Relocation
The shock of Silicon Valley housing costs: how little you can buy on a huge income
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.
Moving to Silicon Valley in fall or winter? A few things to know.
If you are moving to Silicon Valley, whether San Mateo or Santa Clara County, you should know that things are a little different in fall and winter than they are in spring and summer. Here are just a few areas that might not be intuitively obvious to the newcomers.
First, a word on appearance. In Santa Clara County, we have two primary sets of hills – one closer to the Pacific Ocean and Monterey Bay (west side), and one closer to central California (east side). Because our local weather is dominated in very large part by the Pacific Ocean, much of the weather blows in from the coast. A lot of the rain gets dumped in the coastal range, also known as the Santa Cruz Mountains. Less makes it all the way to Los Gatos, less still to downtown San Jose, and a much smaller amount to the east foothills and places such as Alum Rock Park. The coastal range (also called just “the hill” by locals) is green year round as it is full of redwoods and other trees which love the moisture. The east side, though, is more grassy, fewer trees, and gets far less rain. In winter the grasses are a lovely green. With drought or in summer, however, the grass turns brown or pale yellow.
For people coming from the east coast, the hills there are more likely green in summer and brown in winter. Here, though, it is the opposite. We don’t usually get rain in summer, so the grasses die and the hills go brown.
Rain, when we get normal patterns, usually begins in November and comes and goes between then and late April. In a typical year, San Jose gets 15-20″ of rain (Los Gatos more, the Los Gatos Mountains much much more). If we get an El Nino pattern year, temps will be warmer than usual and rain will be much more common than typical. It’s not much fun to have an El Nino year, but right now we desperately need the rain, so folks here are all hoping for it.
Second, a word on roads and travel. Silicon Valley enjoys a sub-tropical climate with mild temperatures and not too much rain, even in a normal year. With very little rain most of the time, our streets and highways can develop a dusty, oily film. Whenever we get rain after a dry spell, those highways and roads can be slicker than you might expect. It’s not that we need a ton of rain for the surfaces to become more slippery, either. A very small amount of precipitation can do the trick, so be careful!
If your destination requires going over “the hill”, be triply careful! Too many people, whether regular commuters or first time adventurers, either tailgate or drive too fast, and it can make it too easy for accidents to happen when a little weather is added into the mix. Continue reading
The biggest challenges in moving to Silicon Valley
Moving 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. Continue reading
San Jose and San Francisco rank as some of the most expensive cities in the world
Realtor Magazine ran an article declaring that many global home buyers consider U.S. real estate prices a bargain. (Related article that was the basis for this piece can be seen here.) Get into these articles just a little bit, though, and you can see that San Francisco and San Jose are exceptions, as are Los Angeles and San Diego:
The study found the following major markets were the most unaffordable:
- Hong Kong
- Vancouver
- Sydney
- San Francisco
- San Jose
- Melbourne
- London
- San Diego
- Auckland
- Los Angeles
This study included medium and large cities. But what do you think would happen if they looked at the most desirable cities and towns nearby, the suburbs with low crime and great schools (or the areas of those 2 cities with the same)? That’s right, it’s worse – much worse.
Nicer suburbs will really cost you, especially those on “The Peninsula” or San Mateo County. Here’s a glance at the median and average sale price of houses sold last month (June 2015). Countywide it is $1,300,000 with homes selling at about 110% of list price.
June 2015 San Mateo County SFH stats by city
Heading south does help. Just as San Jose is a little less expensive than San Francisco, so, too, is Santa Clara County a bit less than San Mateo County. San Jose considers itself the Capital of Silicon Valley – a big suburban, sprawling city of 1 million people reaching out to meet cities like Cupertino, Mountain View, Sunnyvale, Mountain View, and Santa Clara all here in the South Bay’s Santa Clara County. It’s not cheap here, of course. But compare the $1 million median sale price of a home here compared to $1.3 million a little north of here, and you’ll understand why it’s not just the better weather than brings people a little further south (the Peninsula gets more wind and fog than the South Bay does, generally).
