SiliconValleyMLS, Los Altos, CA (2026)

01/25/2022

Single Family Home Makeover

Below are pics of an extensive makeover of a 1960's home in original condition. We updated from head to toe. Home sold for 30% over the list price of $3.0M.

Kitchen - new quartz countertops and stainless steel appliances. Paint wood cabinets white. Replace linoleum with solid oak flooring.

Living room - reface stone fireplace with contemporary tile. Refinish original solid oak floors.

Master bath - replace original bath with free-standing vanity, new pre-fab shower stall and new designer tile floors.

And a lot more. Check out the details at www.siliconvalleymls.com

12/30/2021

Townhome Makeover

Below is a link to details on the makeover of a 3-bedroom Townhome prior to going on market. The results were outstanding. Buyers and agents alike complimented us on a great job and a wonderful townhome. The $50k front-end investment resulted in 50 disclosures being downloaded, generated 12 offers and resulted in the final sales price being nearly 18% over list. My take is that sellers receive 2-3 times more in final sales value over the front-end investment.

https://siliconvalleymls.com/townhome-makeover/

My take is that the extensive updating increased the list price by $100,000 on a $1.4M townhome. It also increased how much buyers were willing to go over list price, so improved the upside potential. In any case, the increase in market value is greater than the approximately $40,000 that was invested over $10,000 in basic paint and cleaning. A project like this took us about four weeks to get on market. One week to sell and another four weeks to close escrow.

Compass offers an interest-free, no cost loan that can fund virtually all updating costs. The loan is paid-off out of escrow so virtually no cash required by you. We also have a bridge loan program and lenders that can provide a loan on your next home without having to sell and close escrow on your existing home. Combined with my contractor team, it can be a pretty easy process for you.

Let me know if you would like more information or to discuss the options. Click here to see the finished product.

12/13/2020

The math behind rent vs buy

Homeownership is considered to be one of the great wealth creators available, second only to stock options. The math below shows that owning a $1M home can create close to $1M in personal wealth over 10 years!

Monthly Cost of Home Ownership vs. Renting

Many people think that they can’t afford the monthly payments. Let’s calculate the cost of owning a $1M home over 10 years. (you can scale up/down from there and I would be happy to run-the-numbers for your specific situation).

The monthly mortgage payment for a $1M purchase would be around $3,400 per month (at 3% interest with 20% down). Property taxes would be ~$1,100 per month for a total of $4,400 per month. The mortgage payment amount is locked-in for 30 years (no increases) and property taxes are limited to 2% increase per year (Prop 13).

First, the principal portion of the mortgage payment is savings, not an expense. Over the course of 10 years you reduce the outstanding loan balance by nearly $200,000! Increasing your home equity from the original $200,000 down payment to $400,000 after principal payments. This is before adding-in the compounding effects of appreciation.

The average cost of housing, excluding savings/principal reduction, over ten years is $3,000 per month. This consists of $218,000 in interest, $130,000 in property taxes (includes 2% increase/yr), and $12,000 in on-going maintenance ($1,200/yr).

This is reduced by ~$1,000 per month in tax savings due to interest and property taxes being tax-deductible. Assuming a federal rate of 25% and a state rate of 8%, you would be reducing your annual tax bill by $11,500 per year, on average.

Therefore the average monthly cost of owning a $1M home is around $2,000 per month. The rental rate for a $1M home is in the $3,000 to $3,500 per month range. This suggests that owning a home is less expensive than renting by nearly $1,000 per month or $12,000 per year in this example.

What price home would equal your after-tax cost for housing? Reply to this email with a number for your current monthly rent amount and I’ll send you the above spreadsheet with your numbers.

What is the return on an investment for a $200,000 down payment?

The median price for Silicon Valley homes has increased 6% per year over the past 20 years. This includes the Internet-bubble burst, the Great Recession and a global pandemic. With the power of compounding, it is reasonable to assume that our $1M home will appreciate to $1.8M over ten years.

