief or denial.  “It cannot be that bad – people are exaggerating.”  That’s followed quickly by “I thought it was bad where I used to live!”

Then there may be outrage (anger is too mild a word): “Why would anyone pay that to live there?”

Next, a little bargaining: “What’s the work around? Are there any bank owned homes?  How about something older – I don’t mind a 15 year old house…” (To us, that’s a young house, by the way.) “What about buying a lot and building?”  Or the commute negotiation “I thought I had to be within 15 minutes, but I could go 30.”  A typical commute might be 30 minutes in the morning, but 45 in the evening.  Many people have worse than typical, though, as they want a bigger, nicer home, better schools, quieter location, etc.

Depression soon follows suit. This may be accompanied by “We just cannot do it” or “We are not willing to do that” (until they see that rents are $4000 for a smallish house in an only OK area and $6000 per month for a decent sized home in a good area.)

Acceptance comes at last. Either you can and will buy locally, or you won’t. For some, coming to terms with our local market costs means they’re ready to go all in, bite the bullet, and buy locally. That may mean spending more or getting less than what you would like. It may lead others to move out of the immediate area and embrace an hour-long commute, or to take the Apple or Google bus to work, if applicable. Or perhaps they choose to rent indefinitely (although this can also appear in the other stages).

Alternatively, it could lead some people to move to Seattle, Orange County or somewhere a little less overwhelming in terms of housing costs where they can buy the home they want.

Burning Money While Housing Prices RiseMoving Through the Stages – Acceptance of Housing Prices

Progressing through the stages is often not a straight line.

Sometimes people think they are at “acceptance” as they write offers which are habitually 5-15% too low.  In reality, they are actually still somewhere between the “denial” and “bargaining” phases, either refusing to believe the market data or hoping for a good deal amidst our raging seller’s market. That “good deal” doesn’t usually happen. Writing multiple unsuccessful offers frequently leads to depression, and sometimes even blaming their agent for their offers not going through (outrage), even when it’s clear at closing that their offer price or terms were the issue, and they were recieving good guidance from their agent that was disregarded (denial).

So how fast can you expect to get to the acceptance stage and write a realistic purchase offer? Honestly, everyone will go at a different pace, but the sooner the better. For people who could have bought 12 months ago but are still shopping now, that wait has cost them about +10% of their home price in many cases, possibly more. For those who have been looking 3 years, it’s more than double that. At that point, it’s like setting a match to your entire down payment.

If you want to be a successful home buyer in this crazy Silicon Valley real estate market, you will need to get onboard quickly, because the longer you take to get to acceptance, the more expensive your final home will cost when the market is appreciating, as it has been for about 3 years now.  Time is money and nowhere is that more true than in the San Jose, Silicon Valley, or South Bay real estate market.

 

 

Looking for more Silicon Valley real estate resources?  Here are a few of my other sites, blogs, and market stats tooks:

popehandy.rereport.com – real estate statics for San Mateo County, Santa Clara County, and Santa Cruz County

popehandy.com – Silicon Valley real estate, Los Gatos real estate, info on many areas of the realty market in Santa Clara and San Mateo counties

SanJoseRealEstateLosGatosHomes.com – Santa Clara County real estate, special focus on San Jose areas of Almaden & Cambrian and also Los Gatos with info on the real estate market, neighborhoods, and more

LiveInLosGatosBlog – Los Gatos real estate, neighborhoods, events, businesses, parks. Many photos and neighborhood or subdivision profiles.

 

 

 

 

 

Silicon Valley Pricing Snapshot

Today we’ll provide a few quick graphics to give you a Silicon Valley pricing snapshot on the counties where we sell homes. These will be ranked by the usual order of housing cost, from highest to lowest. (Sometimes they move “out of order”.)  After that, we’ll provide more resources from our other sites and blogs with a deeper dive on our main Silicon Valley real estate markets. We don’t cover all 9 of the San Francisco Bay Area counties, but here you’ll find 3 of them covered, and it’s a pretty good primer on the Bay Area housing market analysis.

Silicon Valley Pricing Snapshots

San Mateo County

San Mateo County is “The Peninsula”, the county just south of San Francisco and north of Santa Clara County and Santa Cruz County. About a quarter of Silicon Valley is in this area, generally. It’s normally more expensive than Santa Clara County, but once in awhile those two areas flip for pricing order. It’s a hot market in San Mateo County!

