Source: The Wall Street Journal
By YUKARI IWATANI KANE
The resurgence in the Silicon Valley tech industry is leading to a new boom in the area's real estate market, with rising rents and a scarce supply of homes to buy.
Sid Vismanathan, who sold his start-up to LinkedIn in January, purchased a three-bedroom house in Mountain View for $700,000.
When Ann Schneider advertised her 1,782-square-foot, three-bedroom town home in Mountain View for rent on online classifieds site Craigslist earlier this month, she was surprised to get nearly a dozen responses right away.
The modest house has a two-car garage and a backyard, and she had redone the master bath and repainted the walls so it looks in better shape than comparable units in the complex. But she also raised the rent 60% to $4,000 a month.
Nevertheless, she had one potential renter offer to pay two months up front, and another who came to look at the house ready to make an offer with a package of documents that included a copy of a completed rental application, a letter from his employer, additional letters of recommendation and a credit report.
"I've had offers over email without seeing it," said Ms. Schneider, adding that she hasn't experienced anything like it since she began renting the house five years ago.
Inquiries came from as far away as Spain, Germany and Finland, and many from people in the high tech or medical fields. She ultimately rented it to a family. The clincher was that they agreed to sign a two-year lease.
While the nationwide housing market continues to struggle, Silicon Valley is one among a small number of areas where demand is strong. According to website Rent.com, the amount of rent that tenants are paying rose 11% in the first quarter in the San Jose market, which includes Palo Alto, Mountain View and Cupertino, compared with a 2.5% increase nationwide.
Ann Schneider had many offers to rent her Mountain View town home.
Realtors and real estate experts, meanwhile, are reporting a dearth of properties for sale, which often is a precursor to rising home values. Real estate statistics firm Altos Research of Mountain View found that, this spring, an average of about 76 homes were on the market in any given week in Palo Alto—the epicenter of the boom—compared with 110 a year earlier and about one-tenth the number in a similarly sized market near Dallas or Atlanta.
While in some cities, a lack of homes for sale could mean that owners are taking their properties off the market because they can't sell them, Altos Research Chief Executive Mike Simonsen said the very small number of homes listed with reduced prices suggested that this isn't the case in Silicon Valley. Properties with reduced prices comprised just 4% of current listings in Palo Alto, compared with a little more than 40% six months ago and 25% a year earlier.
Additionally, properties that were relisted, most likely because they couldn't be sold, also comprised just 4% of listings in Palo Alto, at the low end of the area's typical range of 4% to 15%. The median sale price in Palo Alto has largely remained unchanged in the past year at about $1.7 million, he said.
Real estate agents already see evidence of a housing crunch in a handful of communities such as Palo Alto, Menlo Park and Atherton, which are known for their schools and are near many of the fastest-growing companies. They say a number of two- and three-bedroom houses that are less than 2,000 square feet have sold for $1 million to $2 million after receiving multiple bids.
"There's just not enough land to build [in this area]," said Keri Nicholas, a real estate agent in Menlo Park, though she added that the market appears to be heating up over the last five months at a slower pace and more unevenly than during the Internet bubble when "it happened very quickly and ended very abruptly." She said there were still pockets in the broader Silicon Valley area where homes are difficult to sell, especially in the lower-end price range where buyers might have a harder time qualifying for loans.
Those who aren't interested in buying or can't find adequate houses for purchase are looking to rent. Mara McCain, an agent at Alain Pinel Realtors, recently listed a three-bedroom 2,850-square-foot house in Menlo Park on Craigslist for rent for $9,500 a month. Despite the high price, she said she has received more than 20 inquiries. She ended up renting the house to a technology executive.
At the heart of the boom is the technology industry, led by heavyweights such as Apple Inc. and Google Inc., which has fueled jobs and created wealth in the area.
An additional factor has been the anticipation of public offerings from companies such as Facebook Inc., valued by some investors at more than $70 billion and expected to go public as early as next year. Already, employees and others who have received private shares can sell them through specialized markets.
"All of a sudden, there are a ton of millionaires coming out because of Facebook," said Katie Hammer Riggs, an agent at Coldwell Banker Menlo Park.
