This weekend, travel back in time to the early- to mid-20th century and celebrate Santa Clara Valley’s heritage with the Saratoga Historical Foundation and the City of Saratoga’s Blossom Festival.
When the hills of Los Gatos, Saratoga, and the surrounding regions were covered with fruit blossoms every year, a Blossom Festival was held with parades, food, games, and theatrical performances. These massive celebrations saw visitors come from miles around to enjoy the beauty of the valley and the festivities.
On March 18th from 10am-4pm, the Saratoga Heritage Orchard and Civic Center area will be host to a new Blossom Festival. The event is free and family friendly. Children may enjoy kids craft and activity tables and a petting zoo. History buffs can rub elbows with costumed characters from Saratoga’s by-gone-days, see vintage vehicles, motors, and tractors, and swing to a live band playing tunes from the 1930s-40s. Foodies might enjoy gourmet food trucks, prune and apricot tasting (the prize crops of the Valley of Heart’s Delight), and docent-led orchard tours. There will also be artists, craftspeople, entertainment, and more!
Join us in the orchard under a snowfall of pink and white flower petals and celebrate the beauty of the changing season at the Saratoga Blossom Festival!
Saratoga Heritage Orchard and Civic Center area
13777 Fruitvale Avenue in Saratoga, CA
March 18th from 10am-4pm, free to all!
Almaden Valley in San Jose is comprised of many neighborhoods and subdivisions. One of them, close to the border with Los Gatos and Cambrian Park, is particularly popular: the Oak Canyon neighborhood.
There are many reasons for its draw among Silicon Valley home buyers: the houses were well built by Shea Homes in about 1980, so they are relatively newer by Silicon Valley standards. They’re larger homes on comfortable lots, often 8000 sf or so but some as small as 6500 sf and others larger than a quarter acre in the Oak Canyon corner of Almaden.
Most of the homes boast a 3 car garage, which is a big help with storage of stuff, if not storage of cars. The roads gently turn, which makes a more pleasing look. It’s a very “conforming” neighborhood where everyone keeps up the homes and yards. Much of Almaden is viewed by consumers as somewhat remote, but this section, near the mouth of Almaden, is not too deep into the valley and is a better commute location for most. One of the largest pulls for the area, though, is the nearby elementary school, Guadalupe School, which has API scores in the 900s.
Where is the Oak Canyon neighborhood in Almaden Valley, San Jose?
Oak Canyon is found near the intersection of Camden Avenue and Coleman Road in San Jose but is bordered by Coleman on one side and the Guadalue Creek on the other sides. (The far side of the Guadalupe Creek at this point is Cambrian Park.)
And to provide some bearings, here’s a map of the Almaden Valley district of San Jose generally:
Hiring a Realtor? Silicon Valley home sellers are very savvy and go at their real estate transactions carefully. However, some may be tempted to try to line all the criteria up in side by side charts and attempt to make a hiring decion that way. Please beware the temptation of focusing on what is “easily measurable” as most important. Sometimes the most easily measurable factors may not be that important at all. Much of what is truly valuable in a Realtor’s suite of services and skills cannot be easily measured in a side-by-side comparison chart.
Silicon Valley home buyers are sometimes confused about the difference between a home inspection and a home appraisal. Are they one and the same? Not even close!
A property or home inspection is done to determine if the major components of a house, townhouse, condo, etc. are all working and in satisfactory condition, and to point out defects and problems so that they may be addressed by the current or future owner. The property inspector will make a visual inspection of things like the foundation (is it cracked, is it bolted?), are there any issues in the crawlspace (moisture, ponding water, cellulose debris), the attic (is there evidence of vermin? are electrical junctions all in boxes? is there enough insulation?) as well as the furnace, water heater, etc. The inspector may check to see if the water flow is good in the home and at the water main. These are all things that the appraiser does not do. (There are other possible inspections, too, besides just the home inspection, such as chimney, roof, HVAC, pool, foundation, etc.)
An appraisal is a formal statement of value by a licensed appraiser. The appraiser measures the size of the home to establish the square footage. The appraiser does not check to see if the furnace works! However, if the roof is very old, if the home needs substantial remodeling, that will impact the assigned value. The appraisal is used by the lender to determine how much the bank should be lending on. Often, that’s the same amount as the purchase price. But sometimes not!
