Silicon Valley Real Estate Blog - 1SiliconValley.com

Statistical analysis isn’t only important in calculating the value of real estate in Silicon Valley, it’s integral to choosing a starting point, whether buying or selling. 

One of the metrics at our disposal which comes up frequently is the cost per square foot of a particular property.  The "per square foot" number divides the total value of the transaction by how many square feet of space within buildings was purchased or rented.  That phrase "within buildings" is important. 

This quick-and-dirty metric lets my clients compare the relative costs of properties of different sizes and shapes located in different cities around the Bay Area (or the rest of the world for that matter).  And it’s useful — to a point. 

But misinterpreting this number often causes buyers to overpay, whether it’s because they offer more than a property is worth, they don’t account for hidden factors, or they take for granted the seller’s valuation based loosely on a per square foot calculations for the most recent, relevant comparable.  Here is what to look out for in your analysis.

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Sep.28.2007 [ Filed under: Home Buyers ] 1 Comment »

Available supply in the Los Altos market hasn’t been as low since 2000, when the median number for single-family homes jumped an astronomical 48.9% year-over-year.  That year, the number of closed transactions to new listings was almost 2-to-1 (48 closed to 25 new).  The headline number this year is that closed sales are the lowest in a decade, but so was the available inventory.  Relative demand for what’s available has been strong enough to draw notable increases in two key statistics.

Only one condo in Los Altos was sold this August and only a handful more in each of the previous years, so their trends and statistics may have a high variance.  In single-family homes, though, it wasn’t just the fact that the percent of list received jumped from just under full value to 104.31%.  The median listing value also increased 4% year-over-year, meaning homes weren’t just selling for more, they were starting higher too.  The median transaction increased year-over-year as well, from $1,650,000 to $1,782,000 (8%).

For July and August numbers in particular, schools play a large role in housing demand and Los Altos schools are some of the best in Silicon Valley.  I’ve worked with people who’ve made the argument that, assuming that schools are the critical factor in their home-buying decision, paying a premium on a home is preferable to sending their kids to lesser schools, or private schools.  To them, private schools may not be as good socially: the kids who they go to school with may not always live nearby or have as varied backgrounds.  Premiums aren’t necessarily the most financially-conservative route, but choices involving children don’t always need to be.

[ Median Home 2007, 2006 | Market Snapshot | How Much Home Can I Get? ]

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Sep.20.2007 [ Filed under: Market Updates, Los Altos ] Comment Here »

It can happen to anyone, no matter what number you offer or what terms you’re willing to agree to.  It even happens to folks here in Silicon Valley who make above-asking offers — actually, it happens more than you’d expect for the most in-demand homes.  So, there’s nothing more risky than falling in love with a home before escrow closes. 

It’s okay to show how much you want that home in your reservation price, and even in your offer if you choose to, but once that offer is made there are so many factors beyond your control.  

While you’re mentally moving your furniture into the home, the owners are evaluating what’s best for them, and even after a good informational interview, you still might not be aware of all the factors that go into their decision to accept, counter, or reject.

"I’d rather look at the letters than the offer sheets right now," he said.  I do my fair share of number-crunching, but as a person who tries to pay attention to people’s emotions, I understood why he’d feel that way.  Their family didn’t really need the money — there’d been so much appreciation in their Silicon Valley home that they were well past the number they’d hoped for.  And since this was "back in the day", all of their incoming offers were non-contingent. 

It wasn’t a matter of real estate anymore.  Remember the college admissions process?  For this family, it wasn’t only about SAT scores or GPAs: who their home should go to was about the story behind the paper.  So if you’ve given it your best effort, in terms of both your number and non-monetary factors owners consider, and your offer wasn’t accepted, what are your options? 

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Sep.15.2007 [ Filed under: Home Buyers, Real Estate Stories ] 2 Comments »

It was a case of home owners sitting out the market.  New listings of single-family homes in Sunnyvale were at a 10-year low in August, dropping from 107 in August 2006, to 79 this year.  In fact, total inventory levels also dropped slightly, from 130 single-family homes to 127 over the same period.

Sunnyvale’s average number of new listings during the month over the last ten years is 105 and it’s an illustration of why real estate is local.  National news headlines from around the country correctly talk about aggregate numbers that are lower because of deflating markets — and many Silicon Valley home owners here who might have considered listing their homes, but could afford to wait, sat out.

But ultimately, real estate is about location, supply, and demand.  And while supplies were down, demand was actually both "normal" and "up".  The ratio of closed transactions to new listings in August 2007 was 73%.  The 10-year average is 74% and it was 58% last year.  How did that increase manifest itself?  Besides a fourth consecutive year of over-asking closing prices in single-family homes, have a look at the difference in the cost of Median Homes year-over-year.

[ Median Home 2007, 2006 | Market Snapshot | How Much Home Can I Get? ]

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Sep.07.2007 [ Filed under: Sunnyvale, Market Updates ] Comment Here »

For many of you, it’s been a long wait, but we’re heading into a time of the year that traditionally favors buyers.  On average, it’s like that every year around this time, but with higher interest rates on jumbo loans, owners with homes on the market in several areas are beginning to see the writing on the wall.

To help my clients in their preparation, I’ve updated my Silicon Valley Home Buyers Book to be a step-by-step guide with insider information on every part of the process.  It’s been completely reorganized to walk through what I recommend, from start to finish.

Folks who’ve already signed up for the book will get an email in the morning with a download link, but if you don’t receive it, please feel free to contact me directly.

Sep.03.2007 [ Filed under: Home Buyers, Silicon Valley News ] Comment Here »

Higher interest rates for jumbo mortgages is a story for another day, but it does color how home owners should read what I’m about to write.  In July, Mountain View experienced a 14% jump in the median for single-family homes from 2006 to 2007.  There was also the fact that the percent of list received went from almost full value (99.28%) to 104.4%.

