The DeLeon Insight - January 2014

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The DeLeon Insight JANUARY 2014

DeLeon Realty’s

STATE OF THE MARKET

F

ollowing on the heels of 2012, 2013 was yet another stellar year for Silicon Valley real estate. While Silicon Valley has seen a robust market, the core areas, namely Mountain View to Atherton, have been even stronger. The towns within that core have experienced double-digit price appreciation, with some areas having an appreciation rate of approximately 20%.

While there are multiple reasons for the continued local market strength, the two most significant are the continued influx of money from overseas, particularly from Chinese investors, and the federal government’s low interest rates in an effort to stimulate the economy.

Foreign Investors & Overseas Money In 2013, we have seen continued investment in the Silicon Valley real estate market by foreign nationals who live abroad and those who relocate here. The stability of the U.S. market and the desire to invest in real estate, despite

restrictions placed by many of the foreign nationals’ home countries, notably China, are two key factors driving foreign investors. Foreign investors often write very strong offers, often including an all-cash payment at a price significantly above the asking price. While this may seem strange to some Americans, two recent business Continued on page 7

JOIN US FOR OUR FEBRUARY SEMINAR FIRE UP FOR THE SIZZLING SPRING MARKET Please join DeLeon Realty for a seminar focused on the upcoming Spring 2014 market in Silicon Valley. You will gain invaluable insight into the real estate market from the most successful real estate agent in Silicon Valley - Ken DeLeon. Also, meet Michael Repka, the Managing Broker & General Counsel, and DeLeon Realty’s talented Area Specialists, who focus on specific neighborhoods in Silicon Valley.

Saturday, February 8, 2014 10am -12pm (Breakfast will be provided)

Where: Palo Alto Hills Country Club, Grand Ballroom 3000 Alexis Drive, Palo Alto

To RSVP Please Contact Ting Conway - 650.543.8588


Market Update

Asian Impact on the Market

A

sian cultures generally value modesty, hard work, and

from 1714 to 1718 to adhere

strong family ties. The popular conception is that most

to the Chinese belief that the

Asians work diligently and quietly. However, the loud

number “8” brings good fortune.

impact of Asian buyers in Silicon Valley has been noticed.

According to the Wall Street

Asian buyers are dominating

High offers from Asian buyers

the housing market as they flock

make property in Silicon Valley a

to Silicon Valley. The influx has

rapidly appreciating asset. Palo

uniquely impacted the Silicon

Alto experienced some of the

Valley market in numerous ways.

highest home appreciation rates

Asian residents are now amongst

of any community in the nation,

one of the largest population groups in Silicon Valley cities. In Cupertino, for example, more than half of the residents are Asian, according to the U.S. Census Bureau of 2010. Asian buyers contributed to the increase in sale and purchase prices

because

of

their

all-

Recently, a home in Los Altos even changed its address from 1714 to 1718 to fit the Chinese belief of “8” bringing fortune.”

Not surprisingly, developers

contingent offers. Buyers know

design homes to appease Asian

that to successfully purchase a

aesthetics, making note of Feng

prime Silicon Valley home, they

Shui, Vatsu Sastra, and other

must place a competitive offer the

cultural beliefs.

seller cannot refuse; Asian buyers

Recently,

a

home

in

Los

Altos even changed its address

Asian buyers are dominating the housing market in Silicon Valley.

have kitchens outfitted with wok burners; others have Europeanstyle bathtubs and bidets; and some South American-inspired residences

include

sprawling

balconies to accommodate large extended families. Whether you seek a home that has features often favored by Asian buyers, or you prefer the opportunity for a value due to traits considered unfavorable to Asian buyers, make sure you find a skilled real estate agent to

over the last two years.

cash, above asking price, non-

do this well.

