What happened to the strong buyer’s market, where bargain hunters could scoop up great deals at ridiculously low prices?

Many buyers have waited to “find the bottom of the market”. Now’s the time to get off the fence; the market’s turning and is headed into seller’s market territory (at least in some areas and price points).

One of the best ways to understand the real estate market conditions is to track the absorption rate or months of inventory. Approximately 6 months of inventory is a balanced market. Five or less is a seller’s market and seven or more months is a buyer’s market.

Here’s a view of what’s happening among single family homes in Santa Clara County (about 60% of the county is represented by the City of San Jose):

Inventory is down, sales volume is up, the median sales price is up (it had been holding steady at appx $450,000 for the last three months - this is the first uptick we’ve seen this year). The days on market are holding steady at close to 100 and the percent of list price is hovering at around 97%, where it’s been throughout 2009.  No real signs of slippage here, but there are signs that inventory is being absorbed.

Once inventory starts declining, there will be pressure on prices to go up.  (It is supply and demand driven, of course.)

On the flip side, the foreclosure moratorium will be ending shortly and there may be an increase of inventory.  If that happens, it will stem the tide and it will revert into buyer territory.  Until and unless that happens, though, it looks like Silicon Valley real estate is generally turning back to the seller’s favor after three long, difficult years of buyer gains.

If you are thinking of buying a home in Silicon Valley, there are things you want to know upfront so that you make an informed decision. Because the most important factor is “location, location, location”, and because once you buy a home you can’t change it, you’ll need to know some location-specific things, including:

• where are the earthquake fault lines?
• where are the geologic hazard zones, such as liquifaction areas?
• where are the flood plains?
• where are man-made things that will negatively or positively impact a home’s value? Things such as
  • train lines
  • freeways
  • high voltage power lines
  • school district boundaries
  • zip code boundaries
  • proximity to entertainment venues

When looking at maps, sometimes these items show up and sometimes they don’t. Realtors and other real estate professionals in the San Jose area often use a Barclay’s Locaide to locate the natural hazard areas. Google maps can help uncover some other areas, but sometimes it raises more questions than it answers. (Last year a Realtor who doesn’t know the Belwood of Los Gatos area too well phoned me to ask what the object showing up in the hills of Belgatos Park was - it is just a covered resevoir, but it was not identified on the map and concerned some buyers. Local knowledge is still very helpful.)

Tonight I spent some time zooming in on Google Maps, using the satellite view, and idenified many of the paths of the high voltage power lines running through Los Gatos and nearby areas, such as Saratoga, Cupertino, Almaden Valley, Santa Teresa, and South San Jose.

Below, please find the fruit of that labor. I do not claim to have tracked all of the high voltage power lines in the west valley area of Santa Clara County, but I think I got many - maybe even most - of them. I hope you find the information helpful!

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Silicon Valley, a region known for high tech (semiconductors, computers, and biotech among them), mostly abides within Santa Clara County.  (It also extends a bit into San Mateo County, Santa Cruz County, and Alameda County.)  This is at the southern part of the San Francisco Bay Area.  The weather is mild - it’s a subtropical climate and the palm and redwood trees will back that up. At one time, during the orchard heyday, it came to be known as The Valley of the Heart’s Delight.  Eventually the fruit and nut trees gave way to housing in the post World War II boom, and as high tech slowly took over as the regional industry, the moniker changed to Silicon Valley.

The people who live here love many things about the San Jose area and the Santa Clara Valley. The climate, of course, cannot be beat. The level of education is high, the population delightfully diverse, and crime is low.  Add to that a close proximity to San Francisco (an hour north by car or train), Berkeley and Oakland (ditto the time up the East Bay by car or BART), the beach at Santa Cruz (about a half hour), Monterey/Carmel (90 minutes), etc. You can drive to Napa or Sonoma for wine tasting - or you could do it within a couple of miles of the airport at the J Lohr Wine Tasting Room just off The Alameda. Of course, our hills have plenty of wineries too, and they are found closer in (Los Gatos and Cupertino and the east foothills of San Jose in the Evergreen area). In other words, there are a lot of reasons why “The Valley of Heart’s Delight” still applies.
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A colleague of mine sometimes asks me to help teach a course he offers on Real Estate Practice (one of the requirements for getting a real estate license) at West Valley College in Saratoga.   He’s been giving this weekly class for a few years now,  and several times I’ve come in to instruct on the broad topic of disclosure (or “disclosures”) for the 2-3 hour session.  It’s very interesting and a fun topic to for me cover because it reaches into some uncommon, yet critically important, areas of discussion in real estate.

What is “disclosure”?

Disclosure is affirmatively offering information that a the other party in a real estate transaction (and the other party’s agent) would want or need to know to make an informed decision on the realty purchase or sale. Often, this information is not easily apparent.  Most of the time, disclosure refers to the seller’s obligation to disclose in particular.  That will be our focus in this post: the seller’s disclosures.

The sellers obligation to disclose is not the same everywhere.

Disclosure laws and practices vary from state to state, both in terms of what must be disclosed and, sometimes, what must not be disclosed. Sometimes it’s a “don’t ask, don’t tell” situation. My comments here refer to the practice in California, which may be different from other states. 

Silicon Valley has varied issues which must be disclosed. Some of them are regional (rather than particular to one home in particular). Some of what must be disclosed is a “natural hazard” and some is an “environmental hazard”.  Other issues might not be hazardous, but instead a nuisance.