 

San Mateo County_MAR2024

 

For three of these counties, we have a newsletter with info by city. The data from Sereno (above) is a little different from the RE Report data for the median sale price. Here’s the San Mateo County real estate newsletter in PDF format (or go to popehandy.rereport.com to see all 3).

 

San Mateo County Market stats by city or town - March 2024

 

Santa Clara County

Santa Clara County, our home base, is the second priciest area in this region and is the heart of Silicon Valley:

 

Santa Clara County_MAR2024

 

Read the PDF for the Santa Clara County newsletter here. And the city by city market stats (much closer aligned for this county between the two data sets):

 

Santa Clara County market stats by city and town 1 - single family homes

 

 

We also do monthly market updates on communities within the Santa Clara County and more on our other blogs. Check out some of those market reports through the link.

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Overbids in homes that sell fast

House at twilight with the words Overbids in homes that sell fastWe are in the middle of the spring market, and overbids in homes that sell fast are often sky high.  Today I just want to mention it since it’s worse than usual, even for Spring. That said, it’s not as bad as in the first half of 2022.

We periodically publish a pricing snapshot, but keep in mind that those are by calendar month, and often the best info is whatever went into escrow yesterday (recently pending sales). That data isn’t published, so it’s a case of learning what can be learned the old fashioned way: networking.

What is going on with overbids in homes that sell fast?

What’s causing these extreme market conditions?

  • Inventory is extremely low.
  • Most of what is for sale is from “have to sell” situations. Many of those properties are not super updated.
  • The recently remodeled, nicely updated segment of the market is probably 20% of what’s available. Buyers are mostly fighting for them.
  • It’s like there are two different markets: the white hot market for recently remodeled homes (that are usually listed low) and the market for homes that are not as updated and not priced too aggressively.

The overbids in homes that sell fast in Silicon Valley have to do with both the home’s condition and the home’s pricing position – think low. The lower the listing price, often the larger the number of competing home buyers and the larger the number of eventual bids. In some cases the offered list price is so low as to be a price mirage. If it looks too good to be true, well, you know.

How bad is it? For single family homes in Santa Clara County that sold / closed in the last week, the average sale to list price ratio was 111%, and the median was 109%.  That figure ranged from a low of 83% to a high of 151%. Often the properties with a very large number of bidders will get the super high offers.

It is deepening. I ran the same data for closed sales 8 – 18 days back and the average sale to list price ratio was 108% and the median was 106%. Month over month it’s been rising.
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The shock of Silicon Valley housing costs: how little you can buy on a huge income

Relocation Housing Costs: how little you can buy on a huge income in Silicon ValleyIf you’re relocating because 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 (5,000+ 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. What about your Silicon Valley Home?

Housing Costs & Relocation

Set Your Expectations

You’ve heard that prices are bad here, but how much worse could they really be? Surely you could downsize a bit to a 3,000 to 3,500 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 $2,500,000. But guess what? Here, in a nice area, that’s a 2,000 SF house on a 10,000 lot in a good area that’s a tear down. And in traffic, it could be a +40 minute commute.

Want an acre in an area with really good public schools at all levels? Think $4 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.)

Setting expectations is a battle of it’s own. If you’re having trouble coming to terms with the price of homes here and seriously want to buy, or maybe you’re wondering why your offers aren’t working out, you may find this article helpful for introspection: Silicon Valley housing prices and the emotional stages they’ll put you through. And if you aren’t already working with an agent, getting good professional help is one of the #1 ways to succeed in this market, so make sure you know how to find and keep a quality agent! We love working with our blog readers, so always feel free to reach out if you’re in need!

Why make the sacrifice to live in Silicon Valley?

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San Jose Districts and their Values

San Jose Districts Price Rankings Graphic January 2024 Landscape SMALL

Click to view full size.

What does it cost to buy a single family home in the city of San Jose? There are many San Jose districts and their values vary by about 2-to-1 from the highest to lowest priced areas in this large, sprawling city with about 1,000,000 residents.

In this article we’ll take a look at the main, fairly well defined districts and discuss the cost of purchasing a house in each one. After each small description, there’s a link to a post on my popehandy.com website for that area.

You can also find relevant information on my Valley of Heart’s Delight blog, SanJoseRealEstateLosGatosHomes.com – just click on the “Neighborhoods” link.