June 2015 Santa Clara County SFH stats
These are tough realities for newcomers to the area, whether buying or renting (rents are possibly harder to swallow than purchases). I’d be doing you no favors to sugar coat the situation. Some companies will help by improving your relocation benefits package. None of them will enable you to move here and get as nice a house as what you’ve got elsewhere for a reasonable amount of money. They cannot and will not pay you enough for that to happen.
Even so, it’s worth it to make the leap. There’s so much to love about this vibrant area: great minds, fabulous international flavor, excellent education, wonderful weather with 300 sunny days a year in a subtropical climate, access to nearby beaches, San Francisco, the Monterey Bay, Wine Country and so much more. (And you don’t need to go to Napa or Sonoma for wine – there are about 2 dozen wineries in Santa Clara County alone! See A visit to Ridge Vineyards in Cupertino as one example.)
How do home prices compare between Los Gatos, Saratoga, Cupertino, Campbell, and areas of San Jose such as Cambrian, Almaden and West San Jose?
Yesterday on my Live in Los Gatos blog, I compared a number of “west valley” areas in Santa Clara County, or southern Silicon Valley, to provide a sense of how much home you can get for your money in Los Gatos, Saratoga, Cupertino, Campbell, and areas of San Jose such as Cambrian, Almaden and West San Jose. I used my Altos Research weekly newsletters, which provide a snapshot view of four real estate pricing tiers for various cities or areas. In these, you see the median list price per quartile with the type of square footage, lots size, beds and baths found for each one.
Let’s look at Cupertino first, since I get a lot of folks wanting to relocate to Silicon Valley for Apple employment, and many of the new recruits have heard about the wonderful public schools in that city – a major draw. A few years ago, it was very possible to purchase a small house in Cupertino for under a million dollars. But have a look at the chart below and check out the days on market as well as the other data….
In many areas, the most affordable homes are the ones that get gobbled up fastest. Why is it that in Cupertino, the lowest priced listings are on the market the longest? It’s not their size – I can tell you this from two decades of experience selling homes in the Bay Area. It is very likely that these properties are not too livable as a group. They probably need serious remodeling or rebuilding (and perhaps expansion as well). Most buyers do not have the cash to totally “rehab” a house, especially if they are starting at over $1,000,000. If you want to live in Cupertino and not throw a ton of money into the existing house, or tear down and rebuild, you’re most likely to need a budget closer to $1.3 or $1.4 million as a starting point. Want to be able to walk to Infinity Loop? Make that $1.5 or more – and you will still need to do some remodeling unless it’s very small!
What about other nearby Silicon Valley communities and neighborhoods? Please have a look at the full article with charts for a number of areas (plus one for all of San Jose).
Which Silicon Valley areas are the most European feeling?
The beautiful Beckwith Building in downtown Los Gatos, California
I have been fortunate to have made 5 trips to Europe, one of them lasting 9 months, and will be returning again before the end of 2013 (this time to Belgium). It is so diverse, beautiful and compelling! Having experienced a little culture shock myself (when living in Florence, Italy, for one year of university), I’m very sympathetic about how hard an international move can be, and I understand that for Europeans moving to Silicon Valley, there can be an acute culture shock, particularly for those coming from more rural areas.
The bulk of Silicon Valley is located in Santa Clara County, which is at the southern end of the San Francisco Bay. In this county, there are approximately 1.8 million people, almost a million of them in the city of San Jose. Some areas, or districts, of San Jose have a distinctive character and are almost like towns or small cities themselves. So in this article I’ll mention both cities and towns, but also areas or districts of San Jose, which might appeal to our European transplants. Most of my comments will reference Santa Clara County or “south bay” locations, but I will also mention others on the San Francisco Peninsula and SF Bay Area too.