Already, the initial public offering of another tech company, LinkedIn Corp., a professional networking site based in Mountain View, is prompting some employees to upgrade their homes.
Sid Vismanathan is a 27-year-old co-founder of a business card reading app called CardMunch that was acquired by LinkedIn in January for an undisclosed amount. After the May IPO of LinkedIn, Mr. Vismanathan this month purchased a 1,500-square-foot, three-bedroom house in Mountain View for $700,000, upgrading from the $400 a month he paid for a two-bedroom rental apartment shared with two others.
"I felt like it was a good deal," he said, adding that he lucked out because the owners wanted to sell quickly. "It was on the higher side of my budget, but it was a single-family unit and nothing of that similar type of house has sold for less than $769,000 in the last year," he said.
Showing posts with label Wall Street Journal. Show all posts
Showing posts with label Wall Street Journal. Show all posts
Wednesday, June 29, 2011
Monday, January 17, 2011
No McMansions for Millenials -- Gen Y Says NO!
Source: Wall Street Journal
By S. Mitra Kalita and Robbie Whelan, Jan 14, 2011
Here's what Generation Y doesn't want: formal living rooms, soaker bathtubs, dependence on a car.
In other words, they don't want their parents' homes.
Much of this week's National Association of Home Builders conference has dwelled on the housing needs of an aging baby boomer population. But their children actually represent an even larger demographic. An estimated 80 million people comprise the category known as "Gen Y," youth born roughly between 1980 and the early 2000s. The boomers, meanwhile, boast 76 million.
"One-third are willing to pay for the ability to walk," Ms. Duggal said. "They don't want to be in a cookie-cutter type of development. ...The suburbs will need to evolve to be attractive to Gen Y."
Outdoor space is important-but please, just a place to put the grill and have some friends over. Lawn-mowing not desired. Amenities such as fitness centers, game rooms and party rooms are important ("Is the room big enough to host a baby shower?" a millennial might think). "Outdoor fire pits," suggested Tony Weremeichik of Canin Associates, an architecture firm in Orlando. "Consider designing outdoor spaces as if they were living rooms."
Smaller rooms and fewer cavernous hallways to get everywhere, a bigger shower stall and skip the tub, he said. Oh, but don't forget space in front of the television for the Wii, and space to eat meals while glued to the tube, because dinner parties and families gathered around the table are so last-Gen. And maybe a little nook in the laundry room for Rover's bed?
In his presentation, KTGY Group residential designer David Senden showed slide after slide of dwellings that looked like a cross between a hotel lobby and the set of "Melrose Place."
He christened the subset of the generation delaying marriage and family as "dawdlers."
"A house in the suburbs is not for them," Mr. Senden said. "At least not yet."
Places to congregate are more important than a big apartment, he cautioned. He showed one layout of a studio apartment-350 square feet, as big as Mom and Dad's Great Room. Common space has migrated to "club rooms," he said, where Gen-Y residents can host meals and hang out before heading to a common movie-screening room or rooftop swimming pool that they share with the building's other tenants.
The Great Recession and its effects on young people's wages will affect how much home they can buy or rent for years to come.
"Not too many college grads can afford a lot of space in the city," he said. "Think lots of amenities with little tiny units-and a lot of them to keep (fees) down. ...The things these places are doing is constantly coordinating activities. The residents get to know each other and it makes for a much livelier and friendlier environment."
By S. Mitra Kalita and Robbie Whelan, Jan 14, 2011
Here's what Generation Y doesn't want: formal living rooms, soaker bathtubs, dependence on a car.
In other words, they don't want their parents' homes.
Much of this week's National Association of Home Builders conference has dwelled on the housing needs of an aging baby boomer population. But their children actually represent an even larger demographic. An estimated 80 million people comprise the category known as "Gen Y," youth born roughly between 1980 and the early 2000s. The boomers, meanwhile, boast 76 million.
"One-third are willing to pay for the ability to walk," Ms. Duggal said. "They don't want to be in a cookie-cutter type of development. ...The suburbs will need to evolve to be attractive to Gen Y."
