The Silicon Valley real estate market is actually a patchwork of micro markets.
Many nation-wide websites would have you believe that you can understand the Silicon Valley real estate market by simply plotting trends by city, zip code, or by tracking sales activity within 1 mile of any given property. While this qualifies as a popular and an easy answer, it’s not a very good one and usually provides far from accurate results. The reason for this is that we don’t have just one real estate market, but many micro markets instead.
Silicon Valley is a large region. It covers all of Santa Clara County, most of San Mateo County, and parts of Alameda and Santa Cruz Counties. Within each county there are vast differences, of course, but sometimes those vast differences occur even within one zip code or smaller area. Sometimes even within one block! I sold a Monte Sereno home that had Campbell schools, while directly across the same street there was a house within the Los Gatos school system. Those are different markets.
The micro markets can be distinct due to
- school district
- rural versus suburban or urban
- style of home (mid-century modern, Victorian, Craftsman, or other)
- historic home or district
- property features, such as pools, extra garages, or specialty features like wine cellars
- proximity to workplaces, universities, shops / restaurants
- the lack of an expected feature, such as no pool in an area of homes on acre lots where most neighbors do have pools, or the lack of a garage
Age and type of construction
For example, the photo to the left is of a historic ranch style home made of adobe in the city of Santa Clara. One micro market may simply be “Historic homes in Santa Clara”. But another could be “Adobe houses in Santa Clara County” – since there are only a handful of them in our area, there won’t be enough old adobe ranch houses to compare just within that city.
But what you would not do is compare this house to one on the same block which is a 1965 ranch style home made of wood. It’s only a little bit helpful that they are close together in location. The probable buyer for either house is most likely to be quite different from one to the next. Historic and adobe homes are both micro markets.
School districts, zip codes, and city boundary lines
Perplexing to many newcomers is the odd way that our school districts relate to zip code and city boundaries. Schools are very often – but not always – a major driver in home values.
If you want to buy a home in Los Gatos, you could find yourself in the Union School District, the Campbell School District, the Los Gatos Union School District – and that is only in zip codes 95030 and 95032! Should you buy in the Los Gatos Mountains, which have a Los Gatos mailing address, you’d be in the Lakeside Union School District or possibly the Loma Prieta School District, unless you are very “close in” and still in the Los Gatos Union School District. Sometimes, most of one school district covers one zip code, but a sliver or smaller area may have a different district. That’s a micro market and is important to factor it in.
Equally unhelpful can be the way that zip codes are drawn. The 95138 zip code is partially in South San Jose / Santa Teresa in a very flat area and partially in a valley of the Evergreen foothills near Silver Creek Valley, where homes have a far higher price tag. Sometimes “the market” is truly only part of a zip code, or a combination of a few. Members of the multiple listing service can search the map by areas we draw onto it – carefully excluding some pockets and including others. It’s time consuming but infinitely more accurate.
Property features (or lack of them)
Individual property features can greatly throw value one way or the other. A few years back, I did a study of the impact of having or not having an in-ground pool on sales price and the difficulty of selling. I learned that for homes with an acre of land, a pool is expected, and not having it made selling the property far more difficult (the “months of inventory” at that time was about eight times as long as opposed to homes with a pool). Likewise I studied the effect of having a pool on a lower priced home with a small yard, and of course to many home buyers that was a detriment and it showed up in the results.
The homes-with-pools category is a micro market.
Another good example is a garage.
Most people expect a 2 car garage, usually attached, with a single family home. With a very large estate property, with a big house and an acre or more, that 2 car garage is probably going to be inadequate. So, too, is a regular sized or typical house with a garage converted into a family room or master bedroom suite, leaving the residents to park in the driveway. Having absolutely no garage will hurt the market value – and the marketability – of that house. In a hot seller’s market, these things may not be a big deal. In a deep buyer’s market, though, it can make it very challenging to sell at all.
Most online valuation programs simply will not factor the lack of a garage in at all.
All of these examples of features, or lack of expected features, are part of a micro market.
There are so many factors which must be included when assessing property values, appreciation, and so on. Please resist the urge to rely on the popular online valuations, as they are more often than not way off. Instead, hire a great real estate professional to work alongside you in crunching the numbers and making sense of them and guiding you through every other twist and turn of the contract, the disclosures, the landcape, and more. Please call or email me to discuss working together on your sale or purchase! I love this valley and helping people find the right home to buy or to sell their treasured home here.