That’s a $800,000 increase over ten years, before tax.

The after-tax gain will be $700,000. There is a huge tax incentive for home ownership of up to $500,000 exclusion (married filing jointly, $250,000 single) from the gain. Primary requirement is that it was your primary residence for 2 out of the last 5 years.

This adds-up to $1 Million of increased personal net worth over 10 years. Nearly $200,000 in savings from the principal portion of the monthly mortgage payment. Another $100,000+ in savings from reduced income taxes due to interest and property taxes deductions. And $700,000 in after-tax gain in appreciation.

Remember that this is with monthly rent being roughly equal to the monthly cost of homeownership (interest plus property tax and maintenance).

This is why home ownership is better financially over renting. A pretty compelling case. Interest rates are so low that it is certainly worth running the numbers.

Think it over. Send me an email and I’ll run the number for you and explore the options.

12/07/2020

Conforming Loan Limit increased to $822,375

The Federal Housing Finance Agency increased the maximum amount for a conforming loan to $822,375 in Santa Clara and San Mateo counties in 2021. This is an increase of 7.4% from the limit of $765,600 in 2020. Assuming 20% down payment, a purchase price of up to $1,028,000 should qualify for a lower interest rate than a higher amount. Higher priced homes can still qualify by increasing the down payment so the loan amount is conforming.

Interest rates for "conforming" loans are typically lower than rates for "jumbo" loans. Wells Fargo is currently advertising a quarter-point difference. Lenders can typically "sell" conforming loans to investors in the financial markets, where as jumbo loans are retained in their portfolio.

Silicon Valley is considered a "high-cost" area in which the median home value exceeds the baseline limit of $548,250 by more than 115%. The maximum ceiling is 150% of the baseline. The map below shows conforming loan limits by county. Interesting to see the location of "high-cost" areas across our nation.

11/30/2020

Proposition 19: Property Tax Transfer
Below is an explanation of how Prop 19 changes your ability to transfer your existing property tax base to a new residence, as summarized by the California Association of Realtors.

How does Proposition 19 change the rules on tax basis portability?

Prop 19 allows a homeowner who is 55 years of age or older, severely disabled or whose home has been substantially damaged by wildfire or natural disaster to transfer the taxable value of their primary residence to: a) a replacement primary residence anywhere in the state, b) regardless of the value of the replacement primary residence (but with adjustments if replacement has a greater value), c) within two years of the sale and d) up to three times (or as often as needed for those whose houses were destroyed by fire). The prior rule limited this exemption to a one-time transfer within the same county (Prop 60) or between certain counties (Prop 90) and only if the replacement property was of “equal or lesser value.”

When does the tax basis portability portion of Prop 19 take effect?
April 1, 2021

Can you buy/sell now and take advantage of the tax portability benefits before April 1, 2021?

There is no definitive answer in the law. Although, we believe that the tax benefits under Prop 19 will apply to transactions where either the sale or purchase of a primary residence takes place before April 1, 2021, as long as the subsequent sale or purchase takes place within two years and occurs on or after April 1. If you wish to obtain the tax benefits of Prop 19 for a transaction that closes prior to April 1, 2021, whether it is buying or selling a property, you should seek the advice of a qualified California real estate attorney or tax advisor.

If the replacement property is of equal or lesser value, does the tax basis of the replacement property change?

No. The taxable value of the original property may be transferred and become the taxable value of the new one.

If the replacement property is of greater value, how is the new taxable value calculated?

The new taxable value is calculated by adding the difference between the full cash value of the replacement property and the original property to the original taxable value. For example, if a seller of an original property has a $300,000 taxable value and a full cash value of $1M and then buys a replacement property for $1.5M, the taxable value of the replacement property would be $800,000.

Can a replacement property be purchased prior to the original primary residence being sold?

Yes. This is how the current rule under Prop 60 works, and Prop19 uses nearly identical language.

