Silicon Valley real estate
How’s the Cupertino real estate market?
The real estate market in Silicon Valley can sometimes be a little quirky, so I like to approach this question from a few angles. In this article I’ll make use of my charts from Altos Research, which uses listing data (not solds) and is automatically updated every week and also monthly reports from my RE Report subscription. Also I’ll periodically update it with info from the MLS that I have crunched myself or anecdotal stories from those of us “in the trenches.” The article is a bit long but I think much more comprehensive giving the multiple methods of answering the question of how the Cupertino real estate market is faring.
Cupertino median list price of houses by price quartile
Often the real estate market in any given city is very different between the most expensive homes and the most affordable ones. While many Cupertino home buyers are looking for a short commute, great public schools or strong resale value, some seek a luxury property with a view in the Cupertino hills (either off of Montevina Road by Ridge Vineyards or in other lower foothills).
The last few months have had some ups and downs in pricing, but most segments of the Cupertino real estate market have seen an overall uptick since last year. The luxury market in Cupertino had some calming over summer, but is back on the rise again. What if we look back more than a year? Combining the quartiles, it seems that there’s been more up than down.
Hearing the real estate market “war stories” about dozens of offers on Silicon Valley properties and overbids ranging from 20 – 55% had convinced me that we were in a Silicon Valley real estate market bubble back in early 2013. At least, this is what a bubble looks like, sounds like, feels like, and acts like. At the time I thought, “how much longer could this continue?” Four years and counting – that is the answer.
I tell my family and friends that we are in “crazyland” as buyers purchase homes with no contingencies of any kind, houses sell in 10 days or less (if everything is right, which seems to be the case 75% of the time), and those same properties are selling at well over list price and with much more than 20% down.
The absorption rate, or months of inventory: it is a Silicon Valley real estate market bubble?
What do the numbers say? I just logged into MLSListings.com and see that right now, in all of Santa Clara County there are 817 single family homes (houses + duet or attached single family homes). The pending and contingent homes measure 1074, far more! That ratio alone suggests that the market is in overdrive. In the last 30 days, 950 single family homes have sold & closed escrow. So the months of inventory is 817 divided by 950 = .86 of a month of inventory, so about 3.5 weeks of inventory. (When I originally blogged about the potential bubble, it was 1.8 months of inventory.)
In other words, things are flying off the shelves. And they have been, with only a few minor blips here and there, since early 2012. Does that sound like a Silicon Valley real estate market bubble to you – a crazy strong seller’s market lasting 4.5 years? I could be wrong, but I think of bubbles as being something fairly swift, not a multi year trend.
Homes are selling faster than new ones are coming onto the market!
It’s one thing to say that one city, town, or school district has a very low months of inventory (or high absorption rate). It is another altogether to say an entire county is that low. This is a major trend, not a tiny blip in the statistics.
How soon we forget that after the outrageously deep seller’s market in 2000, we had a steep drop in 2001. Or that all the crazy buying in the San Jose area (and other places) in 2005-06, combined with bad financial regulations, lead to the crash of 2007-2009. But perhaps that enormous “correction”, in which Santa Clara County lost about 50% of its value on average, had more room to recover than we initially realized. Jobs keep flowing in, and housing starts are not keeping up. Supply and demand – the age old equation. That would seem to refute the idea that this is a Silicon Valley real estate market bubble. Perhaps low inventory and strong demand are what we should be expecting going forward. Continue reading
What makes an expensive house in the San Jose area more than just a pricey bit of real estate, but instead a Silicon Valley luxury home? How is high end real estate different from the rest of the market? When is a property not just a home with land, but an estate?
In other parts of the U.S., spending $1,200,000 may fetch a 4000 square foot home, new construction, in an upscale gated community with country club amenities such as a golf course, tennis courts, and more. Here, that same $1,200,000 will procure an entry to mid-level single family home in many parts of Santa Clara County. It won’t necessarily be a Silicon Valley luxury home.
Luxury connotes a combination of qualities, features, and amenities. And it includes pricing (relative to the nearby market), condition, land, design.
Pricing Luxury Homes in Silicon Valley: What Do They Cost?
