With soaring housing prices in Silicon Valley, newcomers and folks potentially relocating here may wonder what can you buy for $1 million 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.) 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’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
- the Alum Rock area of San Jose
- South San Jose
- the Evergreen area of SJ
- the Berryessa area of SJ
- Downtown and Central San Jose
- the Blossom Valley area of San Jose
- and the Santa Teresa area of San Jose
- 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. (Please find info on a list of neighborhoods at the link above.)
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 March 1, 2018) 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.
Areas in Santa Clara County where a house is possible but unlikely, but a townhouse or condominium may work:
There are some areas in the valley where a few properties that sell under a million are single family homes or houses. When you see ratios of something like 3% 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.
These long-shot, but perhaps possible, areas include Willow Glen (area of San Jose), Cambrian (area of San Jose), Santa Clara, and Campbell. In most of these desirable locales, a townhouse or condo is very doable, but a house – not too likely.
What about condos or townhomes? Except for areas which stratospheric pricing like Palo Alto and Los Altos, a condo or townhouse under $1 million should be possible in virtually all of Santa clara County.
Areas where you will NOT find a house for under $1 million
If you absolutely must buy a house, and not a condo or townhome, skip Palo Alto, Los Altos, Los Altos Hills, Saratoga, Los Gatos, Monte Sereno, Sunnyvale, Cupertino, and West San Jose. Also skip Santa Clara where the schools are Cupertino. It just isn’t going to be in budget.
What about San Mateo county?
In general, San Mateo County is more expensive than Santa Clara County. However, there are some pockets that may work.
Silicon Valley really includes the bayside areas of SMC, not the side that is along the Pacific Ocean. The beachside areas are far more affordable, but you will find the commute to be a bit arduous if you are working in central Silicon Valley. If you don’t mind a longer drive, do check into Pacifica (a pretty good value area) and other communities by the shore. that said, Half Moon Bay is super popular, and that price point won’t work there.
Redwood City is a good value area overall. The schools do not rank as highly as some other areas, and the plus to that is that home prices are a little more affordable. In the last 90 days, 7 of 103 sold houses were under $1 million. That’s not a high percentage, but it may not be impossible. More likely, you’ll get a far nicer townhouse with more space than you would a house in RC. Keep your options open there!
Inland, East Palo Alto has been coming into its own, steadily improving, and showing itself to be a good value area. In the last 90 days, 12 of the 17 homes sold went for $1 million or less. Yes, that’s hardly any inventory, but it is in range – so keep your eye on it.
Daly city had 33 of 70 homes go for $1 million or less. That’s definitely worth checking out, especially if your work takes you to Redwood City or South San Francisco.
Brisbane had 2 of 6 sales sold for $1 million or less. (Inventory so small that you shouldn’t count on it.)
South San Francisco had 16 of 43 homes sell in range.
The rest of the areas were either highly unlikely or a slam dunk “no” to selling in budget for a house.
What about the East Bay?
The east bay tends to be more affordable than the south bay or Peninsula. I did not check into those areas as I don’t know them as well (though I did live in Fremont for a year when I was in grad school). The bridges can get quite backed up. Over time, I believe that “Silicon Valley” will creep more and more into the east bay, both Alameda and Contra Costa Counties.
Some home buyers just must have land, a yard, a detached home. For them, it will be imperative to not spin wheels trying to locate a single family home in areas where they simply won’t be “in budget”. In Silicon Valley, the usual remedy is “drive a little, save a lot”. Hopefully, once BART comes through, the driving will be a whole lot less!
Homes for sale listed at under $1,000,000[idx-listings county=”Santa Clara” minprice=”500000″ maxprice=”1000000″ minbeds=”1″ maxbeds=”6″ statuses=”1″ propertytypes=”831,832″ orderby=”DateAdded” orderdir=”DESC” count=”15″ showlargerphotos=”true”]
If you want to buy a Silicon Valley home and you’re coming from outside of the area, a few things are done differently here. Rather than give a lengthy explanation, I’ll just provide a quick list of things which are different from other parts of California, the U.S. or perhaps the world.
1.) The escrow account, where money is held and disbursed by a neutral third party, is ordinarily with a title company in Silicon Valley and the San Francisco Bay Area generally. In CA it’s legal for real estate brokers to have the escrow account, but that is not the custom here. By contrast, in southern Calif., there are separate companies which often do the escrow work or a real estate broker may handle the funds, called trust funds.
