How to find a rental home in Silicon Valley
Finding a rental home in Silicon Valley can be challenging. Where to look? Can a Realtor help you? (Not very much.)
In many areas of the U.S., real estate agents actively work the rental market. In those areas, owners are willing to pay a commission for the service, and houses and condos are listed in the local multiple listing service.
Not in Silicon Valley, though. Instead, it’s a land of “for rent by owner”. A few properties may be on the MLS (see link below), but hardly any. Far less than 5%.
Related reading:
Why is it so hard to find a rental home in Silicon Valley now?
Finding Rental Housing in San Jose, Santa Clara County and Silicon Valley
Can you buy a home with a contingent offer, subject to selling your current home, in Silicon Valley?
In many parts of the United States, it is not uncommon to write a purchase offer on a property which is contingent upon, or subject to, selling the buyer’s current home. Contingent offers are not very common in Silicon Valley, generally. They are unlikely to be successful if the property has been on the market only a week or two, but if the offer is otherwise really strong, home sellers may consider it. We see a few of them happen here and there, so it’s not impossible to be successful with this kind of real estate contract, but it does pose a few extra challenges. Let’s see what might improve the odds of success with one of these.
What could make a contingent offer strong?
One thing, of course, is cash. Right now in Silicon Valley, anywhere from 30-35% of all sales are without a mortgage or loan, they are all cash deals. So if the sale will mean that once the buyer’s house or condo sells and closes, the purchase can happen without a loan, that’s good – no loan means less risk that it won’t close. Even if the resulting sale isn’t 100% cash, if the sale will bring more than 20% loan to value into the next transaction, it will help.
Terms can really impact whether or not a contingent offer will go through. Some offer terms can be appealing to San Jose area home sellers too, such as a flexible close of escrow date or the option to rent back (at cost or for free).
Many other issues must be factored in, of course. How strong is the market for the property that needs to be sold? This plays into the issue of risk. If it’s an area in high demand, and the home is priced aggressively, or if it is already sale pending, this may lessen the concern that it won’t sell at all. It’s important to share market conditions with the listing agents and sellers so that they have a good understanding of the situation.
Finally, it should be noted that Silicon Valley is composed of many, many niche or micro markets. While some areas are “on fire” – Palo Alto, Menlo Park, Mountain View, Sunnyvale, Cupertino – others are simply good (Silver Creek, Los Gatos, Almaden) and certain areas and price points (think luxury market) are close to balanced. Depending on where and what you hope to buy, a contingent offer may be more or less likely to be successful.
How is home buying in Silicon Valley different from other places?
If you want to buy a Silicon Valley home and you’re coming from outside of the area, a few things are done differently here. Rather than give a lengthy explanation, I’ll just provide a quick list of things which are different from other parts of California, the U.S. or perhaps the world.
- The escrow account, where money is held and disbursed by a neutral third party, is ordinarily with a title company in Silicon Valley and the San Francisco Bay Area generally. In CA it’s legal for real estate brokers to have the escrow account, but that is not the custom here. By contrast, in southern Calif., there are separate companies which often do the escrow work or a real estate broker may handle the funds, called trust funds.
- Santa Clara County is a “seller pay county” by tradition when it comes to the escrow fee and who pays the owner’s policy of title insurance. (Most of California is either buyer pay or split 50/50. Also, SCC is where San Jose and much of Silicon Valley is located.)
- Because it’s a “seller pay” county, the seller or the listing agent (the seller’s real estate agent) normally chooses the title company. Most of the time, the home owners do not have a preference and don’t know anyone working at the nearby title companies, so usually the listing agent suggests which one to utilize. If you purchase the property with a loan, you will need to buy lender’s insurance, too – and that’s a buyer cost.
- While in many east coast states an attorney is involved with the home buying and selling process, here lawyers are seldom involved with real estate sales – unless there is a big problem.
- Surveys are not usually part of the transaction here, with exceptions if there are serious doubts about the property boundaries.
