The Silicon Valley real estate market tends to have seasonal pricing patterns. They are not rigid, and some years the typical or expected patterns don’t really hold. Generally, though, we expect the Spring market to be hot and the winter period to be cool. Is that true? Let’s take a look at the stats that I pulled today from MLS Listings.
Seasonal pricing patterns and today’s market
I spot checked the median sale price as well as the average sale price for houses in Santa Clara County, and they both followed the same seasonal pricing patterns. In the chart below, we have data from January 2013 (when the recovery really began) to November 2021. I’ve named the months with the peak prices and also the biggest dip each year. The pattern is a bit like the stock market – it does not only move up or down, but there are a lot of both with a generally upward trend.
This image is best seen on a tablet or desktop computer. If it is too small, please click on the image to view a larger version of it.
If you prefer a data table, here’s one with just the peak bolded (please click to view larger image):
What kind of residential lots and land will hold value the best in Silicon Valley? Your choices may include a corner lot, flag lot, cul-de-sac lot, a zero lot line parcel, oddly shaped land boundaries, and standard lots. If you are concerned about resale value and appreciation, it’s helpful to know what most buyers ordinarily prefer.
Corner and Standard Lots
While some San Jose area home buyers want a corner lot (more light, fewer adjacent neighbors), for most, the extra traffic and noise outweighs the pluses. An issue that home buyers often raise with corner lots involves headlights hitting bedroom or other windows as cars turn. There is some concern about drivers missing the turn and hitting the house, too. (This is also a worry for buyers looking to purchase a home on a busy road.)
The most-desired lot for home buyers, generally, is a normal, interior, standard (rectangularly shaped) lot.
Cul-de-sac lots are also highly valued among many buyers, though not all. With the court location comes a lack of street parking, especially at the end, and a lack of exit routes. A while back I held a listing open in Los Gatos that was on a cul-de-sac and the idea of only one way in or out spooked one buyer who otherwise really liked the location, which was close to Los Gatos schools. Homes at the end of the court also have irregularly shaped lots, and they tend to be harder to utilize as well but offer large backyards. So there are plusses and minuses, especially at the end of the court.
I’d like to add that pie shaped lots, or those with many angles, often seem to have the lot size misrepresented on county records. Many times I’ve found that a large parcel on a cul-de-sac will be ascribed the same size as nearby plots even if clearly it’s far bigger. The geometry is a headache, but you can use Google Earth to do an approximation of the actual square footage and then check the perimeter against the perimeter found in the Preliminary Title Report. The odds are good that if you get the correct size of the boundary (perimeter measurements added together) on Google Earth, you’ve got the correct lot size. Own a house with such a situation? Bring it to the county tax assessor’s office and get your property’s record updated. (more…)
Duplexes and duet homes are often confused with each other because both involve two attached residential units. But legally and financially, a duplex is very different from a duet!
The photo to the right is of a San Jose home I sold a few years back. You cannot tell from the image, but there is a front door off to the right of the single car garage door, and back around on the left side, near the double car garage door, there’s another front door. There are 2 units. It is a duplex or a duet home? You cannot necessarily tell by looking!
What is a duplex?
A duplex is a multifamily home, in the same category as a triplex or fourplex, meaning there are multiple living units. Most of the time, they are attached to each other, but not always. But what is truly distinctive is the way they are bought and sold. With multifamily homes, such as a duplex, all of these dwellings are sold together. (The units are not sold separately.)
If you buy a duplex, you get both sides. If you buy a triplex, you get three units. Sometimes an owner will live in one of the homes and renters are in the rest. Many times, though, all of these multifamily homes are entirely leased out. (Duplexes are usually 1 story and many of the duplexes in the San Jose area were built in the 1950s and 1960s, but you cannot tell from looking at it what the zoning and class of housing are with certainty.) These types of properties are considered income producing or investment properties.
With a duplex, the property owner is responsible for all of the outside maintenance. Normally there are no HOA dues, because there is just one owner.
What is a duet home?
Silicon Valley is home to three great universities (Santa Clara University, San Jose State University and Stanford University), about a half dozen community colleges (Mission, Evergreen, West Valley, Foothill, De Anza, San Jose City, Ohlone, Canada) plus smaller trade schools or polytechnic colleges for specific career-oriented individuals (such as Cogswell in Sunnyvale).
Most of the smaller schools do not offer student housing while the larger ones typically do – though it may not be guaranteed for all four years.
If you are a parent of a college student in the San Jose – Santa Clara – Palo Alto area, should you consider purchasing a condo, townhouse or house for your son or daughter? Does it make financial sense to do so? Over time, would this be a good investment? Would it be best for your son or daughter to skip the dorm scene? (more…)
If you’re a Silicon Valley homeowner, you will sometimes need to replace elements of your home, such as the roof or water heater, or do repairs or remodeling to keep the home functional, comfortable, and efficient. Kitchens and bathrooms need to be updated from time to time, and sometimes remodeled. These repairs and remodeling projects often (if not always) require permits and finals.
Will you apply and pay for the required permits and finals?
What difference does it make if you do or do not get them?
Will it matter when you sell your home?