Outdoor space is important-but please, just a place to put the grill and have some friends over. Lawn-mowing not desired. Amenities such as fitness centers, game rooms and party rooms are important ("Is the room big enough to host a baby shower?" a millennial might think). "Outdoor fire pits," suggested Tony Weremeichik of Canin Associates, an architecture firm in Orlando. "Consider designing outdoor spaces as if they were living rooms."
Smaller rooms and fewer cavernous hallways to get everywhere, a bigger shower stall and skip the tub, he said. Oh, but don't forget space in front of the television for the Wii, and space to eat meals while glued to the tube, because dinner parties and families gathered around the table are so last-Gen. And maybe a little nook in the laundry room for Rover's bed?
In his presentation, KTGY Group residential designer David Senden showed slide after slide of dwellings that looked like a cross between a hotel lobby and the set of "Melrose Place."
He christened the subset of the generation delaying marriage and family as "dawdlers."
"A house in the suburbs is not for them," Mr. Senden said. "At least not yet."
Places to congregate are more important than a big apartment, he cautioned. He showed one layout of a studio apartment-350 square feet, as big as Mom and Dad's Great Room. Common space has migrated to "club rooms," he said, where Gen-Y residents can host meals and hang out before heading to a common movie-screening room or rooftop swimming pool that they share with the building's other tenants.
The Great Recession and its effects on young people's wages will affect how much home they can buy or rent for years to come.
"Not too many college grads can afford a lot of space in the city," he said. "Think lots of amenities with little tiny units-and a lot of them to keep (fees) down. ...The things these places are doing is constantly coordinating activities. The residents get to know each other and it makes for a much livelier and friendlier environment."
Friday, September 17, 2010
10 Reasons Why it's Good to Buy a Home
Enough with the doom and gloom about homeownership.
Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.
But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.
1. You can get a good deal. Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have come down a long way— about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.
Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.
2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What's not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won't see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.
3. You'll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you'll get a tax break on capital gains—if any—when you sell. Sure, you'll need to do your math. You'll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.
4. It'll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension—zoning permitted—or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You'll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. "You can tell the ones that have been bought," said my local guide. "They've painted the front door. It's the first thing people do when they buy." It was a small sign that said something big.
5. You'll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you're better off buying.
6. It offers some inflation protection. No, it's not perfect. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That's valuable inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there have plummeted of late. That also makes homeownership look a little better by contrast.
7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities—for practical as well as psychological reasons. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy—if it happens—and still managing to sleep at night.
8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won't. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn't a cost. You're just paying yourself by building equity. As a forced monthly saving, it's a good discipline.
9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes. That's below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice, as well as great prices.
10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of the homes will be bought. But many more will simply be destroyed—either deliberately, or by inaction. This is already happening. Even two years ago, when I toured the housing slump in western Florida, I saw bankrupt condo developments that were fast becoming derelict. And, finally, a lot of the "glut" simply won't matter: It's concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won't have any long-term impact on housing supply in your town.
Source: The Wall Street Journal, Brett Arends.
Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.
But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.
1. You can get a good deal. Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have come down a long way— about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.
Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.
2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What's not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won't see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.
3. You'll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you'll get a tax break on capital gains—if any—when you sell. Sure, you'll need to do your math. You'll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.
4. It'll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension—zoning permitted—or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You'll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. "You can tell the ones that have been bought," said my local guide. "They've painted the front door. It's the first thing people do when they buy." It was a small sign that said something big.
5. You'll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you're better off buying.
6. It offers some inflation protection. No, it's not perfect. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That's valuable inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there have plummeted of late. That also makes homeownership look a little better by contrast.
7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities—for practical as well as psychological reasons. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy—if it happens—and still managing to sleep at night.
8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won't. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn't a cost. You're just paying yourself by building equity. As a forced monthly saving, it's a good discipline.
9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes. That's below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice, as well as great prices.
10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of the homes will be bought. But many more will simply be destroyed—either deliberately, or by inaction. This is already happening. Even two years ago, when I toured the housing slump in western Florida, I saw bankrupt condo developments that were fast becoming derelict. And, finally, a lot of the "glut" simply won't matter: It's concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won't have any long-term impact on housing supply in your town.
Source: The Wall Street Journal, Brett Arends.
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