Architecture, Urban Centers and Charm
It is an unfortunate negative in Silicon Valley that much of our housing consists of ranch style tract homes, and truthfully, they are not exactly a work of art. New or newer homes tend to be on very tiny parcels of land (or “lots”) and for many people may simply feel too congested or crowded. But there are beautiful residential neighborhoods – you just need to know where to look! In many ways, the areas with higher charm can make our global home buyers feel more comfortable than if they were faced with only track, ranch neighborhoods.
Do you value unique, older architecture with Victorian, Craftsman, Tudor or other home styles? Then check out these areas:
- Within San Jose: the Japantown, Vendome, and Naglee Park areas of downtown San Jose. Also in central San Jose are the Rosegarden, Shasta Hanchett and Burbank neighborhoods which all boast some lovely older homes. Or, if you love classic Spanish Revival style homes with views, consider the old Alum Rock area of San Jose near the country club (golf course). The Willow Glen area of SJ (zip code 95120) is full of lovely old established neighborhoods with historic homes and tree lined streets. If your job takes you to downtown San Jose, all of these areas will be fairly close.
- If you want a rural, eclectic atmosphere, check out the “New Almaden” area of San Jose. This is actually a county pocket with a San Jose mailing address.
- Other towns or cities with older, more interesting architecture include the “downtown” ares of Los Altos, Palo Alto, Los Gatos, Campbell, Mountain View, Saratoga and Menlo Park (in San Mateo County, just north of Palo Alto).
- If work will be on The Peninsula, there are many areas nearby that may work. San Mateo has some fantastic neighborhoods! Also San Francisco, which is tiny but full of beautiful areas, may be a strong draw (I do not sell there – it’s too far for me). Warning: the weather in San Francisco is very often COLD in summer!
- Across the bay, Berkeley has some great Victorian and other homes and several really interesting pockets, as does parts of Oakland. (I do not work these areas either as they are too far for me, but I did live in Berkeley in graduate school and can connect you with a great agent there.)
Moving to Silicon Valley: is it possible to get a house here that’s as nice as the one you currently own?
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. They want to move here because Silicon Valley is the hub of innovation, our weather's great, crime's low and there's so much to do in this region. They know that housing costs here are extraordinarily high, but they hope that the salaries are commensurately high such that they can replicate the home & lifestyle they currently have – but put it here.
But that really doesn't work. Unless someone's relocating here from Boston, New York, Tokyo or Paris (or somewhere equally astronomically priced), the salary offered in Silicon Valley will not usually make that kind of housing duplication possible.
I'm sorry.
To move here normally means downgrading the house and paying more for it. Yes, incomes are a little higher but not nearly enough to match the discrepancy in real estate prices. I tell people, as a rule of thumb, that when you move here you will pay twice as much and get half as much. (Salaries? You get a little more. Not twice.)
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 housing. Lifestyle often is better here. Shoveling snow? Forgetaboutit. We have 300 sunny days a year on average – if you love to be outdoors, your lifestyle will be far better here where the weather is subtropical. We have the Pacific Ocean an hour or less away, San Francisco an hour away, about 2 dozen wineries, theatre, museums, the Sharks, parks and trails. Our population is highly diverse and highly educated. Crime is low. There are a thousand reasons why the lifestyle here probably is far better than in other parts of the country… but it's not if you equivocate housing with lifestyle.
How is buying a home in Silicon Valley different from in other parts of the country?
Yesterday I was 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?
I thought that this was a great question. Here are the big areas that come to mind:
- 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.
- 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 ValleyWhat To Consider When Buying a Hillside Home in Silicon Valley -
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:
-
Houses:
- 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.
- 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.
- 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.
These are perhaps the most salient differences home buyers relocating to Silicon Valley might want to be aware of. For each of these points, there are things to learn and red flags to watch for.