Lastly, if you’d like to see a map of where these parts of SJ are located, please click on this link to find this article with a helpful map: San Jose is big and sprawling: where are the districts?

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How to find the median rental price by zip code

Looking to get a sense of the rental prices in Silicon Valley? Today I’ll show you how to find the median rental price by zip code for homes in Silicon Valley by using my weekly Altos Research real estate market reports for Silicon Valley.

We will use Cupertino’s housing market as an example, because many high tech employees plan to work in that city. My Altos Research report for Cupertino. You can access it at this link  Mary Pope-Handy’s Cupertino Market Report. When you click through, it will look something like this:

Altos Research - find the median rental price - Mary Pope-Handy weekly report for Santa Clara County cities, towns, and zip codes

There are tabs for houses and condos, and you can toggle as desired. The condo rent can be found in the same area on the right (after toggling to that page).

Not really wanting to live in Cupertino? Find the “Search Anywhere” field near the top and enter a city name or a zip code and you can spot check areas of interest.

Subscribe for the weekly reports

Please click the “Subscribe” button in the upper right corner to get any of the reports emailed to you weekly.

 

Not a rental Realtor

NB: I do not work in the rental market as 99.99% of rental homes are “for rent by owner” and there’s not a place for a Realtor in that structure.  When folks first move to Silicon Valley, though, they usually want to rent for awhile, so I will sometimes provide rental info because I know it’s needed.  Interested in buying or selling? Please do reach out to me! Best to start with email so that a phone call can be scheduled: mary@popehandy.com as I get a lot of spam / robo calls. However, feel free to call first if you prefer – 408-204-7673.
Related reading:

Silicon Valley neighborhoods

San Jose Districts and their Values (Feb 2018)

Facts about San Jose, the Capital of Silicon Valley

Silicon Valley’s most affordable homes – what do they cost?

What kind of cost is associated with the most affordable homes in Silicon Valley?  In Santa Clara County, the median sale price of houses is about $1.7 – $1.8 million (fall 2023) and the average sale price is just about $2 million.  So you know it can’t be easy – these are for the whole county, not the areas with the best commutes, best schools, most charm, etc.

Quick summary:

  • the least expensive areas are often more remote, or have less well regarded schools, or other undesirable factors (higher crime, too close to a negative location)
  • the most expensive  Silicon Valley areas tend to have shorter commutes, better school scores, less crime, more wealth, generally
  • within Santa Clara County,  lower prices are found in the city of Gilroy, in the Los Gatos Mountains (or other remote areas), and these areas of San Jose: South San Jose, Alum Rock, and Downtown or Central San Jose
  • San Mateo County is generally less affordable than Santa Clara County, but there are some less costly areas, like East Palo Alto
  • Santa Cruz County is often much more affordable than Santa Clara County (the commute may be a bear, though)

 

Santa Clara County’s most affordable homes

Here’s a view of home prices and market conditions by city. Gilroy is usually the least expensive city, as it is in this month’s data set. As a general rule, Silicon Valley’s most affordable homes are often the most remote.

 

Santa Clara County single family home stats by city.

 

San Jose makes up about half of the county in terms of population, and every few months we update a post about San Jose Districts and their Values.

Within the city of San Jose, the 3 districts with the most affordable homes are (in order with links to the RE Report for each section):

  1. South San Jose
  2. Alum Rock
  3. Downtown

The next two areas of San Jose on the “more affordable” end of the spectrum are Santa Teresa and Blossom Valley.

Also not represented in the table above are the areas within the Santa Cruz Mountains, also known as the Los Gatos Mountains. This can be among the most affordable areas (nothing is cheap!), but there are commute and other issues that come with living in the mountains.  Please see this article on that topic: What about living in the Los Gatos Mountains (or Santa Cruz Mountains)?

Rural areas in the east foothills, or in more distant parts of South County will also give more home for the buck, but the tradeoffs will include much longer commutes.

More expensive: San Mateo County

And it’s worse if you go north, and into San Mateo County, where the median sale price is $1.8 – $2 million and the average sale price is $2.6 million  (Please visit my RE REPORT for information on Silicon Valley real estate statistics. It is automatically updated each month.)

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Finding New Homes for Sale in Silicon Valley

New Homes in Silicon ValleyFrequently, people new to Silicon Valley and the San Jose area arrive expecting to find new homes like the ones they left behind. But in reality that’s just not the norm in this market!

