With fabulous views, exceptionally high ranking schools and beautiful newer construction, the Graystone and Pfeiffer Ranch neighborhoods in San Jose’s Almaden Valley are perennially desireable.

Today I was in the neighborhood and took a photo of Mt. Umunhum from there. 

The neighborhood also enjoys a park along the creek with a playground to enjoy on days with better weather.

Not sure if you’ve been to this scenic part of San Jose’s Almaden Valley?  Here’s where to find it (this is where I took today’s picture):

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Silicon Valley features a number of upscale communities that enjoy beautiful estate properties. These luxury homes are not simply large houses, but rather they boast qualities generally not seen in regular residential real estate.

What makes a house a “luxury home”?

A luxury property in Santa Clara County often includes a number of elements that set it apart, such as:

• price tag: these homes usually sell for more than three or five million dollars (and may be $10 or $20 million or more)
• more than an acre or two of land
• house larger than 4000 or 5000 sf
• the inclusion of “out buildings” such as a guest cottage, gatehouse, etc.
• views (valley, hill, acreage) or special features of the land (waterfront, riverfront adjacent), a vineyard, or something else special and uniquely beautiful
• amenities such as a pool, tennis court, racquetball court, gym, sports court or facilities for enjoying other sports & exercise on site
• specialized hobby or relaxation rooms, as in a darkroom, library, workshop, conservatory
• entertainment centers not commonly found in private homes, like a ballroom, dedicated home theater room for movie viewing, pool or billiards and “game room”, and ice cream parlor
• safety tools such as a video survelliance system, electronic gates

The (main) house itself is qualitatively different too.

Kitchens tend to be the most important room for San Jose area home buyers of all price ranges, and this includes homes that cost upwards of ten million dollars. Usually, kitchens in these homes are designed with a very clear purpose in mind and are done beautifully, though recently in Los Gatos I saw a home listed for about ten million with a kitchen that needs to be completely remodeled. This is very unusual, though.

Most luxury homes features kitchens of one extreme or the other. On the one hand, it may be more industrial in nature if those cooking in it are primarily professional chefs, domestic employees or catering services rather than the homeowner. This is not the kitchen of glossy magazines, it’s not meant to impress anyone for all the maple cabinets, stainless steel appliances and granite countertops. This sort of kitchen is functional, not gorgeous, and it may have stainless steel countertops, for instance, alongside the giant gas range. Such a kitchen is usually separate from the living areas and the guests are not expected to visit this part of the home.

Far more commonly found in Silicon Valley is the other end of the spectrum, the kitchen where residents spend most of their time, and it’s meant to impress. Here we see high end materials and appliances in a room viewed as much as art as the meals created in it are. This type of kitchen is often the focal point of today’s upscale or luxury home. The home’s floorplan is “open” to the kitchen - often the kitchen and family room blend together as part of a Great Room. This is a kitchen designed for owners who cook, not those who have servants.
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How’s the market in Saratoga?  Your view of the market will be influenced by whether you’re looking at the homes that have sold, the ones on the market, or the ones that are sitting and not selling. 

Here’s a look at the numbers from my Real Estate Report for single family homes: 

Among the sold homes, the median price has been slipping.  This is an “overall” number though, not reflecting price points, location, or school districts.

Here’s the same info for condos and townhomes in Saratoga:

As you can see there were no sales of condos in Saratoga in November - hence all the zeros.   What is managing to sell are the very least expensive homes - not the luxury condos.

Now let’s turn our attention to what’s happening now amoung the active or for sale homes in Saratoga (using Altos Research, to which I have a subscription).

Here’s a graph displaying the overview of list prices for condos and single family homes in Saratoga:

Oddly, list prices appear to be up even though the median sales price is clearly down.  Are sellers out of touch, or what’s happening?  We’ll need more data to answer that.

Here’s a similar graph but just of the single family homes, and this time with a breakdown by price quartile. (Please note that the info would be even more precise if broken down by school district, but this particular program doesn’t yet filter by schools.)

Interestingly, the middle quartiles showed upward movement in pricing over the last 12 months. I have buyers in the lower 3 quartile and it seems that there’s not much inventory among thouse in Saratoga or Cupertino Schools, and when the home is nicely fixed up and has no issues (problems), prices seem to be inching up. 
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The Monte Sereno real estate market is trickier than most Silicon Valley markets to gage because it’s so tiny.  With just four thousand residents, there simply aren’t that many homes for sale in Monte Sereno at any given time and there are even fewer solds.

Monte Sereno Real Estate Trends at a Glance

The info below is from my Silicon Valley REReport, which comes out monthly. Click on the link to see the full report on October’s home sales activity in Monte Sereno.

Home Values in Monte Sereno

Sellers often want to know, perhaps more than anything, what is happening to home values. “What’s my house worth?” is a perennial question because the answer can change from month to month.  Buyers want to know what any particular property should be worth - and often do not see eye to eye with sellers on this point.  Hence, few homes go into escrow (or under contract) each month. (The months supply of inventory has averaged 19 months in MS this year - more on that below - which indicates that there’s a bit of a standoff between buyers and sellers. Buyers aren’t buying in the vast majority of cases.)

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The Monte Sereno real estate market tends to be a good indicator of the high end market throughout Siicon Valley or Santa Clara County. While it may not be exactly the same in Los Altos, Los Altos Hills, Almaden or Saratoga/Los Gatos, it’s often very similar.

