There is one question that every First Time Home Buyer looking for a home in Silicon Valley is currently asking oneself: Can I afford to buy a home given current market conditions in Silicon Valley?
Before answering this tricky question about the Silicon Valley Real Estate Market, I would like to step back for a second and set the stage.
As many homeowners looking for their dream home in the Bay Area have already noticed, Silicon Valley (and San Jose in particular) is in the eye of a Sellers Market storm which manifests itself by:
- a super low inventory of homes for sale (including fewer short sales and a rapidly declining number of REOs pending the next big wave)
- a very short "shelf life" (aka Days On The Market in the jargon of Realtors) of any property offered for sale in Silicon Valley right now (down to double digit numbers in some Silicon Valley neighborhoods)
- many instances of multiple offers on properties offered for sale on the Silicon Valley market leading to inflation of prices on accepted offers up to 20-30% above asking prices, sometimes even higher in highly desirable real estate market like Palo Alto or Menlo Park.
Those trends are well reflected in the chart below which shows annual average price of homes sold on the San Jose Real Estate Market.
If you feel depressed, well, you shouldn't since there is always hope anyway...and a way to grab your dream home in Silicon Valley if you have the right approach and understand precisely what is at stake.
Despite historical low interest rates, many potential buyers are kept away from home ownership.
First Time Home Buyers in particular have a hard time accessing to home ownership as they are often unable to come up with the required down payment, they have a hard time matching escalating offers (from cash-rich real estate investors in particular) , they sometimes have an insufficient credit history and they can have unstable jobs.
What follows are proven tips from my own personal experience which will raise considerably First Time Home Buyers' chances to grab their dream home(s), not just in Silicon Valley, but pretty much anywhere in the Bay Area:
- Always look for homes for sale priced under your maximum price range to enable you to make an offer over the asking price if the property is really worth it.
- Keep in mind that the home appraiser from your bank may not share your enthusiasm for the property. In other words, if he or she thinks you are bidding way over the asking price, be prepared to come up with the difference or to bail out (using the appraisal contingency).
- Ask your Realtor about the 203K FHA loan which may be handy as it will allow you to borrow money to fix the property.
- Think twice before accepting sellers' requirements. I have seen sellers asking prospective home buyers to waive the loan and/or appraisal contingency (see above) before they receive an answer from their lender(s). Remember that if your loan is not funded, you can only count on arguing over the condition of the property to avoid losing your down payment.
© Sophia Delacotte CDPE, SFR, CHS
San Jose Realtor
Cell: (408) 717-2575