Home prices defy gravity — and sales increase, as they fall elsewhere in region


#1

Real estate markets traditionally suffer from the summertime blahs — but Silicon Valley is not a normal market, particularly in Santa Clara County.

With the housing supply at historically low levels, the median price for a single square foot of residential property keeps rising in several Silicon Valley cities. In Los Altos, a square foot was worth $1,291 in August, up 4 percent from July. In Palo Alto, a square foot was worth $1,499, also up 4 percent; in Sunnyvale, $994, up 7.0 percent; and in Los Altos Hills, $1,412, again up 7 percent.

That’s a 7 percent increase in a single month, a dramatic surge.
Even more unusual is this: While sales have fallen across the Bay Area — largely as a result of the region’s tight housing supply — they have risen markedly in Santa Clara County.

A report issued this week by the CoreLogic real estate information service shows that July home sales were down across the nine-county region — but up 13.0 percent in Santa Clara County from the year before. That was despite the fact that the county’s inventory – the number of homes available for sale – was down about 30 percent from the same period in 2016.

“I’ve heard people say Silicon Valley is the 51st state,” said Mark Wong, an Alain Pinel agent in Saratoga. “We have our own culture and our own economy, and our housing prices defy gravity.”


#2

I have been tracking home prices in SV and elsewhere in the Bay Area for the past 3 years. My conclusion is that SV does not stand out particularly. The home price appreciation rate have been pretty even across the board between SF, South Bay, and east bay.


#3

Need to re-post this chart. Is on SFMSA but similar for SJMSA. Lower-tier appreciates much faster than higher-tier. And it would likely accelerate as you have suspected, may be, for a few years (0-3?) before a blowoff… given feedback from BAGB (and action of some my neighborhoods), the acceleration could have started i.e. like in 2004-2005… checked zillow’s and redfin’s estimate of my SV houses… shocked… up 15% for the year??? How can that be possible? Best time to do flipping… I think you get the RE tempo… by luck or what I don’t know. I don’t flip and not interested in selling so would just watch the crest and then wait for the trough :slight_smile:


#4

That’s the mentality that leads to bubbles. I’m not saying we’re there yet, but there’s zero data or fundamental analysis behind his statement.


#5

This chart shows that low-price tier homes hasn’t recovered to 2006-200 peak yet while mid/high-price tier homes have passed 2006-2007 peak.
This suggests that if we are in pre-peak period (like 2005), it is better to buy mid/high-price tier homes than low-price tier homes. Is my understanding correct?


#6

That’s my understanding for buy n hold especially primary. However is better to flip lower-tier since % gain is more which is what wuqijun is doing. Do you think is the correct interpretation? Alternative interpretation or extra insights are welcome.


#7

Yes, I agree.


#8

Low tier home price changes dramatically from peak to trough, perfect for trading. Buy and hold mid to high end will be boring and happy.

For people who bought low tier houses at the bottom, is it better to sell and exchange into better locations? You will pay higher property tax but the future holding experience could be less worrisome

The price difference between good and bad locations is narrowing. The time to sell bad and buy good may be around the corner. It’s indeed sell low and buy high


#9

Actually, it’s just the other way around. It is more lucative to flip high end properties (less work for more bang), and more lucrative to buy low tier homes as rentals (much more cash flow).

This explains why you are buying a lot of properties in Austin and not Cupertino as rentals.


#10

ROE vs ROC :grin:
Return over effort vs Return over capital


#11

Cheap properties are call cash cows, expensive ones --pride of onwership…The key is long term IRR…


#12

Everybody likes to own expensive homes. But the bread and butter lies in cash flow properties.


#13

Are there expensive houses for billionaires?


#14

Doubtful. It’s more lucrative to flip for the masses. It’s simpler, cheaper, faster, and much more repeatable. It takes a lot less effort. Plus run of the mill contractors love to work on simple flips where it is get in get out.


#15

Have you ever flipped houses before? Where have you flipped? Tell us about your experience…


#16

Yes, that would be buying a private island or an entire village…


#17

The market is efficient. The projected IRR should be close enough for each group. It’s less work to do a builders special vs a custom project. You can also look at the big home builders, they all do track housing. It’s their bread and butter.

You mentioned landlord and flipping in the lower price ranges. You are no fool. If it’s so lucrative to be doing the custom homes you would find a way to get involved.


#18

I made my most money building high end spec houses. Flipping is for amateurs. Building specs can have high rewards but is high risk and takes a lot of expertise and money…