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Porta Potty Proliferation

Porta Potty CollageHave you noticed that there now seems to be a porta potty on every block? It’s a proliferation of porta potties! One might be tempted to call it a pandemic of bottomless proportions.

This panoply of modern day outhouses appeared en masse over the last couple of years. Of course, their appearance is the hallmark of home improvement or updating, at least most of the time.

Once in awhile it’s instead the hallmark of a stalled project. It can be a real challenge to get contractors to work on our homes and yards right now. The demand is tremendous and the waits can be long. Sometimes the lengthy stay of the temporary structure isn’t anyone’s fault.

That said, there do seem to be better and worse porta potty placement, and some really do overstay their welcome and become a problem – a neighborhood eyesore or blight. It might be said that like houseguests, portable toilets have a limited shelf life for desirability as far as the neighbors are concerned.

In this post we’ll touch on half bathrooms (created to serve a similar purpose), CCRs, and regulations regarding these portable toilets and where and how long they can adorn front yards.

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Rental property down payment

How's The MarketInterested in buying a rental property?  The first question to ask is if you want to buy it for cash flow or for appreciation.

Here in Silicon Valley, most investment buyers are looking for long term appreciation rather than to get a monthly source of income. In some areas of the country, you can put a small down payment on a property and break even each month. In other areas, that would create a negative cash flow situation.

Here in Santa Clara County, and the greater San Francisco Bay Area, rental values are relatively low when compared to purchase prices. That translates to a much larger down payment being needed to break even each month, let alone have a positive cash flow.

Rental property down payment needed in Silicon Valley

Some consumers believe that a 20% rental property down payment would do the trick to get them started as a real estate investor since that’s the most common amount for owner occupied homes.

While 20% down may work in some places. In most of the U.S.  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.

A few years back, a friend and past client asked me exactly this question. At that time I did the math and it looked like she would need to put more than 52% down just to have a neutral cash flow. Today I’ve updated it.

Depending on where and what you buy for the $1 million budget ,I suspect that the amount of rent collected each month would probably run between $3,000 and $4,000.

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.

 

Monthly condo costs - estimate

 

If my calculations are correct, you really need to put more than 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.

 

See also: Buy a Los Gatos home or real estate investment property

 

 

 

How to price a home in a correcting market

House with dark clouds - How to price a home in a correcting marketHome owners wanting to sell will be asking how to price a home in a correcting market – if they understand that things are shifting right now.

When real estate values are rising, homes that are well priced, well staged, well marketed, well photographed, and easy to sell tend to sell quickly and for top dollar. In that situation, it’s almost impossible to price a property too low, because buyers will rush in and bid it up. If it’s priced extremely aggressively, it may create a larger crowd of willing buyers and the ultimate effect may be a higher than expected sale price. That’s a strategy that often works well in a hot market.

That’s less effective now, as conditions have mellowed significantly due to dramatic changes in inflation, the stock market values plummeting, and interest rates rising sharply. The question, then is how to price a home in a correcting market? Or one that is flattening or generally cooler?

There are tips at the bottom of this post, but if you want to sell your home now, when the market is cooling rapidly, here are some basic concepts on how to price a home in a correcting market:

  • understand that the odds of selling have decreased, and to get yours sold it will need to be the most appealing in terms of price and condition
  • serious sellers will want to position their home as the best value available today and appeal to both the buyers and to their agents
  • consider the trajectory of the market and if it continues as we see today, where the values will be a month from now – that is likely your pricing target

 

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How will the rising interest rates impact housing affordability?

Interest rates and affordabilityThe rising interest rates are impacting most home buyers’ ability to afford the type of house or condo they expected to be able to purchase just a few months ago. The Fed wants to curb all spending, including home buying, and it seems to be working – rising interest rates are having a dampening effect on real estate sales.

Rising interest rates – hypothetical condo buyer

Let’s say a home buyer needs a mortgage of $800,000 to purchase the desired condominium or townhouse, and that said buyer has good credit and 20% down and is seeking a 30 year fixed rate loan.  Interest rates may vary from one lender to another, but as of right now, a 5% to about 5.5% is fairly typical, but some online lenders are advertising 4% and 6% or 6.5% rates may be just around the corner.

$800,000   for 30 year fixed rate with 20% down at 4% interest – monthly principal & interest payment is $3819.32

$800,000   for 30 year fixed rate with 20% down at 5% interest – payment is $4294.57 (12% more than at 4 %)

$800,000   for 30 year fixed rate with 20% down at 6% interest – payment is $4796.40 (26% more than the cost at 4%)

Today I created a data table showing the payments for principle & interest with ascending rates. I took it as high as 16.50%, which was under the highest average rate in 1981, when some consumers paid more than 18% interest rate on their mortgages. (I remember my mom, a Realtor – Pat Pope – talking about those 18% rates at that time. As I recall, it spurred some sellers into carrying back notes just to get their homes sold.)  When Jim and I bought our first house in 1989, our rate was 10.25% after we bought down the rate by paying 2 points. Hence my strong preference for fixed rate mortgages in recent years, when the concern was the risk of rising rates.

