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.

 

 

 

 

 

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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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/

How is buying a home in Silicon Valley different from in other parts of the country?

How is Silicon Valley Different?Every so often I am asked how the San Jose – Silicon Valley area is different from other parts of the US for home buyers. What did they need to be concerned about here versus in the midwest or east coast? They knew about earthquakes, and having to strap water heaters for earthquake safety, but what about earthquake insurance? Are termites a problem here? What things should home buyers worry about here that perhaps are not issues elsewhere?

Silicon Valley Differences

This is a great question, and the answer to it could fill a book! But here are some of the major differences that most relocating buyers, especially those from out-of-state, should be aware of.

Natural Differences

    1. Earthquakes (of course) and everything related: selling requirements, insurance questions, related natural hazard zones (liquifaction zones, landslide areas, etc.), where fault lines are located, etc. People moving to California generally know that they need to be concerned about seismic occurrences, but perhaps not all the related areas.
    2. Expansive clay soils: when you read your history, you may have heard that in early California, homes were made of adobe bricks. What may not have been clear is how strong that soil is. I have a couple of blog posts on my Valley of Hearts Delight blog on this topic:
      Cracked Foundations, Adobe Clay Soils and Water in Silicon Valley
      What To Consider When Buying a Hillside Home in Silicon Valley
    3. Termites: in general, there are 2 types of these pests active on the valley floor: drywood termites and subterranean termites. (In the Los Gatos Mountains and closer to the Pacific Ocean you may also encounter dampwood termites.) It may be possible to try to prevent subterranean termites with bait stakes placed underground, but there is no way to prevent drywood termites. You can fumigate your home and within a few days they could be back (but won’t be visible for a year or two at the earliest in most cases). Termites do better here than in many places of the country simply because it’s warmer here.  They may swarm twice a year rather than once. Please also read this post for more info:
      How Often Should You Get A Termite Inspection?
    4. Fire / Water: more destructive fire seasons have brought about new, stronger safety regulations including mapped fire zones, higher insurance premiums, and construction limitations. On the other end of the spectrum, the Bay Area has tsunami hazard zones (you can spot the evacuation signs around the bayfront) in addition to the usual flood and dam inundation hazard zones. And expect drought to impact water prices plus restrictions on water useage.
      Are Fire Seasons New?

Structural Differences (Houses)

    1. No basements – there are very few homes with basements here (the very old ones and those which are newer and extremely expensive).  A very common question is “where do people store all their stuff if they don’t have a basement?”  For most households, the storage center tends to be the garage. Built in cabinets and storage shelves are highly appreciated. When people purchase homes with 3 car garages, often that 3rd space is not for a car, but for “stuff” – luggage, holiday decor, momentos, old files, etc.
    2. Foundations – older homes are usually built on a “raised” foundation or perimeter foundation with support beams under the center part of the home. Some types of homes, such as Eichler designed houses (mid-century modern ranch style) were built with slab foundations and actually have radiant heating (heating coils built into the slab). Newer homes now tend to be built on slab also (10-15 years of age or less). Most of our valley has 40-60 year old ranch style homes, though, and these are mostly “raised” foundations with a crawl space.
    3. Houses are built to move in case of an earthquake – most of our homes are built with wood and are intended to move in the case of an earthquake.  It is very rare to find a house made out of brick here because they don’t do well in case of severe shaking.
    4. Suburban sprawl – Silicon Valley was built for cars. While BART and VTA are expanding access to some public transit routes, it’s still a very car-dependant area. The median lot size for homes sold in San Jose over the last 2 weeks (as of this writing) was 6,310 SqFt, and the median home size was 1,568 SqFt. Depending on where in the world you are coming from that can sound quite small, but it’s a relatively typical suburban home in this area.

These are perhaps the most salient differences home buyers relocating to Silicon Valley might want to be aware of. Each of these topics could be a blog post of its own, and I have written about all of them! Our blogs offer information on the local market and home buyer, owner, and seller concerns, and we also provide insight into some of the resources and Tools You Can Use When Relocating to the San Jose Area, but an experienced professional Realtor will be your most useful resource for navigating real estate in Silicon Valley. If you’re ready to move to Silicon Valley, we would love to hear from you!

Moving to Silicon Valley: is it possible to get a house here that’s as nice as the one you currently own?

Can You Get the Same Home Relocating to Silicon Valley?“Can I buy the same home in Silicon Valley?”

I am frequently contacted by extremely bright, successful engineers or high tech professionals who are in large homes on large lots with great schools in less expensive areas of the country, or ocasionally outsisde of the country. They want to move here because Silicon Valley is the hub of innovation, a center for jobs in high-tech, our weather’s great, crime’s low, and there’s so much to do in this region. The housing costs here are extraordinarily high here, but often these professionals hope that the salaries are commensurately high such that they can replicate the home and lifestyle they are accustom to elsewhere, but in Silicon Valley. It doesn’t work that way.

Unless you’re relocating here from New York, Tokyo, or Paris (or somewhere equally astronomically priced), don’t expect the salary offered in Silicon Valley will to go as far here as it would elsewhere in the world. I’m sorry.

Relocation & Silicon Valley: Downgrade to Upgrade

Downgrade the House, Upgrade the Price…

Most relocating homeowners can expect a home downgrade and a higher price compared to what they are leaving behind. Yes, incomes are a little higher but not nearly enough to match the discrepancy in real estate prices. This is even more true with the astronomical acceleration of the market that we’ve seen in 2021 and in early 2022. Even without a wild seller’s market I tell people, as a rule of thumb, that when you move here you will pay twice as much and get half as much. (While salaries might be a little higher, they are not usually double what you’d make elsewhere.)

Sometimes I get the comment: “I don’t want to move to Silicon Valley and have my family’s lifestyle negatively impacted by having to live in a smaller house. I want the quality of life to go up, not down!”

That is completely understandable. People who move here don’t do it because of the housing. They do it for the location and the style of living that this area offers.

… to Upgrade the Location and Lifestyle!

We have the Pacific Ocean an hour or less away, San Francisco an hour away, dozens of wineries, theatre, museums, professional sports (go Sharks!), and world-reknown parks and trails. Shoveling snow? Never! San Jose enjoys 300 sunny days a year on average. If you love to be outdoors, you can make the most of it all year long here where the weather is subtropical. Our population is highly diverse and highly educated, crime is low, not to mention it’s the center of the global tech industry! There are a thousand reasons why the South Bay is probably a major upgrade… but it’s not an upgrade if you equivocate your house with your lifestyle.

So if you are considering a move to Silicon Valley, expect to pay more, get less home, and move into an amazing community in a beautiful pocket of the world.

Related Reading from this and my other blogs:

Market Reports for Three Silicon Valley Counties

What can you buy for $1 million in Silicon Valley?

Comparing cost of housing in West Valley communities from Palo Alto to Los Gatos to Blossom Valley: what will a 4 bedroom home cost?