2

with an appreciation of over 30%

Journal, many new residences

help you successfully place an offer and purchase a home in this highly sought after market. Also, when selling, your agent should fully expose your home to Asian buyers. By Kim Heng


DeLeon Tips

It’s not too late to

WINTERIZE your home

A

s the temperature continues to drop, it is tempting to stay cozy inside – but don’t wait until it’s too late to take important winter maintenance steps to keep your home safe and reduce energy costs. Here are some helpful suggestions to save your home from having winter issues.

1

Install storm doors and windows. Better insulation will increase energy efficiency.

Seal cracks with caulking and place barriers around

4

Clear the leaves. Although fall is over, be sure to remove any

lingering leaves and debris in your gutters. The

doors and windows to prevent drafts, which often leaves and debris can mix with water and cold waste 5% to 30% of your energy according to the temperatures to form ice dams, causing leaks. U.S. Department of Energy. By keeping the heat in and the cold out, you will stay warm while saving energy and money.

2

Change furnace filters or replace your furnace.

5

Check your fireplace. Many homes in Silicon Valley have fireplaces,

which are great for additional warmth, but be sure the chimney is cleaned, and the top is

Making sure you have clean furnace filters once capped or screened to keep out rodents and a month will help increase airflow and decrease birds. Be sure to stay aware of Bay Area “Spare energy demands. If you are in need of a new the Air” days, which limit times you can burn furnace, consider spending a bit more on a modern wood. machine to increase heating efficiency rates and decrease energy utility costs.

By Samantha Juda & Nicole Chavez

3

Check your air conditioner and water lines. Drain pipes and hoses to be sure you don’t have

water pooled in the equipment. Seal any water leaks, and remove window air conditioning units, to avoid leaks and drafts during the cold months.

3


Real Estate Debate

Preserve charm or enhance home value?

S

ilicon Valley has charming neighborhoods, and there is an

story homes take up less of the

understandable desire to retain the charm and feel of the

precious lawn area. Because of

community. To preserve this appeal, some neighborhood

this, newer construction is often

associations enact building restrictions aimed at curbing

seen in areas with less onerous

new construction, especially larger or multi-floor properties. These

new

building restrictions. This newer

restrictions,

maximize the square footage of a

however, can have an impact

property while keeping costs low.

on local housing values and appreciation rates. Homeowners

in

favor

of

building limitations want to maintain

and

preserve

the

existing charm and character of the neighborhood. Additionally, they are concerned about the loss of light, views, and privacy

Two-story

“

homes

can

be

...builders need to maximize the square footage of a property while keeping costs low.

associated with being next to a

4

multi-floor property. These are

constructed more economically

all legitimate concerns, but they

than one-story homes of the

do have associated costs.

same square footage because

In towns like Palo Alto, where

of the reduced foundation and

land is limited, builders need to

roofing costs. Additionally, two-

construction tends to increase the average price per square foot in the entire area, as less desirable homes get razed to build new homes. In contrast, builders’ reluctance to purchase homes that face increased restrictions slows the gentrification process, which can have an impact on the fair market value of homes in poor condition. Be

sure

to

consider

the

impact of building regulations or proposals for new restrictions when you consider purchasing a home in Silicon Valley. By Ken DeLeon & Michael Repka


DeLeon Tips

How to FENG

SHUI your home

I

n Palo Alto and the surrounding areas in Silicon Valley, a significant and growing

2

Home Layouts

In smart Feng Shui floor plans, the front/main

portion of the buyers are Asian, most notably door will not be directly aligned with another Chinese. For many Chinese buyers, a house door or a big window. Likewise, the stairs needs to have good Feng Shui before they would should never face the front door, because it is consider purchasing it. The most basic principle believed that the chi will accelerate and rush of Feng Shui is to focus on balancing the energies out the front door. This can be mitigated by of a given space to assure the heath, wealth and adopting a decorating style that will slow the happiness of the people inhabiting it. Below are energy down and redirect it around the main three basic suggestions to help “Feng Shui” your living floor. Strategic placement of art, plants home from the DeLeon Design Team.

or flowers can help reduce the negative impact of this layout.