How does Prop 19 affect the rules on intergenerational transfers to children or grandchildren?

It limits the exemption to those properties where the primary residence continues to be used as a family home by the child or grandchild transferee. If so, the taxable value will remain the same, subject to some upward adjustments if the property value, at the time of transfer, is more than $1M over the original tax basis.

If the property is more than $1M over the original tax basis, what is the new taxable basis?

The new taxable basis will be the assessed value of the property at time of transfer minus $1M.

When do these new rules on intergenerational transfers apply?
February 16, 2021.

Where may a claim to transfer a tax basis be made?

Claims may be made with forms provided by the local county assessor’s office.

11/29/2020

What is an affordable home for you?

A necessary exercise for first-time home buyers and interesting for existing homeowners thinking about upsizing.

Financing is the primary question: How large of a loan do you qualify for? Knowing this, you add-in the down payment amount, optimize between the two and you have a purchase price.

The loan amount depends on three key factors: your gross monthly income, your credit score and current interest rates.

Monthly Mortgage Amount

Lenders (and you) want to minimize the risk of you not being able to make your monthly mortgage payments.

The FHA says that total debt payments are not to exceed 43% of gross monthly income (before withholdings). This “debt-to-income” ratio (DTI) includes all debt commitments: mortgage payment, property taxes, HOA fees and other loans, such as auto and student loans and credit cards. Many buyers and financial advisors like to keep this closer to 35%.

For example: $12,000/mo income * 40% DTI = $4,800 /mo total debt payment. Reduce this by existing monthly debt payments and this is your monthly mortgage payment limit.

Credit Score

Your credit score affects the interest rate. The rates quoted on the Wells Fargo website use “Excellent” for 760+ and “Good” for 700-759. There is an eighth of a point difference in these two rates, so not a huge impact. More of an issue as you drop below 700.

Good idea to review your own credit score and report, while you can resolve any issues that may be sticking points with underwriters in the future. Something you should do now (a good winter-day project).

Interest Rate

Interest rates are unbelievably low right now. The national average for a 30-year fixed loan is 2.75% (blue line). Wells Fargo says 3.0% for a jumbo loan with good credit in Santa Clara County. Rates vary daily by lender, how much you pay in points (up-front payment) and if you have an account with them.

Loan Amount

Use an online mortgage calculator to calculate the loan amount that fits with the monthly payment you can afford. Google has a quick and easy calculator with a “Maximum loan” tab that calculates the loan amount.

Affordable Purchase Price

The chart below puts this all together for four different levels of income. Loan amounts increase with lower rates and decline with higher interest rates. Larger down payments increase the purchase price.

Consult with a mortgage advisor to have them “run-the-numbers” to get a proper answer. This is usually a no-charge service and can be completed within a day or two.

Affordable Areas

A map of recent home sales in your price range gives you an idea of potential areas with affordable homes.

Below is a map of recent single family home sales with a final sales price in the $1.0M to $1.5M price range in the Silicon Valley area. I can quickly provide you one for your price range.

Keep in mind desirable homes that sell within the first week or two will typically sell for 3-5% over list. Listings that have been on the market for 3+ weeks may be considering reducing their list price by 3-5%.

My website www.SiliconValleyMLS.com provides a breakdown of home prices by the 12 cities over the past year. Another great tool to help find areas with affordable homes.

I am more than happy to “run-the-numbers” with you, discuss the options and answer any questions.

Send me an email me at [email protected] and let’s get started.

Bryan Sweeley
Associate Broker, MBA
Compass DRE 01877044

11/09/2020

Silicon Valley home values are immune to Covid.

The median price for homes in Silicon Valley have bounced back from a dip in 2019 to a new all-time high, or at least on track to do so. The supply of New Listings took a hit in April, but have regained ground and are on-track to be slightly higher than last year. Market demand has also remained strong with average days on market continuing at historic lows.

