California and Bay Area Real Estate Market at a Glance

Today we’ll take a look at the housing market from a very high overview position, that is, by metro area within California. How’s the San Francisco Bay Area, which includes Silicon Valley, faring in comparison to the rest of the state? And how is the real estate market within the 9 Bay Area Counties? Have a look at the statistics to get a sense of the market at a glance. (Note: SFH stands for Single Family Homes.)

Silicon Valley is found primarily in Santa Clara County, but also substantially in San Mateo County.  There are some pockets, very small, also in Alameda County and Santa Cruz County.  Santa Cruz County is not considered part of the SF Bay Area, but part of the Monterey Bay Area and the Central Coast (the SF Bay area is considered Northern California.)

Statistics for Bay Area Real Estate Market

Statistics for Bay Area Real Estate Market care of the California Association of Realtors

What does it take to buy a home in Silicon Valley?

Graphic of people running to an open houseYou’ve probably heard that buying a home in Silicon Valley is a bit like purchasing real estate in Manhattan, 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):

  1. A large down payment is needed – usually 25% or more – to win in the multiple offer situations which are the norm right now.
  2. 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.)
  3. 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.
  4. 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.
  5. 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.
  6. 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.)

The biggest challenges in moving to Silicon Valley

Finding Affordable HousingMoving across the state, country, or globe always presents opportunities – but also challenges.  What are the biggest hurdles for people moving to Silicon Valley?

The cost of housing is the # 1 challenge for newcomers to Silicon Valley

For most people, the hardest issue is the cost of housing in the San Francisco Bay Area.  Whether buying or renting, it’s extremely costly here.  Depending on where you’re coming from, it could be man, many times more expensive. Finding affordable housing is the # 1 challenge for people relocating to Silicon Valley.

How does it compare to other places?  It is close to on par with New York  City, about 50% more expensive than Austin, TX, and about 1/3 more than Chicago, IL.  Check Sperling’s Cost of Living comparison to get a good sense of how it relates to your current home town.

Not only are the houses, condominiums, townhouses and apartments more expensive, but most of our homes are smaller too.   (more…)

Facts about San Jose, the Capital of Silicon Valley

San Jose Quick FactsThe City of San Jose is the largest city in Silicon Valley, with just over 1 million residents, and a look at this large and highly populated area will give you a quick sense of what the region is like, generally.

Today I found an online document produced by the San Jose Planning Department which covers a wealth of information, including the largest employers, educational resources, annual rainfall, cost of rentals by number of bedrooms in the apartment, residential real estate median & average sale prices (data is a little old on home buying prices, so don’t use those numbers), and demographics (education, income, race, employment and more).

Here’s the info:

“FACT SHEET: HISTORY & GEOGRAPHY”
Department of Planning, Building & Code Enforcement, Planning Division

https://www.sanjoseca.gov/DocumentCenter/View/780