- Buyers are provided information on natural hazards, and usually also known environmental hazards and area tax liabilities, in most cases via a professional disclosure company such as JCP Disclosures. Things such as 100 year flood plains, liquifaction zones, earthquake fault lines, underground water contamination will be revealed, if known, in most cases.
- In some parts of the world, buyers do not have their own real estate professionals for guidance and advocacy, but here they do. Most of the time, in the San Jose and Peninsula area buyers have their own real estate agent working on their behalf. Usually the buyers’ agents are paid by the sellers – but they do not represent the sellers. Dual agency is legal in California as long as it is disclosed (and dual agency can mean either the same person or brokerage).
- In recent years, it has become the norm to get pre-approved with a lender or bank prior to writing a purchase offer on a house, condo or other home. (If you meet with a Realtor, getting you set up with a reputable lender will be one of the first things he or she asks you to do.) Also it’s pretty normal to have to provide “proof of funds” to demonstrate that you have the down payment available. Sometimes our international clients are surprised at the documentation required here, so it’s good if you are aware of it upfront.
- It usually takes 30-45 days to close escrow on a property here (from the time the sellers accept your contract to the time you actually own it).
- Finally, it should be noted that the cost of housing in Silicon Valley is truly exorbitant. Most people know that Silicon Valley houses are very expensive, but until they get out and see what things cost, they really don’t understand how extreme it is. Often I tell people to expect to pay twice as much and to get half as much. Unless you are coming from a pricey locale, such as London, Tokyo, Paris, Manhattan or Boston, you may still find yourself in “sticker shock”. A half million dollars buys a fairly small, modest home here, in an average area. A million dollars is better – you can get into a better area and better house. The “luxury market” starts somewhere between 1.5 and 2.5 million, depending on which area you’re considering.
The Crazy Silicon Valley Real Estate Market
There is most always a big shock when folks relocate to Silicon Valley and start to learn how far their money goes – or doesn’t go – here. This has been the case for a very long time, since long before I got into the business 20 years ago. Prior to to looking online, you may hear that it’s bad, but you don’t really know what people are talking about until you get into a car with a Realtor and go see what $500,000 or a million or more will buy you here.
And now, too add to the already high home prices, the real estate market is overheated due to a severe inventory shortage of homes for sale in the San Jose and “South Bay” areas, too. Most properties are selling over list price – and that was high to start with, particularly for out of state or global buyers.
In most parts of the U.S., a half a million dollars will buy you a great home. Here, not so much. A million dollars will buy you a nice home in a decent area, but it won’t be fancy, and you’re unlikely to have a large lot unless your commute is huge and you’re on the outskirts of the valley. It’s more than a million to have a really nicely remodeled home with great schools; that price point seems to start at about 1.2 million in most parts of the valley. Have a look at the median and average sales prices for houses in Santa Clara County – this will give you a sense of how the market has been behaving, but also of the cost to purchase homes generally.
Santa Clara County (Silicon Valley - San Jose area) Prices and Sales Feb 2013
Waterfront homes in Silicon Valley: are there any concerns?
Sometimes people relocating to Silicon Valley tell me that they’d like to move to an area with a view of the Pacific Ocean. Most of Silicon Valley is inland, though, separated from the ocean by the coastal mountains.
For those truly set on having a view of the Pacific, home can be found in the Santa Cruz area with lovely ocean and Monterey Bay views. The compromise will likely be a long commute over Highway 17. Or similarly, ocean lovers may settle close to Half Moon Bay or Pescadero, but will have to slog over the coastal hills on Hwy 35 each day to get to the Peninsula. (Some lucky souls may find employment in Scotts Valley or along the coast, but most of the jobs are not in these places.) If a faraway ocean view will work, perhaps making the Santa Cruz Mountains home may be the ideal fit.