Next, find some examples of regional things in the Santa Clara Valley that might be disclosed. In the south county areas of Morgan Hill and Gilroy, disclosure issues will include the farming and crop dusting. In some of the newer, downtown San Jose loft communities, there will be disclosure about the proximity of trains and their late-night runs nearby (horns blaring).  In Cupertino, Los Gatos, Monte Sereno, Saratoga, Almaden Valley, and may areas near hills, there may be disclosures about high water tables, water runoff, and damp crawl spaces.  Remote areas all around Santa Clara County may report a requirement to clear brush within so many feet of structures for fire safety.

Throughout Silicon Valley, we have some constants that should be disclosed. Issues here that the seller needs to tell the buyer include the fact that sometimes we have drought years and cannot water our lawns when we want.  Also, we have expansive clay soils and that is important to know regarding proper grading - do it wrong and your foundation may suffer.  Earthquake fault zones and other natural hazard zones also must be disclosed to buyers. (You would want to know if you were buying a home on the San Andreas or Hayward Fault, wouldn’t you?) Forms and ordered reports do address most of these issues, luckily!

Forms are a big help, but they have limits. 

There are forms - lots and lots of forms, particularly when buying or selling a home in Santa Clara County or Silicon Valley - that can help with the obliation to disclose. But what has to be disclosed isn’t necessarily written on the form. The form is just an aid to making that full disclosure.

How does a seller know when something must be disclosed?
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This morning brought a chilly 35 degrees here in Silicon Valley. Rain was threatened and kids everywhere across Santa Clara County have been hoping that the snow will come low enough to play in easily today.

The nippier-than-usual weather brings not just hope of very unusual snow, but also a chance to learn something about your home (or your future home, if you’re in escrow to buy a San Jose area home).

My Los Gatos street is like a lot of other residential areas in Almaden Valley, Cambrian Park, Campbell, and Willow Glen - homes are clustered together and closed up tightly against the cold. Look at the rooftops. What do you see on an icy morning?

Frost graces all three of the roofs above. But how much of the roof has the white blanket? In this case, more is better.  The homes where there’s little or no frost are essentially “defrosting” their roofs with escaping heat. Homes that hold in the heat better do not have warm roofs and thus have a good amount of frost on top.

Of course, places where air or gas is meant to escape, such as at the vent pipes, are going to warm up the area immediately around them.  If there are just patches of melted ice with no such pipes nearby, perhaps your insulation has been disturbed and it’s worth a visit to the attic.

Buying a home? Drive by early on these cold winter mornings to see how frosty the roof is.  Selling a home? Make sure your insulation is good - it is a selling point that cost-conscious homebuyers will appreciate!

So if you want to go green, have a look at your roof on an icy morning and see if your heat is staying in the house or defrosting your roof.

Silicon Valley real estate values are driven by many factors, possibly the greatest of which is the quality of the public schools.

A Word About Silicon Valley School District Boundaries

The school boundaries in Santa Clara County (Silicon Valley includes all of Santa Clara County plus a bit of Santa Cruz County, San Mateo County, and Alameda County) are not defined by the city or town boundaries. The reason for this is that the school district boundaries were formed before all of the current city or town limits were finalized. This makes it confusing for everyone, but especially people relocating to the San Jose area.

As an example, let’s look at the Town of Los Gatos and its schools. It would seem that the Los Gatos School District should include all of the Town of Los Gatos and everything within the town limits, but that isn’t the case. Some residents of Los Gatos belong to the Los Gatos School District, others to the Moreland School District (which includes some of Saratoga and San Jose too), and still others to the Union School District (which includes part of the Cambrian Park area of San Jose). Even more complicating is the fact that a small part of Almaden Valley (a district in San Jose) has “Los Gatos Schools”. So you could possibly be in San Jose and attend Los Gatos Schools. That isn’t convenient, either. The people living in that part of Almaden, just off Guadalupe Mines Road, must drive through a section with Union Schools to arrive, some 15 minutes later, at the nearest school in their district!

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What’s Are The Fun Places for Kids In and Near San Jose?

There are oodles of fun things for kids and the young-at-heart to do in San Jose and the greater Silicon Valley area. Here are a few of the more dramatic highlights!

Paramount’s Great America in Santa Clara. Suitable for all ages but teens will like this best! This park does offer some water play areas and some little kid areas (but it’s expensive for that). Shows in air conditioned theaters will be welcome on warm days. Check out the Wow Card (or VIP Pass if you want to park close) if you’ll be back again in the same season.
Information on season passes & free return trips to Great America

List of Attractions Throughout Santa Clara County and Beyond

Gilroy (south of San Jose)

Bonfante Gardens in Gilroy Want to make a bigger trip of it to The Garlic Capital of the World? Gilroy offers great shopping to dress up those kids (or yourself)! Outlet Mall - List of Shops. And maybe when that’s all done, do some wine tasting. If you can take a tour, the kids may not even get bored. List of wineries (and breweries) in and near Gilroy. And lastly, don’t forget the Garlic Festival! It happens in late July every year. Yes, it’s hot. Yes, they do really serve Garlic Ice Cream. You need to try it at least once! The Gilroy Garlic Festival - information, recipes, calendar, fun stuff for kids.

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