Expensive Silicon Valley homes are not necessarily luxury homes. Depending on the city or town, the price tag could be higher or lower. For instance, a fabulous house on a large lot in Gilroy’s Eagle Ridge might sell for 1/3 as much as the identical type of home, land and neighborhood found in Saratoga, Monte Sereno, or Los Gatos, or Los Altos, if a similar home happened to be available. Generally, though, luxury homes could cost as little as $1,000,000 or so in some parts of Silicon Valley or in neighboring counties, but in most parts of Silicon Valley, a true estate type property will be valued at $2,000,000 or $3,000,000 or more. In some areas, such as Palo Alto, that $2 million doesn’t go too far and the home you can purchase at that price tag may need major updating – or it could be “land value”. For our purposes today, we’ll use $2 million as the bottom number for estate properties, but it may or may not be the case in some areas.
How are the key housing indicators in the Almaden Valley area of San Jose? At the moment it’s said to be a hot “seller’s market” overall. But look closer and you can see there are clear market micro-climates. Prices are better for sellers, while buyers struggle with higher prices and less homes to choose from.
Almaden Valley Inventory of Houses for Sale
Right now I have a few Almaden Valley home buyers and they have all been disappointed at the lack of inventory. What’s happening?
First, let’s see what “usually” happens in the 95120 zip code in terms of the number of houses for sale. Here’s a look at the last 10 years (all available history), care of Altos Research:
Here you can see that inventory has regular peaks and dips. Inventory tends to rise early each year and peak in mid to late summer. After the peak is a decline through autumn and winter with the lowest point in the coldest part of the year before turning around again before spring.
Now let’s look up close at just the last 3 years.
As usual, our inventory bottoms out in winter and then rises beginning sometime after the Super Bowl or perhaps a little later – at least, that happened until 2017. This year, inventory stayed up longer than usual, not going as low in winter as expected, but instead fell later, when the market is usually heating up! Rather than rising to a peak again in summer, it looks like inventory is continuing to drop or at least remain extraordinarily low. We have hit the bottom (hopefully), but inventory won’t necessarily increase as the year progresses, if seasonal trends are followed. Perhaps the whole cycle is running a little late.
The Oaktree Park neighborhood in San Jose is a scenic residential community with wide appeal to home buyers due to good Almaden schools, close proximity to large parks and is one of only a few areas in Almaden Valley which includes a cabaña and swim team. Additionally, this area is very convenient as it’s close to schools, shops and commute routes to downtown San Jose and much of Silicon Valley. It is a fairly intimate neighborhood with 156 homes.
Where is the Oaktree Park neighborhood?
The Oaktree Park subdivision is within the boundaries of Meridian Avenue, Redmond Avenue and Mcabbe Road on three sides and the Jeffrey Fontana Park on the north side.
The census bureau (and perhaps also the city of San Jose) has attributed names to some parts of Almaden and this neighborhood falls into the Crossgates section. I do not believe that most residents refer to this area that way, though. Perhaps more likely they’d call it part of the greater Fontana Park neighborhood. Just the other side of Meridian is the vastly larger Almaden Meadows neighborhood.
What schools serve the Oaktree Park neighborhood in San Jose?
The public schools for Oaktree Park are within the San Jose Unified School District:
Los Alamitos Elementary School (API 935 in 2013)
Castillero Middle School (API 846 in 2013)
Pioneer High School (API 822 in 2013)
Los Alamitos Elementary and Holy Spirit Elementary (Catholic) are both just a couple of blocks from Oaktree Park. Additonally there are 2 preschools really close too: Precious Preschool and Shepherd of the Valley Lutheran Preschool.
For more information and links for schools, school districts, API scores and maps of boundaries lines for schools in the Almaden area of San Jose, please also read:
What are homes like in Oaktree Park?
Homes in Oaktree Park are single family dwellings – all detached houses (no townhouses or condominiums). These are primarily ranch style or two story ranch style houses, built in the early 1970s on lots of about 8000 to 9000 square feet, though a few are more than that. Interior size runs between about 1600 square feet to about 3000 square feet (if added on). Prices may be in the mid 600s for a smaller home, needing work and a less desirable location (such as on a busy road or immediately adjacent to the high voltage power lines that run through the park) to perhaps a little over a million dollars for a beautifully updated or rebuilt larger home in an ideal location within the neighborhood. In the current market (June 2017), smaller homes are going between the mid $900s to the mid $1.1 million mark and larger homes are selling between $1.2-$1.3 million.