2.) Santa Clara County is a “seller pay county” by tradition when it comes to the escrow fee and who pays the owner’s policy of title insurance. (Most of California is either buyer pay or split 50/50. Also, SCC is where San Jose and much of Silicon Valley is located.)
3.) Because it’s a “seller pay” county, the seller or the listing agent (the seller’s real estate agent) normally chooses the title company. Most of the time, the home owners do not have a preference and don’t know anyone working at the nearby title companies, so usually the listing agent suggests which one to utilize. If you purchase the property with a loan, you will need to buy lender’s insurance, too – and that’s a buyer cost.
4.) While in many east coast states an attorney is involved with the home buying and selling process, here lawyers are seldom involved with real estate sales – unless there is a big problem.
5.) Surveys are not usually part of the transaction here, with exceptions if there are serious doubts about the property boundaries.
6.) Buyers are provided information on natural hazards, and usually also known environmental hazards and area tax liabilities, in most cases via a professional disclosure company such as JCP Disclosures. Things such as 100 year flood plains, liquifaction zones, earthquake fault lines, underground water contamination will be revealed, if known, in most cases.
7.) In some parts of the world, buyers do not have their own real estate professionals for guidance and advocacy, but here they do. Most of the time, in the San Jose and Peninsula area buyers have their own real estate agent working on their behalf. Usually the buyers’ agents are paid by the sellers – but they do not represent the sellers. Dual agency is legal in California as long as it is disclosed (and dual agency can mean either the same person or brokerage).
8.) In recent years, it has become the norm to get pre-approved with a lender or bank prior to writing a purchase offer on a house, condo or other home. (If you meet with a Realtor, getting you set up with a reputable lender will be one of the first things he or she asks you to do.) Also it’s pretty normal to have to provide “proof of funds” to demonstrate that you have the down payment available. Sometimes our international clients are surprised at the documentation required here, so it’s good if you are aware of it upfront.
9.) It usually takes 30-45 days to close escrow on a property here (from the time the sellers accept your contract to the time you actually own it).
Finally, it should be noted that the cost of housing in Silicon Valley is truly exorbitant. Most people know that Silicon Valley houses are very expensive, but until they get out and see what things cost, they really don’t understand how extreme it is. Often I tell people to expect to pay twice as much and to get half as much. Unless you are coming from a pricey locale, such as London, Tokyo, Paris, Manhattan or Boston, you may still find yourself in “sticker shock.” A half million dollars buys a fairly small, modest home here, in an average area. A million dollars is better – you can get into a better area and better house. The “luxury market” starts somewhere between 1.5 and 2.5 million, depending on which area you’re considering.
As you may know, I have a number of blogs relating to Silicon Valley real estate (I will list them below). My family and I live in Los Gatos, and my office is in Los Gatos too, so my focus is that town and the nearby areas, such as Saratoga, Cupertino, Campbell, Monte Sereno, and parts of San Jose such as Cambrian and Almaden and Willow Glen. One area I’m working on for the blogs, as well as for my Facebook business page, Google + and Twitter are video “drive throughs” of neighborhoods. I’m starting in Los Gatos but eventually hope to get to all of the areas listed above.
Right now, I’ve got 5 Los Gatos neighborhood videos on my YouTube channel, plus slideshows of a few more areas and parks. Additionally there are some slideshows up of Saratoga and parts of San Jose. Interested in an up close view of these parts of Silicon Valley? Please visit my channel: http://www.youtube.com/PopeHandy Or start with the Los Gatos playlist, below. The first one is a slideshow of Los Gatos as a general intro, and after that there is a mixture of slideshows and drive throughs. Enjoy!
Other blogs about Silicon Valley real estate, homes and neigbhorhoods:
Valley of Hearts Delight – aka San Jose Real Estate Los Gatos Homes
Belwood of Los Gatos blog
Here are a few of the homes for sale in Los Gatos and Monte Sereno right now![idx-listings linkid=”445042″ count=”15″ showlargerphotos=”true”]
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)
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?
It’s an old question – should you find your Realtor first or your lender first? I would like to suggest that you find your Realtor first, and then ask your real estate agent for a list of reputable, trusted loan agents or lenders.
Because as with all professionals, lenders (and Realtors) are not created equally.