Check it out for yourself at www.SiliconValleyMLS.com

05/15/2020

Public health orders related to real estate activities started with real estate being deemed not an essential business in March to an essential business with significant restrictions in April. These orders and the overall shelter-in-place orders have resulted in a 40% decline in the supply of new listings during April.

These restrictions have been further relaxed starting in May. We are now allowed to show a listing by appointment if no one else (i.e. occupants) are on the premises. Open houses are still prohibited.

Effective May 4th, San Mateo and Santa Clara county public health orders allow service providers that enable necessary real estate transactions (including rentals, leases, and home sales) including, but not limited to, real estate agents, escrow agents, notaries, and title companies, provided that appointments and other real estate viewings must only occur virtually or, if a virtual viewing is not feasible, by appointment with no more than two visitors at a time residing within the same household or living unit and one individual showing the unit (except that in-person visits are not allowed when an occupant is present in a residence). SCC 4/29/20 para 16.f.x

On a related note, our multiple listing service is reinstating the Days on Market counter. It had been put on hold starting March 17 resulting in the days on market not increasing for Active listings. The counter will once again begin accumulating days as of May 16th.

These are good steps towards reopening our local real estate market. I suspect some buyers will remain on the sidelines until the Bay Area counties remove shelter-in-place orders, hopefully in June. Buyers looking to make the move sooner-than-later, for example to get into the right schools, are able to take advantage of more buyer-friendly market conditions.

Bryan

05/15/2020

Interest rates remain steady at all-time historic lows.

The first chart shows rates over the past 12 months. Rates have declined significantly since this time last year. Interest rates for 30-year fix mortgages declined from 4.0% to 3.28%.

From a historical perspective, our current rates are the lowest ever. The closest was in 2012 when the 30-yr rate fell to 3.32%. These rates are the lowest going back to 1972 when the market survey started. Bottom-line is that it doesn’t get much better than this.

All-time low interest rates will help our local real estate to return to near-normal. Unemployment rates will be the challenge going forward.

Bryan

01/09/2020

Interest rates return to historic lows after a 1-point jump in 2018.

In perspective, it is hard to imagine rates being much lower than they are now. Even the jump in 2018 was minor from a historical perspective, but had a big impact on home buyers. I suspect this contributed significantly to our current market slow-down.

I don't expect rates to change dramatically this year. The Fed will probably keep the Fed rate stable in an election year. The risk is the global market impact on 10-year Treasure Bonds, which is what really drives our mortgage rates. Note the 2018 jump, then decline in 2019.

01/09/2020

Alain Pinel acquired by Compass during 2019. Compass is a rapidly growing national brokerage based in New York which has raised $1.5 Billion in venture funding.

Compass is now ranked as #1 among independently-owned brokerages nationwide. We completed over 40,000 transactions totaling $45 Billion worth of homes.

Technology is a key advantage in today's market. The Compass platform is developed in-house and designed to enhance our client's experience. Agents and clients can share feedback on listings. It has a really nice user interface and fully integrated with everything you need.

An exciting future with leading-edge technology. More to follow... www.Compass.com

01/09/2020

The median price of a Silicon Valley home DECLINED 4.7% in 2019. This was the average across Menlo Park to Los Gatos. The average for each city ranges from -3.4% in Los Altos to -9.3% in Santa Clara. Los Gatos was the outlier with a +3.6%.

Certainly a major event given this is the first decline since 2009. Keep in mind that prices are still higher than 2017 after 10% and 14% increases in 2017-18. Homes have appreciated an average of 6.25% per year going back to 2003, which includes a Great Recession!

My expectation is that 2020 will show single-digit appreciation in the median price. Political uncertainty doesn't help build confidence in such a large financial decision. However, interest rates have returned to historic lows, which means more qualified buyers will be in the market.

The short answer is that a home in Silicon Valley is one of the best investments around. Not to mention one of the nicest places to live in the USA.

SiliconValleyMLS

01/25/2022

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