If you’re a Silicon Valley homebuyer, the whole idea of buying a home without all the necessary permits is a bit spooky. My buyer clients often hear or read something like “garage conversion done – permits unknown” or “kitchen remodel done by contractor but without permits”. They worry about the consequences of buying homes with non-permitted work, so let’s talk about the issues involved.
What does it take to be a successful move-up buyer in Silicon Valley right now? How hard is that to do? What does it take for a move up scenario in the San Jose area to be a possibility?
There are a few big challenges for buyers and sellers of Silicon Valley real estate right now:
(1) Buyers are extremely picky – most want a turnkey, perfect home.
(2) Homes that need work (updating, remodeling) are selling at deep discounts, if they sell at all.
(3) Loans are harder to come by then they used to be. If your credit is not perfect, clean it up! Save for a bigger downpayment, especially in the arena of jumbo loans.
If you must sell the current home to buy the next home, you’ll need to get your house or condo into ideal condition. If you can buy the next home without selling the current one, it’s a great rental market! You may want to investigate the possibility of investing by holding your current home and renting it out. Talk to your tax professional about the ramifications of doing this before you decide. (more…)
Are you looking to purchase a Silicon Valley investment property? Now is a great time as several segments of the Silicon Valley and San Jose real estate market are extremely favorable to buyers, and interest rates are being aided by recent government action.
Let’s consider what to buy and where you might want to invest in Santa Clara County real estate. Part of the equation will be the type of housing you’d like to own, part will be the location, and of course much of it will be determined by your budget.
Types of Silicon Valley Residential Investment Properties
The most popular type of property for investment buyers is a single family home. This makes sense in Silicon Valley especially because the structure of the house is not what truly holds the value here. Instead, it’s land value for the long term preservation of your assets and the growth potential. There’s also the issue of control. In a condo, owners have a loss of control in regards to noise and other nuisances, suprise special assessments from a poorly managed Homeowners Association, and so on. With a single family home, there’s less risk because there’s more space between neighbors, more control over one’s own property improvements and maintenance, etc.
Which part of the Santa Clara Valley
is seeing all of this foreclosure and pre-foreclosure activity?
Depending on where you live in Santa Clara County, you may be seeing a whole lot of distressed properties on the market – or you may be seeing none at all. This is part of our current “bifurcated market” situation.
Generally, the more expensive areas of Silicon Valley (Palo Alto, Cupertino, Saratoga, Monte Sereno, Los Gatos, Almaden Valley and Silver Creek) are not suffering from a huge number of listings in which the sellers are in financial straits. There are some, though.
It is the less wealthy areas in San Jose (including parts of downtown, the east side, south San Jose, Santa Teresa, Blossom Valley) and the south county cities of Morgan Hill and Gilroy) where there is an inundation with short sales – in the lower price ranges especially.
Generally speaking, most short sales, preforeclosures and bank owned homes are priced below $600,000.
How can you tell if a home is in pre-foreclosure?
Homes listed for sale in your neighborhood of San Jose, Saratoga or Los Gatos that are in pre-foreclosure may look like any others available. They may have granite in the kitchen, beautiful baseboard and crown molding, new dual pane windows, and on and on. The sellers may have borrowed and borrowed to improve the property, be unable to make the payments due to job loss, divorce, or other problems, and now be in default on a loan, heading toward foreclosure.
This status usually doesn’t “show” unless you have access to the county records or have a subscription to a service that lets you know the status (and those services are no where near 100% reliable, by the way). Your real estate agent, who should have a subscription to the MLS with full information, can see a report at no cost that shows the foreclosure history. (Not all pre-foreclosures are short sales.)
What’s a short sale? Being in “pre-foreclosure” means that the seller has missed payments on a loan in which the real estate owned is used as collateral, or security. Let’s say a home is worth $1 million, but the amount in default is a small loan, perhaps of $25,000. If the home is sold, it can pay off the debt in full.
Sometimes, though, a distressed seller bought higher than the home is now worth. When prices fall (and if the owner bought the home with a low down payment especially), selling the home will not be enough to pay off the loan. So again let’s imagine that a house is worth $1 million, but the owners owe $1.1 million on it (and to sell they have to worry about closing costs to boot). By selling the home, foreclosure can be averted – but to do so, the bank will have to agree to not being repaid 100%. This is a “short sale”. (Not all short sales are in preforeclosure, though, as not all home owners of these properties have missed payments on their mortgage.)
We’re seeing a lot of short sales in the entry level markets. In these cases, current owners bought their properties a year or two ago – for 10% or 20% more than those houses are now worth.
In the higher-priced regions of Silicon Valley, it’s less common to see a short sale than it is a straight pre-foreclosure because someone just can’t make the loan payment (due to some new problem like divorce or job loss, or because the adjustable loan went up and the payments are now untenable).
So you think you want to buy a Silicon Valley short sale?
Short sales sell but often don’t close: why?
Browse Short Sale Listings & Bank Owned Properties for Sale in Los Gatos
Recently I viewed a piece on Forbes.com that said that San Jose was on it’s “top 10” list of good places to be a landlord. Investors, take note!
Update: Trulia’s rent vs buy study puts the San Jose area as more affordable to buy than to rent in late Jan 2011. Check it out!