Silicon Valley retirement can be challenging for those already living in the San Francisco Bay Area, but it’s even more challenging for those hoping to spend their Golden Years here if they are coming from a less expensive area. Today I want to give some info on:
- what does it cost to buy a home here (typical retirement size home)
- what are typical HOA dues
- what are typical property taxes
- what are some of the housing options that retirees or seniors have when relocating to Silicon Valley?
Silicon Valley retirement: what a modest home costs to buy here
The average sale price of a condominium in Santa Clara County is over $1 million (and it’s even more in San Mateo County), and that includes the range from most pricey to most affordable (and often most remote) locations. In most of the Unites States, a million dollars will get you a high end house on a comfortable lot. Houses are averaging around $2 million, so that is out of the question for the majority of retirees who move here from out of the area.
If a family member wants to come here to retire, most likely he or she will want to pay cash for a home so that there is no mortgage payment in retirement. If the budget is $1 million or less, that’s likely to mean purchasing a condo or perhaps a townhouse. In Santa Clara County, here’s where the money would go furthest:
A 2 bedroom, 2 bath unit…
Silicon Valley retirement costs will be vastly different between Palo Alto and Gilroy. San Jose will generally be more affordable than most of the rest of Santa Clara County except for the “South County” areas of Morgan Hill, San Martin, and Gilroy. San Jose is home to about a million people, and it has more and less expensive areas, of course.
The average sale price of a 2 bedroom, 2 bath condominium in San Jose in the last 30 days was $748,797. The average square footage was 1160 SF,
The average sale price of a 2 bed, 2 bathroom townhouse in San Jose in the last 30 days was $919,060. The average size was 1317 SF.
Typical HOA dues for a 2 bed, 2 bath condo or townhouse
Your Silicon Valley retirement plan will possibly include budgeting for a purchase of a home and its related costs. Most seniors prefer to have at least a 2 bed, 1.5 or 2 bath home, so we’ll use a 2/2 (2 bed, 2 bath) as our model.
Right now there are just 97 2 bedroom, 2 bath condos and townhomes for sale in San Jose, and they average 1248 SF of living space. The average HOA dues for these listed homes is $371. The range for Home Owner Association dues is $213 – $1,318.
For the condos that have sold in the last month, the average HOA fee was $530 and for the townhomes it was $373.
I would suggest budgeting $500 as the nicer units do have more expensive HOA dues, generally.
Taxes in Silicon Valley: property, sales, and income taxes
This is the most expensive place in the country, and our tax burden doesn’t make the option of Silicon Valley retirement.
With a $1 million purchase, that will be a property tax bill of $12,500 per year, or $1,041.67 per month. It’s steep for seniors on a fixed income, and it can go up 2% per year.
Using our 2 bedroom, 2 bathroom model from above and the related prices:
- At a sale price of $748,797, the starting property taxes would be $9,359.96 ($780 per month)
- At a closing amount of $919,060, the property taxes would begin at $11,488.25 ($957.35 per month)
If the retiree moving here purchases a modest 2 bed, 2 bath condo or townhome for all cash (assuming that they have this much), the ongoing expenses will include the HOA dues and the taxes, very likely in the range of $1,280 – $1,457 per month as the starting amount. Taxes can go up 2% per year, and HOA dues are frequently underfunded and may need occasional special assessments to keep the complex in good working order.
Santa Clara County has a property tax deferral program for some seniors who meet the eligibility criteria.
Something else to factor in is our income and sales taxes, which may be higher than where the senior is moving from. California has a state income tax, but thankfully Social Security benefits are not taxed in CA.
Our sales tax is 9% or more, depending on exactly where one lives. In Los Gatos, where I live, it’s 9.25%. I believe the maximum is 9.88%.
Silicon Valley retirement options
It’s expensive for retirees living on a fixed budget to move here due to the high cost of housing and high taxes. Many locals leave the area when they retire for that reason! Those folks cash out and move to a less expensive area, where the equity they got from their home sale goes further. We seldom see retirees moving here.
What are the options for those relocating seniors coming here have for Silicon Valley retirement? Here are a few:
- Move in with family under the same roof. A popular living configuration is a 5 bed, 3 or 3.5 bath house with the older generation’s bedroom on the main floor and the rest of the bedrooms and full bathrooms upstairs.
- Consider building a cottage in the backyard – an ADU, or accessory dwelling unit. Some of these are pre-fab and can be installed in weeks. Others are custom made and the process will be much longer and more expensive.
- Convert all or part of a garage to living space or an apartment. I know a family that purchased a house with a 3 car garage and converted one of the 3 bays to a granny unit / ADU.
- The Silicon Valley relatives could consider a change and purchase a duplex, each with their own kitchen, living areas, garage, etc. Sometimes sharing the kitchen is the major challenge, and this would address it. The downsides are significant, though: the homes are often small, the garages are typically 1 bedroom, and the neighborhoods may not feel as nice or uncrowded as they do in single family home neighborhoods.
- The older relative could rent a studio or one bedroom, but depending on where the local roots are, that cost may be $2,000 – $3,000 per month for a home potentially intolerably small for Grandma or Grandpa.
- There are some low income senior rentals available. Many of them have waiting lists. This link may have some info (I do not know this agency, so this is not an endorsement). Please research this carefully if this option interests you.
- Mobile homes are much more affordable, and when they are on a rented pad have no property tax. However, the rental is often $1,000 or more per month and there’s always the possibility that the mobile home park will be sold and developed. That could leave someone with a difficult to move unit and push a loss of control over the future on the residents. In Santa Cruz County there are a few mobile home parks where the owners purchase the land under the living space. (I wish we had more places like that in Santa Clara County.) Some mobile home parks are age restricted (55+, 62+, etc.)
- Live further out. If the family is in Saratoga, consider buying a condo in Blossom Valley or Santa Teresa or in South County.
- An option that I would not want myself is to purchase a condo closer to family but in an undesirable area such as next to a freeway. In Los Gatos there is a condo complex on Lora Drive (it started as senior housing many years ago) and those units sell between $550,000 and $700,000 for a 2 bed, 2 bath condo, approximately.
- Buying a cosmetic fixer is often an economically good idea, but the stress from construction may not be worth it.
- Senior or 55+ or 62+ houses, townhouses, or condos to buy are somewhat rare in Santa Clara County, but we do have some.
- The largest one, which also has some more affordable options, is The Villages in the Evergreen area of San Jose. (The link will take you to an article on our main website.)
- In Los Gatos, less expensive senior living can be found at the Los Gatos Commons (this link goes to our Live in Los Gatos blog, which has more info on Los Gatos neighborhoods than any other site we’ve seen)
- There are more complexes scattered around the valley, with a better selection in Morgan Hill than in most areas.
- You can view a list of what is for sale right now (all 22 homes as of now!) by using this link or click on the map below
Are there options that we should add here? If so, please drop me a note and we’ll see if it looks like a viable idea!
Silicon Valley Retirement – Related reading:
Deciding to downsize (on our main site, SanJoseRealEstateLosGatosHomes.com, aka The Valley of Heart’s Delight blog).
Moving timetable (on this site)