If you want to live along the waterfront within Silicon Valley, there really are not a lot of neighborhoods from which to choose. Most of the water views involve being near the San Francisco Bay. There are a few rivers, creeks, ponds and lakes to be found as well, but enjoying lovely water views up close is not the easiest criteria to fill. Along the bay, though, it often comes down to Foster City and Redwood Shores, which we’ll discuss next. Continue reading
Where to find historic homes in the San Jose and Silicon Valley area?
Sometimes newcomers to Silicon Valley strongly prefer older homes, such as Victorians, Craftsman, or other distinctive architectural styles, preferably surrounded by homes of the same vintage. Most of the valley is filled with ranch style housing, but there are quite a few neighborhoods which enjoy historic home which exude tons of charm. Where to find them?
San Jose’s historic homes
San Jose is a large city (10th largest in the United States, almost 1 million residents) and very spread out with a wide diversity of neighborhoods. Here are a few to consider for classic, older properties:
In central San Jose there are quite a few areas to check out:
(1) Downtown San Jose generally, but within that area
Naglee Park
Japantown
Vendome areas
(2) the Shasta-Hanchett neighborhood
(3) the Rosegarden area (close to Shasta Hanchett, both in “central San Jose”)
(4) Alum Rock in east San Jose – up into the foothills there are lovely, older Spanish style homes
(5) Willow Glen – close to downtown SJ, features all sorts of architectural styes, from mid-century modern to Spanish, Victorian, Tudor – you name it. Within Willow Glen, The Palm Haven neighborhood has the added charm of so many palm trees (very visible when flying into the San Jose airport)
There are many more scattered throughout San Jose and nearby suburbs, even in places like Cambrian Park or Almaden (away from the old mercury mining area), where it seems all the houses were built from the 1950s to the 1980s. When we see a hundred year old house in this area, it’s very likely that it used to be the house on a large ranch, orchard or farm.
Los Gatos
The town of Los Gatos is far smaller than neighboring San Jose, but has a great assortment of historic districts that are beautifully maintained and tastefully updated, most of them right in downtown. I’ve written about these on my Live in Los Gatos blog, so here are a few links to those neighborhood posts:
Broadway – first subdivision in Los Gatos
Palo Alto
Palo Alto enjoys some of the most beautiful, gracious older houses in Silicon Valley, particularly the Professorville and Old Palo Alto areas, but others too. Drive the neighborhoods between Stanford University (El Camino Real) and 101 and you’ll find lots of historic homes to love! The challenge is affordability, as these are the most expensive historic homes in the region.
There are many more lovely older homes throughout Santa Clara and San Mateo Counties and nearby. If you enjoy these classic beauties, watch for a series of spring home tours which become available beginning in around March each year. Most of them will cost a few dollars, with proceeds going to a worthy local charity. If you’re interested in purchasing an historic property, visit my “search by map” page and enter a “built before” year and then scroll around the valley to see what is available.
Buying a home in 2013? Cash is king!
Each January, would be home owners roll up their sleeves and make plans to buy a house, townhouse or condo. This year, like most, I’m getting contacted by Silicon Valley home buyers new to me as well as those who played with the idea in the past but ended up putting off the purchase. (Recently I learned that nationally, only about 50% of interested home buyers actually do purchase during the year that they think they will.)
Right now it is a very deep seller’s market in Santa Clara County as well as nearby areas of Silicon Valley. There is more demand than supply, the majority of “regular sale” properties under $ 1 million or so are getting multiple offers and the sales prices are averaging over the list price in almost all neighborhoods. The months supply of inventory is less than one month in Santa Clara County right now.
There are a lot of strategies you can employ when competing in multiple offer situations, but very few things can trump cash. A 20% down payment is considered a minimum for most of the valley. It is extremely difficult for a home buyer with FHA backed financing to buy a home in most cases.
This morning I looked at the sales of houses in San Jose over the last 30 days (meaning those which closed escrow). There were 368 houses that sold & closed. Of those 268 had conventional loans, 77 were all cash, 10 were FHA, 6 were conventional 1st and 2nd, 1 was a VA loan and none were “owner carry”. In other words, the vast majority had 20% down or more, and only a tiny handful came to the table with a small down payment.