Finding New Homes for Sale in Silicon Valley
Frequently, people new to Silicon Valley and the San Jose area arrive from places where their last home was new construction, and they hope to find a brand new home here, too.
Unless you are looking to purchase a condominium or a townhome, though, it can be really challenging to find truly new homes for sale here. (There are tons of fabulous new condos in downtown San Jose, which is enjoying a great redevelopment period.)
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, even, most of the open space was gone. Today we do have a few new patches of new homes “here and there”, but there aren’t many. Unfortunately, too, since most of the best land was built up long ago, some of the newest developments are in less desireable areas such as next to freeways.
For the Silicon Valley new home buyer, I want to suggest a couple of strategies: first, in addition to checking out whatever new homes are currently being built, consider homes that are younger than 20 years of age. Many of them are still in great shape. Some have already been remodeled! Another option is to look for the “fully remodeled” home. With the latter, you must be extra dilligent to make sure that the house has not just been gussied up to be be flipped, but is truly remodeled in areas you cannot see, such as the wiring and the pipes.
Please also read:
Myths and Misconceptions about Buying a New (or Newer) Home
Some younger neighborhoods:
Introducing a Beautiful Willow Glen Neighborhood, “The Willows”
The Almaden Winery Neighborhood of San Jose
Where Are the Good Public Schools in Silicon Valley?
Many relocating families search specifically for neighborhoods with the very best schools. There are many sites which will give you this information in immense detail, but if you want a “quick answer” on excellent schools in Silicon Valley and San Jose, I can give that to you quickly here.
The finest public schools and districts (with excellent scores at all levels of schooling) tend to be found in the most expensive parts of Santa Clara County, and most of them are along the “west valley” areas, including Almaden Valley (an area of San Jose), Los Gatos, Monte Sereno, Saratoga, Cupertino, Los Altos, Los Altos Hills, and Palo Alto. Most of these communities are found along the base of the coastal foothills, aka the Santa Cruz Mountains, are are located not too far from Highway 85. The Silver Creek area (of the Evergreen District of San Jose) on the east side also has some fine schools. There are pockets with great elementary schools scattered throughout the valley too.
What do these homes cost? In the best areas, it is not uncommon to spend a million dollars or more for a “turnkey” home of 1800 square feet with no issues (no high voltage lines, no busy road, etc.). In some areas, like Saratoga, that might be closer to $2 million.
In many parts of Santa Clara County the elementary schools are excellent, middle schools are “very good” and the high schools are good. This is true for parts of west San Jose (bordering Cupertino and Saratoga) and Cambrian Park. These areas tend to be much more affordable than those with excellent schools in all levels. For home buyers not so worried about high schools as cost, these can be a great option for getting more home (and school) for your money.
While many home buyers are reluctant to consider private schools, sometimes it is much less expensive in the long run to purchase a comfortable home in an area you like but which doesn’t have fantastic schools and then send your kids to private or parochial schools. In Los Gatos, where the schools run from very good to exceptional, about one-third of students are not in public schools.
If you are planning a relocation to Silicon Valley and want to know more about local schools (public or private) please email me at mary (at) popehandy.com and I’ll be happy to chat with you about them more in person. I can also help you to find areas which are more affordable and offer strong schools.
CIPS, CRS, ABR, SRES
Sereno Group
214 Los Gatos-Saratoga Rd.
Los Gatos CA 95030
[Silicon Valley, California, USA]
1-408-204-7673
mary (at) popehandy.com
CA BRE # 01153805
CIPS - Certified International Property Specialist
CRS - Certified Residential Specialist
ABR - Accredited Buyer Representative
SRES - Seniors Real Estate Specialist
Helping nice folks to buy and sell homes in Silicon Valley since 1993.
Please find many more icons for connecting socially at the very bottom of this page.
Browse listings of homes for sale by map here on Move2SiliconValley.com by using this link: https://move2siliconvalley.com/homes-and-housing/homes-for-sale/.