You will probably spend a LOT more time with your Realtor in viewing homes, reviewing disclosures, writing the contract, meeting inspectors, and so on – so I do suggest that you begin by very carefully choosing the right real estate licensee or broker for yourself. A good Realtor can probably give you between 3 and 10 names of trusted, reputable, reliable, knowledgeable lenders. From there you can interview and choose someone.
It is extremely important that your lender be good at what he or she does. A bad lender – and there are many of them – could cost you the sale, but definitely will create undue stress, will waste your time and ultimately cost you money. This is no exaggeration.
In our hot Silicon Valley real estate market, when there are multiple offers, many listing agents will phone the buyer’s lender to see how solid the buyers are and how decent the lender seems to be. The better loan agents will answer the phone when called – because they are anticipating the call. The lesser ones are not paying attention and don’t pick up. That small decision, one way or the other, can be critical! A few years back, I spoke with a high powered agent out of Saratoga who told me of this very scenario. She concluded “the lender who didn’t take my call cost the buyer the sale.” Yes, it matters that much.
A poorly organized loan agent may misplace documentation, causing you to miss work so that you can get it to him or her again in a rush (under pressure of the loan contingency removal date). I have known buyers to lose time from work due to the ineptitude of a loan agent (but not one that I suggested).
All deadlines must be agreed to by buyers and sellers in writing, no exceptions. Can you imagine what it’s like to ask your lender how many days will be needed for the loan contingency, only to have to extend it not once, but a few times, because it’s just not done yet? A lousy lender will make this happen. Sometimes they are submitting loan packages based on old guidelines rather than current ones. You and I won’t be involved at that microscopic level – but if the lender messes up, we’ll hear about it later.
In the worst case scenarios, a really terrible mortgage banker or broker will cause so many delays that you close escrow late, causing you, the buyer, to pay some of the seller’s coverage costs. If the rates go up during all of the delays, you may pay a higher interest rate too.
That’s the gloom and doom of it.
In my real estate practice, often about half of my clients come to me with their own lender. Although this is not ideal (it’s better if the Realtor and lender go into it with a good working relationship), often it works out OK. But sometimes it’s a train wreck. This doesn’t happen, at least not in my experience, if you get a lender I’ve already vetted. Or if you’re working with another great Silicon Valley Realtor, one that he or she has screened. I would not suggest someone incompetent or who will screw up the transaction – of that you can be sure! I want you to buy your home as much as you do, and I want it to be as smooth and hassle free as possible. A bad lender can put all of that in jeopardy, though.
As I was going through old blog posts, I found this brief installment from April 17th, 2014. Often I write that the current hot sellers market in the Bay is “prolonged,” “steady,” or “persistent,” but seeing these two headlines from over 3 years ago really shows just how unyielding it has been. It is highly unusual to be in such a strong, drawn-out market, but there’s no clear indicator that things will change anytime soon, either. Buyers and renters might find some relief now that autumn is here in hopes that it brings the usual seasonal cooling.
Find the original post immediately below. – Update October 22nd, 2017
Here are the headlines from the San Jose Mercury News in mid April 2014:
Rental article: Bay Area apartment rents set record 4/16/14
Excerpt: Bay Area apartment rents are rising at nearly double-digit annual rates and have reached record levels, according to a report released Tuesday, prompting some analysts to warn that the region’s economic boom could be choked off by the relentless rise….. Among the Bay Area’s three largest cities, San Jose had an average asking rent of $2,066 during this year’s January-March quarter, up 10.3 percent from the same period last year, RealFacts reported. Oakland had an average rental rate of $2,187, up 12.3 percent, while San Francisco posted an average of $3,057, up 9.5 percent.
Home buying article: Bay Area home prices jump year over year
Excerpt: March marked more than 20 consecutive months of year-over-year price gains for single-family homes in the East Bay, South Bay and Peninsula, according to real estate information service DataQuick, which released a report on March sales Wednesday…. The San Diego-based company said that prices were up 29.2 percent from the previous March in Alameda County to $575,000. In Contra Costa County, prices rose 22.8 percent to $425,000. Santa Clara County gained 20.3 percent to $800,000, and San Mateo County was up 13.2 percent to $860,000.
Whether you buy or rent, prices have been rising dramatically. When factoring in what housing will cost, include the trajectory of appreciation per month.
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.