What happens if the appraisal is lower than the purchase price of a home?
A buyer with 20% down payment is in contract to purchase a Cambrian house for $1,400,000. The expectation is that the bank will fund a loan for 80% of purchase price, or $1,120,000. If the appraiser finds the value to be only $1,350,000, the loan will be 80% of that number – not the purchase price. In that case, the mortgage would be at $1,080,000. Note: most people think that the buyer will be “making up” the full $50,000 shortfall, but that’s not the case. The amount to make up is $40,000, not $50,000 because it’s the percentage of the gap, not the whole thing.
If you happen to be buying residential real estate “all cash”, you will not be required to have or pay for an appraisal. You are also never required to have inspections, but unless a seller is providing excellent pre-sale inspections, it would be a huge and possibly costly mistake to skip having them.
One question I get a lot is this: what does it cost to buy a 4 bedroom, 2 bath house of about 2000 square feet?
So to answer this question, let’s see what houses like this are selling for (4 bed, 2 bath, appx 2000 SF or 185 square meters) and see how the cost looks in one Santa Clara Count y / Silicon Valley area versus another.
Today I compared several areas and cities using this criteria: single family homes of 1800 – 2200 SF, 3-5 bedrooms, 2-3 bathrooms, on lot sizes of 6000 SF to 10,000 SF. Normally I would chart this over the last 2 months, or 60 days, but because of the low inventory causing the sellers market I have expanded the search to the last 4 months, or 120 days, for a better range. As of this writing, Los Altos only had one sale over the last 120 days, so data for that segment spans from 0 to 180 days back, or 6 months, and in that half a year we have merely 3 sold.
Here’s how it shakes out in the “west valley areas” along the Highway 85 corridor, most of which are known to have good to great public schools. What areas are most affordable? One way of analyzing this is the “price per square foot” figure. Whenever I update the chart, I re-arrange the order of the cities from high to low based on the price per square foot, although there’s usually minimal movement.
Below are my results from the same search back in September 18, 2015. By comparisson, you can tell that Santa Clara’s average Price has increased, pushing it above Almaden and Campbell.
How competitive is the market? Have a look at the DOM or “Days on Market” figure. All of these days on market are short, but they range from low to heart-skippingly fast.
In most cases, the priciest and most desirable places have either the best schools or shortest commute location or both (Palo Alto and Cupertino have both). Had I ranked these for school scores, you’d find that Cambrian is fairly high up and a good “bang for the buck” location – though not a super short commute for folks who work in Mountain View (though not so bad for people working in Cupertino). Almaden, too, offers a good value for the quality of the schools, homes, and neighborhoods, though the commute is longer. None of these is especially close to North San Jose (where a major employer is Cisco).
It should also be noted that in some of the smaller communities with less on the market these numbers may not be as stable as others with more data – for instance, Saratoga only had four homes sold matching this criteria within the 120 days of collected data, and therefore may not be as accurate as others, such as the Blossom Valley area of San Jose with the most data at 35 homes sold. For these smaller communities with less data, it is beneficial to look at them more closely – Saratoga, for instance, has 3 different high school districts which have an impact the real estate prices. This chart is really just a snapshot to give a general sense of the relative affordability of these markets to one another. Continue reading
Below, please find the charts indicating Silicon Valley home prices by high school district for transactions closed in December 2016 for condos and townhomes first, and later also for single family homes. The vast majority of Silicon Valley is found within Santa Clara County and San Mateo County, with small portions also in Santa Cruz County and Alameda County. Alameda County is not part of the local MLS, so unfortunately I don’t have that data to share. The data presented here is courtesy of my brokerage, Sereno Group.
Silicon Valley home prices by high school district: a few words of caution
If you only glance at the median sale price, you may be confused about the most expensive Silicon Valley places in which to live for the condominium or townhouse buyer. For instance, in Santa Clara County, the Los Gatos-Saratoga Joint Union High School District has a median sale price of $1,4 85,000. At first view, this seems to be the most expensive part of the county. But please note that the average square footage is 1910. Now look at Palo Alto Unified, with a median sale price of $1,260,000 – but an average square footage of just 1313. The price per square foot, though, correctly pegs the pain value of home buying in Silicon Valley as PA Unified comes in at a whopping $1,014 per square foot. (More disclaimers: large homes sell for much less than smaller ones on a price per sf basis, so this is more helpful when the average square footage is similar.)