Unless you are looking to purchase a condominium or a townhome, or are looking at areas with very long commutes, it can be challenging to find truly new homes for sale here.

Finding New Homes in Silicon Valley

For the most part, Silicon Valley had a post World War II housing boom that stretched primarily from the 50s into the 70s. By the 1980s, most open space in the Valley was gone.

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South County – where is it?

Santa Clara County - South County, Stylized MapSilicon Valley residents will sometimes refer to “South County”.  Where is it?  This is the area south of south San Jose where you find Gilroy, Morgan Hill, San Martin and nearby areas.

View the approximate area on Google Maps.

Agricultural Stronghold

The South County region of Santa Clara County is the last real stronghold of agricultural land in the valley (that plus the eastern range by Mt Hamilton). There you will find many orchards, vineyards, farms and ranches even today.

As you drive through Gilroy you may catch a scent of garlic – particularly if you drive highway 152 toward Pacheco Pass as you go past a garlic processing plant! In summer you may have visited the famous “Garlic Festival” at least once, though the annual event has sadly been discontinued in recent years.

Neighbors and travelers alike can enjoy the roadside fruit stands. Visitors can enjoy seasonal events such as fruit picking, pumpkin patches, cut-your-own holiday tree farms, and more. And for just the adults, of course there are vineyards and wineries as well!

And equestrians from beginner to advanced will find plenty of horse properties here with boarding stables, arenas, and lessons.

Fun for the Family

Gilroy Gardens Amusement Park is another major attraction with fun for the family and seasonal celebrations.

It is home to the discount Outlet Malls (at Hwy 101 at 152 east), so if you live in or near South Bay, it’s likely you will eventually find your way there! Residents can enjoy plenty of shopping and dining areas around the community, including downtown Gilroy which is a hub of community activity and events as well as home to the Historical Museum.

There are plenty of outdoors activities to engage in, such as golfing, hiking, camping, and water sports, to name a few.

Moving to South County

Want to relocate to South Santa Clara County?

The area has plenty of appeal! Homes and land tend to be more affordable in this area, and whether you’re looking for an off-the-grid ranch, vineyard mansion, or a suburban new construction home there’s something for everyone!

But traffic can be an issue. For many people working in the Bay Area the South County is a long commute. In addition, commuters are mostly reliant on 101 which can slow to a crawl in rush hour traffic.

The region also has somewhat harsher weather. This part of the Santa Clara Valley is farther from the Bay and it’s temperate water-front climate, so gets more inland weather. Although air conditioning is becoming more standardized in Silicon Valley, it was adopted in these inland communities first due to the more intense dry summer heat they experience.

Many San Jose area residents consider it a good place to retire since they can downsize to a comfortable home and often pay much less than a comparable home might cost in Los Altos, Saratoga, Los Gatos, Willow Glen or Almaden and at the same time get more home.  A number of my clients have spoken of wanting to retire into the Eagle Ridge Golf Course area for that very reason.

 

 

Silicon Valley Homebuying and Bidding Wars

What do you need to know if you are shopping for a home in Silicon Valley right now?

First, you need to understand that possibly more than in any other time, it’s a deep seller’s market, meaning you most likely will be competing against multiple offers.

Homes for sale are not as abundant as normal, and there are a lot of buyers trying to purchase a house or condo in the San Jose area.  Not enough supply, too much demand equals multiple offers and rising prices.  (You can check the current Santa Clara County real estate market statistics at popehandy.rereport.com.)

Secondly, if you want a chance at buying a property in Santa Clara or San Mateo Counties, you must have a great “offer package”.

It is imperative that you have a solid down payment, 20% is a minimum standard in our area, but often it takes 25% or more to convince sellers that they should take your offer over the others. Cash is king and you may get out bid by an all cash offer, especially if it’s also a non contingent offer.

If you include any contingencies for inspections, loan and appraisal, they will have to be fairly short to compete in multiple offers.  A 17 day loan contingency is a pretty sure fire way to get eliminated from multiple bids.

Want to avoid a bidding war? You’ll have to be willing to compromise, possibly quite a lot, to be the only offer in this market! But don’t confuse being the only bidder with getting a good deal – homes that have been passed over by other buyers will have problems, some of which may not be “fixable”

Continue reading on the Valley of Hearts Delight blog:
http://sanjoserealestatelosgatoshomes.com/homebuying-in-silicon-valley-today/