That doesn’t mean that FHA buyers are never successful or that they aren’t trying. But the odds of success are about 3%.
Looking for another option? There are conventional 1st and second loans available – of course not many of those either but they are usually viewed more favorably than an FHA offer, especially if the house is older or needs work.
Another strategy may be to cosign with a relative who puts up a 2nd mortgage for you.
Nothing can really beat cash, and for most buyers, that means saving for years to pull together that elusive 20%. Up against an all cash bid, even 20% will look weak, but to increase your odds of success, 20% should be your minimum target in today’s market.
The Santa Clara County Real Estate Market
The Silicon Valley real estate market is spread out over a few counties, primarily Santa Clara County but also much of San Mateo County and part of Alameda and Santa Cruz Counties. Santa Clara County is home to about 1.8 million residents, more than half of them in the big city of San Jose. The high tech companies such as Cisco, Apple, Google and more are spread out around the valley, and each neighborhood has a very different set of housing market conditions. Even so, we’ll take a broad view of the county today to give some general indicators on what you might expect when moving here.
As a whole, home prices in Santa Clara are rising due to a dire scarcity of listing inventory. On average, houses sold in December were overbid and the sales price to list price ratio was about 102%. Here are the numbers at a glance:
| Trends At a Glance | Dec 2012 | Previous Month | Year-over Year |
|---|---|---|---|
| Median Price | $682,500 | $685,000 (-0.4%) | $530,000 (+28.8%) |
| Average Price | $908,873 | $885,921 (+2.6%) | $714,562 (+27.2%) |
| No. of Sales | 899 | 903 (-0.4%) | 903 (-0.4%) |
| Pending Properties | 980 | 1,500 (-34.7%) | 1,396 (-29.8%) |
| Foreclosures Sold | 25 | 34 (-26.5%) | 112 (-77.7%) |
| Short Sales Sold | 154 | 138 (+11.6%) | 229 (-32.8%) |
| Active Listings | 534 | 782 (-31.7%) | 2345 (-77.2%) |
| Active Foreclosures | 22 | 27 (-18.5%) | 173 (-87.3%) |
| Active Short Sales | 39 | 52 (-25.0%) | 980 (-96.0%) |
| Sales Price vs. List Price | 102.6% | 102.3% (+0.3%) | 98.7% (+3.9%) |
| Days on Market | 36 | 32 (+11.3%) | 63 (-42.8%) |
Though there was a slight slippage in values from the prior month’s median sales prices, the average price was up 2.6%. More dramatically, though, prices were up 27-28% from the year before! Foreclosures and short sales are way down. Inventory is critically low, off 77% from a year earlier.
It is a very deep seller’s market in Santa Clara County. Some areas, such as Cupertino, are very difficult for buyers right now. Cupertino’s prices are already past the last peak pricing and have only about 2 weeks of inventory.
| Trends At a Glance | Dec 2012 | Previous Month | Year-over Year |
|---|---|---|---|
| Median Price | $1,343,880 | $1,325,000 (+1.4%) | $982,500 (+36.8%) |
| Average Price | $1,304,180 | $1,373,820 (-5.1%) | $1,085,210 (+20.2%) |
| No. of Sales | 26 | 27 (-3.7%) | 24 (+8.3%) |
| Pending Properties | 18 | 23 (-21.7%) | 13 (+38.5%) |
| Foreclosures Sold | 0 | 0 (N/A) | 0 (N/A) |
| Short Sales Sold | 0 | 0 (N/A) | 0 (N/A) |
| Active Listings | 13 | 26 (-50.0%) | 31 (-58.1%) |
| Active Foreclosures | 0 | 0 (N/A) | 0 (N/A) |
| Active Short Sales | 0 | 0 (N/A) | 4 (-100.0%) |
| Sales Price vs. List Price | 102.9% | 104.4% (-1.4%) | 96.4% (+6.7%) |
| Days on Market | 31 | 33 (-5.8%) | 52 (-40.7%) |
To get the full report with much more data and information for all areas within Santa Clara County, please see www.popehandy.rereport.com.