Also, please note that the high school district boundaries do not neatly follow those of city, town, zip code, or any other boundary. It’s sloppy at best. Campbell Union High School District covers not only Campbell, but parts of San Jose, Los Gatos, Saratoga, and Monte Sereno. The Los Gatos-Saratoga Joint Union High School District encompasses parts of Los Gatos, Saratoga, Monte Sereno, the Los Gatos Mountains and even a sliver of the Almaden Valley in San Jose.
Condos and townhomes – prices by high school district
Santa Cruz County has some Silicon Valley jobs and a strong number of residents who work in tech on the other side of “the hill”. Studying these home values, you can imagine why some locals are willing to commute across the Santa Cruz Mountains. It is much more affordable.
Next, the same data but for single family homes .
Interested in buying or selling anywhere in these counties? Please call or email me today!
Cambrian Months of Inventory (by elementary school district)
Saratoga, CA real estate market update (with info by price point and high school district)
Los Gatos real estate market trends by price point and high school district (on the Live in Los Gatos blog)
Learn more about what homes cost in Silicon Valley on the Move2SiliconValley blog
Interested in buying a rental property? Perhaps you were thinking that a 20% rental property down payment would do the trick to get you started as a real estate investor? That may work in some places. In most of the U.S., though, you’ll need 30% down to be “cash flow neutral”, meaning that you aren’t losing money each month. In pricey Silicon Valley, though, often it takes more than a 40% down payment on an investment property just to break even.
Today a friend and past client asked me exactly this question. The investment property in mind, a townhouse, would pull in a monthly rent of about $2600 to $2800 when occupied. (Remember, you have to also factor in at least some vacancy rate.) The list price for this townhouse is about $650,000. (Side note: with a condo or townhouse, insurance coverage is probably going to be a lot less costly than with a single family home. The estimates below are for a townhome.)
Where do you think the cash flow neutral or break even point would be in terms of the down payment? That question is today’s case study. Have a look at the various scenarios of 20% down, 30% down,40% down and 50% down:
If my calculations are correct, you really need to put about 50% down to buy this particular Santa Clara County townhome and have it support itself.
Is that a good deal? Not really. At least not if your main focus is cash flow.
There are other places in the country where you can put a lot less down and break even or have a positive cash flow.
Of course, cash flow is one motivator. Another, though, is appreciation. Depending on your own goals, you may be far more interested in appreciation than cash flow. If that’s the case, Silicon Valley may be exactly what you’re looking for as an investment buyer. Those places where the down payment can be smaller may not have the same upside potential with appreciation as we have here in the San Jose area, or the San Francisco Bay Area as a whole.
Interested in becoming a real estate investor? Have a good down payment saved? Please call or email me and we can chat. If Silicon Valley isn’t the right place for you to make your real estate investment, I can introduce you to wonderful Realtors in other areas where the numbers may be more favorable.
The months of inventory for any part of the real estate market can vary, depending on many factors, including age of home, house size, lot size, and school district, whether or not there’s a pool, and many other things. It can be very useful to understand this metric when selling a Silicon Valley home. I’ve done market numbers crunching tied to the specific characteristics of a property (say, small yard with pool or big yard with no pool) to find the impact of those characteristics on the probability that a home will sell – or how fast.
The Cambrian area of San Jose is a very “hot market” overall, but it can be confusing to know how hot it really is, just like the rest of Santa Clara County, because there are multiple school districts – and schools are probably the number one driver of home values in this highly educated valley.
An explanation of “months of inventory”
What does “months of inventory” mean? This figure references how long it would take to sell a property if homes continued to sell and close at the current pace with no new inventory coming on the market. A good analogy is to consider a bathtub which drains. If you add no new water to the tub, how long will it take to empty out?
The months of inventory is sometimes called the absorption rate. The question is simple: how long will it take for the current inventory of homes for sale to get absorbed by the home buyers purchasing them? It doesn’t have to be calculated by months. It could be in days, weeks, or years. But months is probably most common.