 

Rising interest rates - payments on 800k mortgage P and I only

 

What impact will a rising interest rate have on qualifying for the mortgage?

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Prides Crossing Neighborhood

1 Prides Crossing South sign along Cox AvenueThe Prides Crossing neighborhood in the northern part of Saratoga has a lot to boast about: a sense of community, easy access to commuter routes and many amenities, and laid-back California luxury. We’ll go into more detail below, but here is a profile of the neighborhood in bullet points:

  • The average home is ~2,400 SqFt on ~12,500 SqFt lot, built between the early 1960s-70s
  • Homes are in the attendance area for either Saratoga or Cupertino schools
  • Expect to pay between $3 – $4M for most homes, possibly a little less for a small home near a busy street, and more for a larger, centrally located home
  • The neighborhood is home to 2 parks, a member-owned pool and racket club, and has easy access to commuter routes, shopping, entertainment, and places of worship
  • There are few hazards, but keep an eye out for Zinsco panels

Where is Prides Crossing?

Prides Crossing Map with markers

Click to view full size – Prides Crossing map with markers

North of 85 near the Campbell and West San Jose borders, boundaries of the neighborhood include Prospect Rd to the north and Cox Ave to the south, with 85 and Saratoga Creek at the southern corners. To the west, Scully Ave and to the east Titus Ave border what makes up the majority of the neighborhood, although they are not exact boundaries (the map paints a better picture). Miller Ave is the main thoroughfare through the community with a brick and brass sign marking it’s entrance at it’s intersection with Cox Ave.

While not technically part of Prides Crossing, I did include a corner of the Summerplace subdivision (built 1973) in the neighborhood map as it might easily be mistaken as such. There are 46 homes in the Summerplace tract (5233), but 37 are only accessible through the Prides Crossing neighborhood, touching the south end of Kevin Moran Park, while the other 9 are on the opposite side of highway 85!

Continue reading below, or explore other areas in our interactive map of neighborhoods in this city. We are slowly adding more!

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Is the Silicon Valley market cooling?

Silicon Valley market cooling - aerial view from over Los Gatos, CA to the rest of Santa Clara CountySilicon Valley market cooling is underway, as we have been reporting here for a few weeks. Sometimes the shared real estate agent experiences foretell the shift before the data does; now is one of those times. In fact, we don’t actually have data for all of the hallmarks at play in a transitional market.

For a few weeks, there have been rumblings within the Realtor community of a change in the real estate market. The observations and comments include these:

  • fewer buyers at open houses (not a tracked data point)
  • fewer offers being submitted on the offer due dates (not tracked)
  • fewer offer due dates (not tracked)
  • increasing number of offers with contingencies being accepted
  • longer days on market, or longer than expected
  • homes not selling quite as high as anticipated or hoped (not tracked)

 

Silicon Valley market cooling – what does the data say?

The information on closed home sales is only a partial reflection of what’s happening, but it’s important as it does provide much needed perspective.

One of the most useful charts we can pull from MLS Listings is the combined Days on Market and Sale Price to List Price Ratio graph. It’s a good way to get a quick take on things.

Here’s a look at the last year, including the first part of June 2022 showing the Silicon Valley market cooling with longer days on market and smaller sale to list price ratios than we had a few months ago.

 

SCC Sale Price to List Price Ratio and DOM July 2021 - June 10 2022 - Silicon Valley market cooling

 

So far, this doesn’t look like much – we do have seasonal changes, which is why we like the year over year view for an anchor. Yes, June is continuing the cooling trend seen in May and in April. Is that alarming? Somewhat, yes, because May is often the peak of the market – not March.

What about the Days on Market?

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The percentage of all cash sales in Santa Clara County

In 2012 and 2013, Santa Clara County saw many single family homes selling for all cash, no loans. The peak may have been in March 2012, when the percentage of all cash sales was a whopping 25%. That was the beginning of a long housing boom, and today the percentage of all cash sales in Santa Clara County has settled down significantly, though it is still in double digits in most months.

Today I crunched the numbers on MLSListings.com (first pulling the number of sales per month, then the number of cash sales, and after exporting the data to excel, did the math to get the percentages). The chart below reflects the sales of homes sold with all cash, no loans in Santa Clara County among houses and duet homes, which combined are known as single family homes.  (Duet homes are not the same as duplexes.)

All cash sales, month by month, in Santa Clara County (single family homes)

 

 Percentage of All Cash Sales in Santa Clara County - single family homes

The percent is shrinking month over month, but May’s figure was higher than the year before, interestingly.

What does the lower percentage of cash sales mean? In Santa Clara County, we have had some hyper inflation of home prices since Covid began, so it would make sense if the all cash, no loans buyers receded a little bit.

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