With soaring housing prices in Silicon Valley, newcomers and folks potentially relocating here may wonder what can you buy for $1 million or less in Silicon Valley? This article will provide a snapshot in time and provide a sense of whether your million dollar budget can get you into a house, a townhouse, or a condo – or perhaps “none of the above” – on the valley floor.
(Homes in the Los Gatos or Santa Cruz Mountains are generally more affordable, but will of course be farther out and are generally considered a specialty market. Not included will be mobile homes, as the space rents are often close to or more than $1,000 per month. Also not included are duplexes, which you’d be hard pressed to find many of under that $1 million mark.)
If you absolutely must buy a house, and the budget must be under $1 million…
If you absolutely must have a house or single family home, as opposed to a condominium or townhouse, there are a number of areas for you to consider in Santa Clara County, including
- Morgan Hill
- Certain districts in San Jose
- Alum Rock
- South San Jose
- Downtown and Central San Jose
- Santa Teresa
- and Alviso (including County pockets)
- the Los Gatos 95033 (mountains) area – which is vast and contains many small communities
The Los Gatos mountains area varies in price from one community to the next and right now that is a hopping market, I’m told. You can find information, including a list of mountain neighborhoods, on the page linked as well as the occasional market update. If you’re interested in buying or selling a mountain home here in the Bay Area, please reach out! I do some work in the mountains, and if it’s not a match I am happy to connect nice folks with trusted Realtors that are mountain market specialists.
To determine where someone could get into a house for under $1,000,000, I pulled the sales from the last 90 days (as of August 31, 2021) and looked at how many of the sales of houses for any given area were under that budget amount. In many places, there were zero – even if I looked back a full year! The areas below are listed in order of the average sale price for these “in budget” properties, though you might prefer to rank them by the average square footage or some other criteria.
(Trouble reading the image above? Click to view the full-sized photo.)
This doesn’t mean you can’t find something under $1mil elsewhere. San Jose’s Almaden Valley, Willow Glen, and Cambrian areas each had one sale under the million-dollar mark during the same time period, but these sales are significantly less common. When you see ratios of something like 3% or less of the houses sold are under that price point, it’s important to understand that those homes may be major fixer uppers, tear downs, or have a location issue or some other big challenge. But – perhaps you are handy, do not mind the property condition, location, extremely small size, or whatever the presenting issue may be.
Areas in Santa Clara County where a house is possible but unlikely, but a townhouse or condominium may work:
Moving to the San Jose or San Francisco Bay Area? You may be wondering what does it cost to rent a 1 bedroom apartment in Silicon Valley? (You can find a list of rental housing resources on this site here.)
The range in rental prices varies with location, condition, and amenities – exclusive or covered parking, air conditioning, dishwashers, a small yard for downstairs units, and pools are not all automatic.
- In general, it is very difficult to find a decent 1 bedroom for under $2,000 per month (but possibly as low as $1800).
- An average 1 bedroom is likely to run $2300- $2600 in most areas.
- It’s not hard to find one at $3,000 per month, especially in nicer and more in-demand areas such as Mountain View, Sunnyvale, Cupertino, Saratoga, and Los Gatos.
- If you move to one of the expensive areas and get to enjoy extra perks, you may be spending $3000, $3500 or more per month.
If you are working on a smaller budget, you’ll find a few studio apartments available and they will of course be more affordable. Apartments lacking air conditioning, pools, or other highly sought after amenities will also be offered for a bit less. Another option is to look a little further out and consider units without AC, pools, etc.
Apartment homes with a yard are renting for about 15% more than those with no outside space, from what I have seen.
Recently I saw a studio in West San Jose (fairly expensive area) for about $2100. The complex does have a pool, but the units don’t have air conditioning of any kind. I also viewed a 1 bedroom in Campbell for about the same price but it included a wall AC unit. It’s very similar to purchases in that if you get closer in, you get less home for your money.
A couple of things to beware of when looking for rental housing
Something to be aware of is that some houses have Accessory Dwelling Units that seem inexpensive, and often it’s because something is missing, whether it’s a decent amount of square footage, a kitchen will a full sized oven and stove, etc. Not long ago I saw such a place but the kitchen was really just a wet bar with a microwave and toaster oven. The old adage is accurate: if it sounds too good to be true, it is too good to be true. (more…)
Every area has its linguistic quirks or slang, and the San Jose – Silicon Valley – Santa Clara County region is no exception. Some of it is in the words we use, some of it’s the way we pronounce things, and some of it is just the way we think. If you relocate to the South Bay, you may want to know what some of these mean!