Like many other places in Silicon Valley, like Sunnyvale and Cupertino with their Eichlers and San Mateo with its older homes near downtown, among others, Mountain View has its share of older homes.  Many of these homes come on larger lots that give ambitious owners room for expansion.  One of this month’s Median Homes illustrates that potential.

Mountain View is a unique environment because of the money from one local company in particular and it was a competitive summer season — as you’ll see, though, not every property experienced the same level of interest.

[ Median Home 2007, 2006 | Market Snapshot | How Much Home Can I Get? ]

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Aug.29.2007 [ Filed under: Mountain View, Market Updates ] 2 Comments »

My previous market updates have focused on analysis of year-over-year statistics, particularly with respect to medians around Silicon Valley cities.  The numbers are useful, but what I really want to provide my clients with is an intuition of how far that money goes and what the snapshot of today’s market looks like.

With that goal in mind, I’ve added some information to my market updates.  I think, as of today at least, that this site is the only place you’ll find this information.

The first addition I call "The Median Home", literally the home that is the statistical median for that period in that area.  (Sometimes there will be more than one.)  I’ll also add representative homes and multi-family interests that cover the spectrum of completed sales in that city.  Condominium complexes and many communities have their own micro-climates which I also cover individually in my Neighborhood Notes.

The second addition I call the "Active CDOM".  DOM is days-on-market and I have some opinions about its usefulness.  The CDOM, or continuious days-on-market, is an improvement which takes into account "rolling back the odometer".  The Active CDOM is a snapshot of how long the properties currently for sale have been on the market (as opposed to the ones that sold).  When compared to the CDOM, it gives a rough indication of the quality of the properties on the market.  

Aug.29.2007 [ Filed under: Market Updates ] 1 Comment »

Congratulations, you're in contract.  The sellers have accepted your offer.  You've gained a lot of insight into yourself, looked at homes one-by-one after a thorough MLS search, did background research on your favorites, made a few offers, and negotiated a deal that has protections built-in for you.

This was their first home in Silicon Valley, but on their last one, they had a close call.  One that almost cost them the keys to their house.  Everything was signed and they couldn't help it.  It was such a relief to know where they were going to be living from now on that they wanted their home to be ready from day one.

They were prepared too.  All the comparison shopping had been finished weeks ago and it just so happened there was a special this week.  Too perfect.  They seized their moment knowing it would take about three weeks for delivery.  Their all new furniture would be ready when their house closed escrow.

This story came up because I feel it's important to look out for my clients.  In this case, they didn't need the advice I was about to give — they'd already knew through experience.  

My hope when I tell these stories is that you'll gain the benefit of others' experience without having to go through it personally.  So what happened and what can you do to successfully complete your home purchase?

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Aug.24.2007 [ Filed under: Home Buyers, Silicon Valley News ] Comment Here »

There it was.  The orange house.  The bright orange house.  The newly-painted bright orange house.  The neighbors stood aghast as they watched each stroke cover more of the nondescript color, the one nobody could remember now.  That lost color may as well have been green because they couldn't imagine themselves living next to the Great Pumpkin, much less convincing someone else to pay for the privilege.

This story doesn't happen to come from Silicon Valley's real estate circle but it's an illustration of individual property rights.  Whose, though?  As you can see, the story is different if you're the painter or the onlooker — and because Silicon Valley has such limited space geographically, what one person does with their property often affects many others positively or negatively.

When you purchase a home in a homeowners association (HOA), you get a set of benefits in exchange for your monthly HOA fee.  (See the article The Impact of Homeowners Associations on Purchasing Decisions.)  But you also explicitly agree to play by the set of rules established by the HOA, in the cryptically-named CC&Rs: it's covenants, conditions and restrictions.

For many people, judging an HOA by benefits versus the monthly dues is sufficient.  Others prefer to pay a lower HOA fee for fewer services.  It's a topic deep enough for there to be companies that specialize in evaluating homeowners associations, but with an hour or two of scanning and reading HOA documents, usually included a home's disclosure packet, you can evaluate how well an HOA will work for you.

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Aug.16.2007 [ Filed under: Home Buyers, Silicon Valley News ] 2 Comments »

When is a $900,000 home more expensive than a million dollar home?  When the $900,000 home comes with a $533 per month HOA fee.  

If you bought a one million dollar home in Silicon Valley using a 30-year fixed-rate principal and interest mortgage with a 7% interest rate and 20% down payment, your monthly payment would be $5,322.  The same terms on a $900,000 Silicon Valley home would be $4,790.  The difference per month? $532.

The HOA provides a number of conveniences and economies of scale to its members but it's also important to remember that payment itself is important.  (Like your mortgage, if you don't pay your homeowners association dues, you can lose your home, so the HOA payment can be thought of as just as important as your mortgage payment.  Though unlike mortgage interest, these HOA dues aren't tax deductible.)

This has two implications for my clients.  The first is clear: you can afford a numerically more expensive home if it has a lower HOA fee than one that does, or conversely a home is less affordable if it has a higher HOA fee; the trade-off is that you'll have to pay for the services the HOA would have provided.  The second is that the HOA has a real impact on the resale of your home (a good HOA is a plus) so it's important to evaluate the services an HOA provides relative to the HOA's monthly dues.

After all, HOA fees vary from association to association, from a nominal $25 to over $800 in some parts of the Bay Area, and the different homeowners associations provide different services (at different efficiency levels) to their members.  For my clients, the key questions are, where is your money going, do you value it enough to pay for it, and will it be worth it to the folks you hope to resell your home to?

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Aug.10.2007 [ Filed under: Home Buyers ] 4 Comments »