More information on the Oaktree Park neighborhood below!
Often I have clients who are interested in purchasing a 4 bedroom, 2 bath home in a good school district in Silicon Valley, particularly in the South Bay and West Valley areas. Tonight I did a study on the MLS of homes that have sold and closed escrow in the last 4 months with these characteristics:
- single family home (house)
- 4 bedrooms
- 2 bathrooms
- 1800 to 2200 square feet of living space
- 6000 to 10,000 sf lot
Disclaimers aside, here are the numbers for select West Valley Communities in the West/South Bay area with good schools. The first number is the average sales price per square foot, the second number is the average sales price:
And a look at the chart from all back in 2015…
And all the way back in 2011. What’s changed? A lot! The order has shifted some, showing where demand has increased or decreased. Most noticeably, the prices are significantly lower in 2011 than they are now. The 2015 chart shows prices somewhere in-between the 2011 and 2017 levels. Palo Alto and Los Altos remain consistently in the top two positions.
The home prices tend to run with the school district API scores. You can check the 2013, three year average, API scores in Santa Clara County for both the districts and the individual schools online here. Continue reading
If you’ve been trying to sell your home in Los Gatos, Saratoga, Almaden Valley, Cambrian, or anywhere in the greater San Jose area but haven’t received an offer yet, don’t despair! With our mild winters, you really can sell real estate any time of year. And inventory is extremely tight right now, increasing your odds of success.
In late November and December a lot of folks DO pull their property off the market, and the result is a, even further tightening of inventory across Silicon Valley from the months immediately prior. The ratio between listed and sale pending homes improves dramatically. (The “absorption rate” tends to get better with fewer houses, condos and townhouses listed on the MLS.)
But you’re thinking: it’s a hassle. It’s the holidays. Is this any time to sell Silicon Valley real estate?
And you’re right about that. So do it differently.
Every day, I seem to get an email or have a conversation on what “the market” is doing. Trouble is, we like easy answers and that doesn’t work here. We don’t have ONE Silicon Valley real estate market. We have a whole bunch – or maybe myriad – of smaller markets.
The market for historic homes in Willow Glen is very different from the market for condos at Santana Row. The market for luxury properties in Almaden is extremely different from that of starter houses in Cupertino or Palo Alto. The condo market in Saratoga with Saratoga schools is not the same as the townhouse market in Cambrian with Union Schools.
You get the idea.
And yet, there are anecdotal stories of things calming down.
Last week I closed a buyer sale in Evergreen where there were 14 offers. That seems to be increasingly unusual. Word among real estate agents seems to be that while traffic is decent at open houses, it’s not what it was in early spring. Hint: this may be seasonally normal! June is almost always slower than the Feb – April window!
I’m hearing agents talk about great listings that get one or two offers rather than many multiples.
I’m hearing that in some segments of the market, one home in four now needs a price reduction.
All of that said, to know what’s happening, it is absolutely imperative to drill down to YOUR market, whatever it may be. It could be Los Gatos betwen $1.5 and $2 million. It could be entry level Saratoga with Saratoga schools. It could be Almaden with whichever high school (Leland, Pioneer, Leigh, Los Gatos). Or some other configuration. What is certainly true is that the relevant market for you, whether buying or selling, is the hyper local market.
Hyper local is usually more than just a zip code, as within the zip code there are different pricing tiers and frequently different school districts or other highly important factors. To drill down to the relevant comparables, please work with a local real estate professional who knows how to crunch the numbers. “Easy answers” may make good sound bites, but they don’t make a good basis for an informed real estate perspective for buying or selling. It’s way too important to get this wrong.
There are clever, but ultimately unsubstantial, things that real estate consumers might experience in the process of buying or selling a home – or just researching Silicon Valley real estate on the web. Here are a few of the doozies that some people fall for, in no particular order:
(1) Quoting the contract paragraph by number is meant to impress you with the agent’s grasp of the contract, which must be thorough if the thing is memorized like chapter and verse. You might hear something like this: “as it says in paragraph 14 of the purchase agreement”. Perhaps better is not so much the paragraph number, but the nuance, how it matters and perhaps how the alternative contract or paperwork reads on the same subject. I like this better: “The PRDS contract says that any repairs must be done by a licensed contractor. The CAR contract says that anyone may do repairs, even the home owner, as long as it is done in ‘workmanlike fashion’ with comparable quality materials.”