The Hill – refers to the Santa Cruz Mountains. Going “over the hill” means going to Scotts Valley, Santa Cruz, or somewhere along the coast.p>
The City – means San Francisco, even though it’s smaller in population than San Jose.
South County – areas such as Gilroy, Morgan Hill, San Martin and Coyote Valley (and outlying areas)
The Bay – is the San Francisco Bay, not the Monterey Bay.
The Airplane Park – this is Oak Meadow Park in the Town of Los Gatos
Read the rest of the post on the Valley of Heart’s Delight blog post, Silicon Valley Local-Speak: A Guide to Understanding Folks in the South Bay
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. From the heavy hitters like Google and Intel to the many fresh startups, 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, Honduran? Check, check, check. You name it, we seem to have it, whether it’s Middle Eastern, African, Asian, Pacific Islands, or European, there’s something for everyone. (OK I haven’t yet seen an Australian restaurant, but I also don’t know what counts as classic Australian cuisine other than Vegemite sandwiches and barbecues.)
Additionally, there are 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. We’re talking 300 sunny days a year. This January we hit 70F one day, which is not unusual. 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. There are weekend farmers markets open all year! 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.) Minutes away, take a little trek around the valley’s mountains and hills, which are full of open space preserves, county, and local parks which make for a great escape from the hustle and bustle of the valley floor.
Moving might mean 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 for those who buy here 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, now more than ever, but as long as huge companies continue to hire, there’s no reason to think that real estate won’t be a wise investment.
Is it a good idea for newcomers to Silicon Valley to rent for a year, or smarter for them to purchase right away? There are many factors to consider, and even more if you are coming from another state or country.
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.
The current market remains an impacted, strong seller’s market which has refused to let up over the last few years. With home prices trending on a seemingly endless climb, some buyers are clamoring to purchase before prices rise higher. Other potential buyers sometimes try to rent with the plan to sit out the storm until the market has cooled, but high demand has raised rental costs as well, and there’s no knowing how long it will take for the market to correct, or if it will ever correct below the current trend. For this reason, trying to wait-out the market involves a huge risk.
Back in 2013, when I originally published this post, there was a lot of focus on mortgage interest rates, which were very favorable at the time, hovering between 4.125 and 4.25%. Since most buyers use mortgage loans, the interest rate can be a big factor in budgeting the purchase. To understand the impact, let’s compare the 2013 numbers with the predicted rise that was given for 2014 to 5.4% interest.
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
To summarize, a rise of interest from 4.25% to 5.4% cuts into the buying power of a $2,500 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.
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?
Perhaps you love – even need – a good view in order to feel happy with your new home in a new place. We don’t have a lot of water views in Silicon Valley, though there are some of the San Francisco Bay in places. What’s easier to find are views of the hills or views of the valley from the views. What do these Silicon Valley view homes cost?
Naturally a lot of the answer has to do with location, home size, condition of the property, and land value. In general, it’s difficult to find a house with valley views for less than $2 million unless the property needs a lot of remodeling, repairs, and updating OR is in a very remote location.
Right now, I have a gorgeous Los Gatos view home for sale in the Belgatos area. It is in great condition and features 4 bedrooms, 3 bathrooms, and about 3,000 SF of living space close to Belgatos Park in east Los Gatos, which is a “close in” location, not out in the boondocks. It’s a remodeled, single story house, stunning condition with a pool and spa, and the list price is $2,288,000. (You can check it out here: 211 Westhill Drive, Los Gatos CA 95030.) Los Gatos is a bargain by Silicon Valley standards. If you haven’t spent much time there, I’d invite you to check it out!
Take that same house and move it to Saratoga with Saratoga, and the price would be substantially more expensive, and more still in Los Altos. Silicon Valley view homes vary in condition, size, parcel size, and many other factors. In most cases, the properties which are move-in ready will run between $2,000,000 at the low end to $5,000,000. Supersized estates and land may well cost more. We see homes in Santa Clara County priced up to $20 million at times, and on The Peninsula with much higher ceilings.