The Cambrian area of San Jose’s months of inventory as a whole, and in one price point
Cambrian was once an enormous zone of the Santa Clara Valley. Today we mostly think of it as within San Jose in the 95124 and 95118 zip codes. Some of it it adjacent to Campbell – a very tiny sliver is IN Campbell, and a tinier still area is in San Jose and is under the Campbell School Union District. Most of this area is in one of three elementary school districts: Cambrian, Union, or San Jose Unified.
Here’s the breakdown – first, for ALL of Cambrian (MLS area 14 for my Realtor readers) that’s within the City of San Jose and second, by elementary school district. The area for Campbell Elementary is so small that the numbers are not significant (no offense to the Campbell school residents). It can just jump around too much to be helpful, and often gives us no usable data. Please have a look:
I highlighted the San Jose Unified and Union Elementary School Districts in both charts. Aside from Campbell, which has numbers too small to register a MOI, these are the hottest tickets in the district.
The message I’d like to convey is this: you can read about information for your part of Silicon Valley, or your city or zip code, but it’s not until you drill things down to an area that closely matches your own home will you have a better sense of your own home’s “real estate marker.” It’s never “how is the market?” so much as “how’s the market for YOUR home – or the one you want to buy?”
If you were only tracking Cambrian, you might see 0.2 months of inventory. That’s a lightning fast seller’s market. But it’s not nearly as good if you’re selling in the area with Cambrian Elementary Schools. There, you’re looking at closer to 1 month of inventory for homes around $1 million, while the same price point with Union Schools is a blazing 0.2 of a month, or about 6 days – as opposed to 30!
Years ago, I had a Willow Glen listing where the whole back yard was the pool. I did a study on the months of inventory and learned that pools in properties with that lot size took substantially more time to be absorbed. Likewise, I had a Los Gatos estate property on an acre of land, and the reverse was also true: the months of inventory showed that large lots on $2 million and up homes for sale did not sell nearly as well without a pool.
The math is simple: using the same criteria, divide the number of active listings by those of homes sold in the last 30 days. The criteria can be anything you like – a property’s size, location, number of bathrooms, price, age, etc. Often I include approximately the same home and lot size together with the school district. That usually provides much more accurate info on “how’s the market” as compared to just getting it by zip code alone.
If you are looking to buy or sell a home in Cambrian, or anywhere in San Jose or Santa Clara County, this kind of information is really important. It is not hard to do, but very few real estate agents will provide this information before you list or before you make the final determination on the list price of your home.
Looking for a good Silicon Valley Realtor who will get you that extra data? Please call or email me. I would love to chat to see about possibly working together.
Buying a home in Silicon Valley is seldom easy, but right now, it’s nearly impossible with Santa Clara County’s critically low housing inventory. With rising interest rates getting folks off the fence and strong job growth in the San Jose area, there are many more home buyers than home sellers. While this isn’t unusual, the severity of the problem certainly is extreme. How bad is it? Here’s a visual cue dating from January 2003 to December 2016 which indicates that last month’s inventory of single family homes for sale in Santa Clara County is the lowest we’ve had since January 2003 (that’s how far back MLSListings.com shows them). Perhaps much longer.
It’s all about supply and demand. Look at the shortage of supply! Below is an alternate presentation of the same information but as a spread sheet format. I like this better because you can skim all of any particular month, such as December, and see how the most recent one compares to the same month in prior years. December 2016 had just 515 houses and duet homes on the market. The year before it was 834, which is historically low, but not nearly as dire as the current numbers. Santa Clara County’s critically low housing inventory is at historic lows!
This is precisely why it is so hard to buy a home in San Jose, Los Gatos, Campbell, Saratoga, or anywhere in Silicon Valley today. Has it improved since the inventory was measured by the MLS? No, it hasn’t. It was 452 as of January 1st and 450 today, on the 3rd!! This is sort of like “inventory limbo” – how low can you go?
How does this impact you?
Many long time residents may recall that we have had a shortage for a few years here. In January 2012, I wrote about it here: Why is it so hard to buy Silicon Valley real estate right now? Compared to the recession that had just ended, inventory was low – I can look back now and think “wow, we had no right to complain! We had a lot more inventory then as we do now!” What also happened is that with the restricted inventory, home prices rose. A lot.