1

Avoid T-Intersections

Chinese buyers will avoid homes facing a

perpendicular street (i.e., a T-Intersection). This

3

Clear the Clutter

Clear out clutter by getting rid of things you

is considered bad Feng Shui because energy of do not love in your house. Clutter can negatively the T-junction literally “hits” the house with influence, or even completely block, the flow sharp, aggressive, Sha chi quality energy.

If of energy and events in your life. Once the you live at a T-Intersection, this problem can be clutter is removed, it is said that you will start to mitigated by constructing a barrier, such as a wall experience high energy levels, more clarity, and or fence, with appropriate landscaping to soften a heightened sense of well-being. the energy.

E

B

OR EF

By The DeLeon Design Team

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sa

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5


Market Update

United States Household Wealth Trends

A

mericans’ wealth hit an all-time high last summer, in part from the steady recovery of home prices. According to the Federal Reserves’ report, from July through September, the nation’s wealth rose 2.6% to $77.3 trillion.

We see that Americans’ net worth

borrowing

more

money,

indicating

spiked based on two contributing

job security and confidence in our

factors: stock prices rising by $917

broader

billion and home values rising by $428

total mortgage debt rose 0.9% from the

billion. Overall, household wealth has

previous quarter, the first increase since

been rising gradually since 2008. Household wealth, or net worth, is the total value of homes,

stocks,

accounts,

and

bank other

economy.

Higher household wealth suggests a hot real estate market...”

assets,

Specifically,

2009. This rise reflects home sales increasing and fewer mortgage defaults. Higher

household

minus

wealth suggests a hot real estate market,

mortgages, credit cards, and other

as people have the financial capability

debts. Though this information stopped

and confidence to purchase homes.

in September, we see stock prices and

With the start of 2014, we hope to see

household wealth have continued to rise

this trend continue to move upward

since then.

with household wealth increasing.

The also

Federal noted

that

Reserves’

Report

Americans

are

By Alex Seroff

Higher household wealth, or net worth suggests a hot real estate market.

6

the


From the Cover Continued from Page 1

Silicon Valley Real Estate - looking to 2014 trips we took to mainland China, Taiwan, and Hong Kong have indicated that, despite high prices, Silicon Valley homes are a relative bargain compared to prices of nicely appointed condominiums in some of the first-tier Asian cities.

spike in interest rates because Federal Reserve Chief Ben Bernanke indicated that he was going to end quantitative easing and stop holding the interest rates low. His comments caused a very dramatic spike in interest rates, and this was the only Interest Rates time in 2013 where we saw a slowdown in demand, Another factor that albeit, short lived. Shortly contributes to the strength thereafter, the market of the local economy is the federal government’s ...we look forward desire to keep interest rates to another robust low. While most of the year in 2014. country is still recovering from the Great Recession, Silicon Valley’s vibrant calmed and interest rates economy has continued to settled back down towards flourish. Nevertheless, the where they were before. low interest rates, available As a result, this fueled0 nationally, have added fuel the strong burning fire that to an already kindling fire. much more. People who The Federal Reserve, thought they may have however, has made clear been priced out of market its intent to raise interest because of increasing rates in the future. Some interest rates decided to similar statements in June use the interest rate retreat 2013 caused a temporary as an opportunity, thus

creating an even stronger fall market than usual. Looking Forward While we generally expect the real estate market in the core areas of Silicon Valley to remain strong into 2014, we believe the trend will shift slightly towards neighboring cities that have not increased quite as quickly as Palo Alto due to the upward pressure of people being priced out of Palo Alto’s most prime neighborhoods. In the recent months we have started to notice more variations in home prices between Palo Alto and its neighboring cities. Overall, 2013 was a strong year for the real estate market in Silicon Valley, and we look forward to another robust year in 2014. By Ken DeLeon & Michael Repka

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DeLeon Realty 2600 El Camino Real, Suite 110 Palo Alto, CA 94306

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