A similar twist may be quoting statistics that aren’t real. “There are 2.3 months of inventory in Campbell right now” may be a made up number. Realtors know that sounding precise makes them sound credible. But is it true? Check it out. (As for me, I am not a walking statistics machine. I have to look it up, or crunch it, to tell an answer. Yesterday a total stranger texted me and asked what the cheapest townhouse or condo in Mountain View is right now. I am not the MLS! I don’t know off the top of my head – and I’m not going to fake it.)
(2) Focusing on less relevant marketing approaches to selling your home may be a way for the potential listing agent to appear better, to seem to “do more”. The most important is price, because a grossly overpriced house will not sell for top dollar even if the print and web marketing are over the top wonderful. The second most important is photos, because they are your first open house – albeit virtual. If the photos are poor, or if every major area or room isn’t shown, whatever is not represented is deemed as bad. Photos of a cluttered, mismatched home will cause buyers to skip your property. That said, some agents will say that they will advertise your home in China, so you should list with them. Well, Chinese buyers are real, but they either come over to buy or they have close family and friends here who will help them buy. And whoever is here can see the listing on the regular channels. Similarly, things like drone photography do not usually improve either the odds of a home selling or the price for which it will sell in most cases. For a luxury property with a lot of land, ok, yes, of course a drone video or photo series would be great. But some agents push the drone angle only because it differentiates them – they’ll provide what other agents don’t want to provide. (Because it doesn’t make sense for most tract homes.) Beware marketing gimmicks.
(3) Combined experience – if you have a team with 4 agents and they each have 2 years’ experience, you might hear this: “we have 8 years combined experience”. Nonsense. You have 4 people with 2 years each.
Alternatively, there may be things which sound like trickery but aren’t. One friend of mine, on the east coast, bemoaned that every time he wanted to buy a house, the listing agent told him that another offer was coming in. “Do they teach you to say that at real estate school?” he complained. No, they don’t teach us to say that. In fact, if it’s not true that another offer is coming in, we may not say so if we are Realtors – it’s against the Realtor Code of Ethics to lie. (Not all real estate agents are Realtors. The state issues the real estate license, but membership in the National Association of Realtors is voluntary.)
Another thing which make some sellers skeptical feeling is the need for staging. “Why should I fill my empty rental house with someone else’s stuff? Buyers can see that it’s a kitchen!” But let me tell you, there are statistics proving that staged homes do sell for more. A good Realtor wants your home to sell for top dollar, wants you to become a raving, lifelong fan, and hopes like crazy you’ll be so happy that you’ll refer your best family and friends to that same Realtor.
As a Silicon Valley home buyer or seller, the best thing you can do for yourself is to hire a great Realltor. Don’t do it because they use slick “closing techniques”, but because they are experienced, knowledgable, capable, honest, and not afraid of hard work. Right now 20% of all real estate licensees have less than 2 years’ experience selling homes in the US. (Source for that statistic: CNBC article.) It doesn’t cost more to hire a great Realtor, so please do your due dilligence and don’t fall for stupid tricks. Go for substance.
Silicon Valley real estate offers few simple answers but many recurring questions. One of them is whether or not you should write a “lowball offer“. So the first question is this: what makes an offer a lowball one?
It’s entirely relative to how the market in that area (not the county, not the state, but that particular area) is selling. If houses in one area of San Jose are selling within 1% of list price and you come in 5% under, the seller may feel insulted. But if properties are routinely selling at 10% under list price and your offer is at 13% under, that’s not such a big deal. So keep an eye on that.
As a reality check, though – right now, and for the last year or so (as in this glance back to March, 2015), most homes in the Bay Area are selling OVER list price. Houses in Santa Clara County in March 2016 (San Jose, Los Gatos, Saratoga, Santa Clara, Sunnyvale, Cupertino etc.) sold, on average, at 105.3% of list price and condos at 105.5% (these numbers come from my ReReport, updated monthly at popehandy.rereport.com/). If homes are routinely coming in at or over list price, and you bid 3-5% under, and ask for a Section 1 pest clearance, or other contingencies, etc., this could be viewed as “lowball” given the current real estate market conditions in Silicon Valley.
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