How to Decide Where to Live in Silicon Valley or Santa Clara County
How do you choose where you’d like to live in Silicon Valley? Especially if you’re relocating here from out of the area, this can be a huge question. Most Santa Clara County home buyers have strong preferences for low crime, good schools, and pleasant looking & quiet neighborhoods.
My clients often ask me to compare for them areas which are somewhat similar, such as Los Gatos & Los Altos. Off the top of my head, I can give general answers, such as these: Compared to Los Gatos, Los Altos is a more expensive (perhaps 20 or 25% more?), has a very slightly smaller population, is a little more spread out, has slightly milder weather and is overall “quieter” in terms of the downtown night life. Los Altos is more convenient if you want to go to Palo Alto or San Francisco. Los Gatos is more convenient if you like to visit Santa Cruz, Monterey and the coast. Los Gatos is more mixed in terms of housing types (it still has many beautiful historic districts with nicely renovated Victorian homes, but also newer construction). Both are “nice looking” but Los Gatos has more varied terrain as it is nestled into the Santa Cruz Mountains. Both enjoy pleasant neighborhoods, good schools, lower than normal crime and community involvement.
That’s the kind of “ballpark” info I can tell people about various areas of the Santa Clara Valley, whether it’s comparing one part of San Jose to another (Cambrian Park vs Almaden Valley vs Willow Glen) or one city to another (Cupertino vs Saratoga). I can give general info on schools….
To read more, please see the rest of the article on the Valley of Hearts Delight blog:
http://sanjoserealestatelosgatoshomes.com/how-to-choose-where-to-live-in-silicon-valley-or-santa-clara-county/
Why is it so hard to find a rental home in Silicon Valley now?
At the moment, many people relocating to Silicon Valley are reporting that it’s harder to rent a home than to buy one. What’s the reason for that?
Two things are happening that create pressure:
- There are a lot of companies hiring, and many high tech people, especially, are moving to Silicon Valley
- People who have lost homes in foreclosure, or who had to do a short sale to avoid it, are not able to buy for at least a few years. They may double up with family or friends for awhile but eventually do rent.
With demand increasing like crazy, rents are increasing like crazy too. It’s the old tale of supply and demand: more demand than supply exists in the rental housing market today.
Just watch out for the scams! If a price sounds too good to be true, it probably is. I wrote about this not too long ago, please have a look:
Finding a place to rent – how do people locate one in Santa Clara County? Where can you find properties to lease or rent? I have a list of resources on my Valley of Hearts Delight blog – please click on the following link.
Finding Rental Housing in San Jose, Santa Clara County and Silicon Valley
What about a broker or agent? Can a Realtor help you to find a rental home in Silicon Valley? Most of the time, a real estate sales person will not be of much help in finding rental properties, and that’s because they aren’t usually listed in the MLS (and the MLS is the way in which we are paid).
Sometimes, though, a rental is listed on our Multiple Listing Service (MLS). You can check it out directly at www.MLSListings.com – just select rental under “type”. The vast majority of rentals are online via Craigslist, though, and a real estate agent has no role in that type of rental property. Just beware of the scams, mentioned above, and always google the address of the property that looks interesting to see if it’s for sale also. If it is listed as for sale, the odds are that it’s not really for rent.
On occasion, members of the real estate community will know of a “courtesy rental” property, meaning that a client wants to rent it out but not necessarily put it on Craigslist or the MLS. Instead, it’s word of mouth. You do not need to call every real estate professional in town to ask if they have any courtesy rentals. Instead, turn to your trusted Realtor and ask him or her to inquire for you. Most agents are very happy to send out the request within their company and to top agents or managers of others nearby to ask on your behalf (but it’s no good if 10 Realtors are all circulating the same request, so please don’t give in to temptation and ask everyone for this favor.)