Homes at the high end of the price range have taken a beating in the downturn, as would-be buyers - mostly “move up” home buyers - haven’t got enough equity to purchase the next home.  Many are running into problems getting financing too. So without a large amount of money to put down, it’s very difficult for even willing buyers to make the purchase.

Prices have been dropping in Monte Sereno, as they have been dropping everywhere in the San Jose area.  Although we aren’t seeing the deep discounting here that we see in Alum Rock (where most of the houses bought are distressed properties, either short sales or bank owned homes), the rollback in pricing is still painful for home sellers, especially if they were counting on that money for retirement.

Let’s first look at the recent historical data on list prices in Monte Sereno (graphs courtesy of Altos Research, with which I have a subscription). First here’s a view of the median list price of all houses offered for sale in Monte Sereno in recent years:

Now, the asking prices in Monte Sereno in recent years broken out by quartile (each segment is 25% of the inventory):

The highest priced homes have shown the most volatility, as you can see by the swings in the top line.  That could be a statistical abberation since each quartile represents very, very few homes.
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As of today, there are nineteen condominiums and townhomes for sale, and just one pending sale, in the upscale Silicon Valley city of Saratoga, CA.

Homeowners are used to buyers stretching to buy homes their corner of Santa Clara County.  It’s a highly desirable place to live, with great schools, low crime, scenic beauty, character, history, and community involvement.

Right now, though, the hottest segment of the Silicon Valley real estate market is the lower priced single family home market.  Conversely, the coolest part part of the market is the luxury condo market, that is, condominums and townhouses in expensive areas like Los Altos, Cupertino, Saratoga, Los Gatos and Almaden Valley. Put directly, homebuyers with a  four or five hundred thousand dollar budget can purchase a single family home in San Jose for the same amount that a condo would cost in Saratoga.   The selling challenge appears to be even more acute as the price point rises.  It has been several months since a million dollar towhnouse in Saratoga has sold.

A good tool for understanding  the market condition is the rate of absorption, which factors in current inventory levels with sales. The question being answered is this: if no new homes were to come on the market, how long would it take for the current inventory to be absorbed if sales continue at the current rate?  (It can be viewed as days, weeks, or months of inventory.)  For example,  if there are one hundred homes for sale and twenty of them sell in a month, there’s a five month supply of inventory, or five “months of inventory”.

If there are under six months of inventory, it’s considered a sellers’ market. Six months is neutral. More than six is a buyers’ market. Obviously, the higher that number goes, the more extreme the market gets into the buyers’ favor.

Right now, it’s quite acute.

For the last two months in Saratoga, there have been NO closed sales among condos and townhomes. None.  This is almost a total market rejection by consumers - they don’t want what is offered at the prices offered. So the months of inventory would be infinite - if we could graph that. This chart doesn’t do well with intangibles like that, so I’ve plugged in in as if there were one sale in January and February - but there were not. So please envision the last two months as having bars that continue through the top of the chart.  Here’s how the history of the months of inventory in Saratoga look when put into a graph (March 2001 is missing data):

The numbers are from MLSListings, our mls provider. I did the crunching to get the absorption rate. The information for March 2001 was missing on MLSListings.com for some reason - so you’ll see a gap in the chart where that info belongs.

What’s happening with prices? The peak of pricing was about two years ago, and prices have been dropping since then - if slightly at first, it’s more dramatic now. This has been a very deep correction, and prices have “rolled back” in time a number of years.  For some properties, it’s only to about 2005 or 2006. For others, it’s between 2002 and 2004 prices. Since no condos have closed recently in Saratoga, it’s hard to pin the “rollback year” down. It is, however, clear that buyers don’t like the list prices of the homes for sale - if they did, they’d be buying.

When will it recover? It’s hard to say.  This correction has been deep and it may take a few years to see a recovery.  Buyers will need to feel confident in their jobs, particularly in purchasing a luxury condominium.  I would not expect to see peak prices again for another five years or so, possibly more.

Most homes in Silicon Valley come with some type of parking space for cars beyond street parking.  Home buyers want to know that there will be a place for their vehicles (and often their “stuff” too).   Garages and parking are sometimes under-appreciated aspects of evaluating real estate, so it will be the focus of today’s topic. 

Because a real estate purchase is a big ticket item, it is always important to consider the ability to sell it later.  (Always buy with selling in mind!)  Will it be hard to sell it in the future if it is not a red-hot sellers market?  Parking can greatly impact “resale value” and overall desireability to a large portion of consumers.   If you are evaluating a condominium, townhouse, or planned unit development home with private roads and parking, there will be some special concerns that may be a little different than if you were purchasing a single family home. We’ll consider both.

General principle:  In all types of housing in the San Jose area, usually the most highly desired type of parking arrangement is an attached garage.  This is not true in all cases but is generally true.  You would not find homebuyers interested in historic homes (Victorian, Spanish, Craftsman) wanting a prominent two car garage at the front of the house, commanding the lion’s share of the view from the street. (So don’t expect to see that in Japantown, Naglee Park, or the the Rose Garden.)  But for the typical buyer of the more common ranch style home, the attached garage is expected and appreciated, and if it’s missing it’s a challenge to sell the property later because as sellers you’ll be appealling to a far smaller pool of buyers.
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