If you are a renter and want to be a home buyer, you now have two things going against you: rising interest rates and rising home prices (due to strong demand and critically low supply of homes to buy). If you wait a year, there’s a good chance that you will lose quite a lot of buying power as interest rates continue to go up and home prices do, too. Please check out my article on rates: How will rising interest rates impact your home buying power? Super low inventories tend to cause rapid price appreciation, and if you aren’t careful you could be priced out of the market (either because of home prices or because of those rising interest rates).
Take heart, home buyers, often the supply of homes for sale does go lower in January before rising again in either late January or early February. So buyers, hang on!
If you are a seller, this is great news for you as it’s very likely that your equity will be increasing with the tight inventory. Buyer demand is good and interest rates are still very tolerable. Don’t wait until interest rates rise to the point where it impacts home prices due to affordability. At some point, we will hit that tipping point, and that’s when the all cash buyers really win.
Recently I have been in quite a few multiple offer situations with my Silicon Valley home buyers (ranging to as many as 15 contracts on a Los Gatos house). Understandably, home buyers do not want to pay more than a home “is worth”. With several buyers all vying for the same property, though, the price is driven up. That’s a seller’s dream and a buyer’s nightmare. Is it possible to pay fair market value, and not more, with multiple offers?
What is fair market value?
With a little research, you may find a few slightly different definitions of fair market value. Most, though, include these elements:
In other words, fair market value is usually achieved when the buyer and seller have a normal sale, with normal time frames, normal contingencies, normal relationships to one another. Most of the time, this is the result of one offer on the house after a week or two on the open market.
If a seller or buyer is desperate to sell or buy, you probably won’t see fair market value. Similarly, if a parent sells the family home to a son or daughter, there’s a good chance it will never be a matter of exposing it to the pool of buyers, and the price is likely to be soft. Off market sales may be on the low side, though recently we’re seeing buyers in those circumstances paying more just to secure the property. A buyer who writes an offer subject to the sale of her or his home will be at a negotiating disadvantage, but a seller may accept that bid if the home has been on the market awhile, there is no other competition, and if the sale price is higher than it otherwise would be. (They’ll accept more risk for a higher sale price.)
With multiple offers, usually there is undue pressure on the buyer to compete with better terms (few or no contingencies, faster than normal sale, buyer picking up more of the seller’s costs) and better pricing. Nearly always, bidding wars will result in a sale price that is more than fair market value. Frequently there’s a “band of pricing” which is above the list price. Most home buyers will fall into that range, and when a home has been listed a little on the low side, this band may represent fair market value. This can be far exceeded if one super motivated person, an outlier, spikes the price.
In summary, residential real estate sales that take place with multiple offers will usually be with terms that strongly favor the seller and with a price that is above fair market value. It is not usually possible to pay fair market value with multiple offers – most of the time, the property will sell for more than fair market value.
Silicon Valley buyer and seller advice
Fiscally conservative home buyers in Silicon Valley will find this a very frustrating and discouraging situation as they write offers for “fair” prices and find them too low each time – and to see prices rising! When that happens, the more offers they write and the longer they take to buy, the more expensive it becomes to purchase anything at all. Today we have the double whammy of rising interest rates, too. My best advice is to find a property in a good location with fixable defects (such as an ugly kitchen, not a location problem, which you cannot change) which has been on the market more than 3 weeks. In that case you will probably have no other competition and can pay what is fair market value rather than an inflated price to due multiple bids.
Conservative home sellers are sometimes afraid to slightly underprice their property to attract multiple offers. That is understandable, so I would suggest never putting a price on the home that you wouldn’t actually accept. There are many things you can do to get your home to sell fast (within 2 weeks) and which will attract a few buyers. Those aren’t so risky but they do involve some work. If your property looks like “the best deal”, you can be sure that the home buying public will notice. Just don’t undermine yourself by being present at showings, making it too hard for buyers to see your property, or not making the home attractive and risk free to home buyers. I have written many articles on how to attract buyers who will pay top dollar – you can google “pope-handy home seller tips” or start with this piece: How to make people line up and beg to buy your home.
For more reading:
On this site: All comps are not equal
On popehandy.com: How much is your home really worth? (Discussion on fair market value vs appraisal value in addition to other factors)