Is it worth buying a million dollar condo in Cupertino?

Asked by Sai, San Jose, CA Mon Sep 22, 2008

We saw a 2600 sq.ft. brand new condo in Cupertino with best schools (Monta Vista High, Kennedy middle and Regnart). Is it worth buying at a million dollars? There is no attached garage (underground parking) and it is in the middle of a business area (not residential). However a Single Family home in the same area would sell for 1.5 million or more. Is it worth buying the condo? What are future chances of selling? How much can we negotiate in this market? We are a large family (6 people in the household) and need a big house with good schools.

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18
Anita, , San Jose, CA
Wed Nov 5, 2008
Why not rent a place in the school district of your choice? We are renting a SFH. If we wanted to buy it at current prices, we'd be out at least another 2,000 per month *and* we'd be tying up a significant amount of down payment money in an illiquid, rapidly depreciating asset. We're not in Cupertino, so I can't speak to that specific area, but for that money, you could buy a SFH elsewhere and look at private schools as well.
1 vote
Sam Shueh, , San Jose, CA
Sat Nov 1, 2008
First of all, I do not suggest anyone purchase a place 'cause of the address. It must be something you will live comfortably.

I would ask if the price of your dream house drops another 100K or so (likely until this severe recession is over) can you manage the payment? To find out how little you can get you need to be willing to make offers frequent enough to see what you can get. The farther away you live the more affordable homes become. The 1.5 M home in MV you can get ~750-800 K in other areas. BTW: Some API obsessed parents find out some neighborhoods have just as good test scores and they are quite affordable.

As far as home appreciation, CU, SARA have lower appreciation rate since 1999 than other local areas due to diminishing return. When you chart avg price vs API -for high school, it has an index of determination of .3 (R^2). The only advantage I see CU/ PA seems somewhat to be insulated by the price erosion experiencing now. The investors who bring $$$ into the area to speculate seem to be on a hold pattern.
When major local employers had a massive layoff (1970, 1985, 2001-2) I did notice CU had a sharper price erosion.

This kind answers your question when bulk of high wage earners lost their job can they afford to hold on to their homes? If you think you have solid employment that is when you jump in. Shoot me an email if you got specific question. shueh at yahoo
1 vote
Mary Pope-Ha…, Agent, Los Gatos, CA
Mon Sep 22, 2008
Putting 6 people into a million dollar condo that's not even in a residential area does not sound like a good idea to me. Remember, this is not just a vehicle to good schools, it's also a home. Is this an area where you could go out strolling in the evening? Walk a dog? It doesn't sound like it - and that will impact resale value in the long run. Ideally, homes should have good schools and good neighborhoods too. Most buyers want to be in an area where there are many other homes, parks, and schools, and not businesses.

Generally speaking, I would tell people to take that million dollars and buy a single family home in an area with good schools. For instance, at that price, you could buy a home in Santa Clara with Cupertino Schools (a little pocket off Mauricia). Or you could purchase a house in a pocket of West San Jose with Cupertino schools too. Or consider Saratoga, Los Gatos, Los Altos, etc. For a million dollars I'd sure like to see some land associated with the purchase. After all, it is the land which holds its value here, not the structure.

If you said that the condo was in a nice neighborhood, in walking distance to the schools and park, I would be more convinced that this was a good idea. But since it's in a business area, it seems to me that it's a very high price tag. My advice: look at houses instead.
1 vote
Sam Shueh, , San Jose, CA
Sat Nov 1, 2008
First of all, I do not suggest anyone purchase a place 'cause of the address. It must be something you
will live comfortably.

I would ask if the price of your dream house drops another 100K or so(likely until the severe recession is over) can you manage the payment? To find out how much you can get you need to be willing to make offers frequent enough to see what you can get. The farther away you live the more affordable homes become. The %1.5 M home in MV probably you can get may be 750K in many places. BTW: Some API obsessed parents find out some neighborhoods have just as good test scores and they are quite affordable.

As far as home appreciation, CU, SARA etc have lower appreciation rate since 1999 than other areas due to diminishing return. When you chart avg price vs API -for high school. It ,at the best ,has an index of determination of .3 (R^2). The only advantage I see CU/ PA seems somewhat to be insulated by the price erosion experiencing now. The investors who bring $$$ into the area seems to be on hold pattern. When the big local employers have a massive layoff (1970, 1985, 2001-2) I did notice CU had a sharper price erosion.

This kind answers your question when bulk of high wage earners lost their job can they afford to hold on to their homes? If you think you have solid employment that is when you jump in. Shoot me an email if you got specific question. shueh at yahoo
0 votes
Sai, , San Jose, CA
Mon Sep 29, 2008
Thanks for all the answers. Keep them coming. For now, I have decided that the prices will come down in Cupertino pretty soon and so am going to wait for that to happen. I am not buying a condo for 1 million in this market(especially since I have lost 30% of my small portfolio in the bloodbath).
One thing though - if prices indeed drop 15-20% I wonder if people will want to sell or just hold on waiting for prices to go back up. Though I guess builders would need to get rid of their excess inventory so they may be open to a bigger price cut?
0 votes
Jt, Both Buyer And Seller, San Jose, CA
Mon Sep 29, 2008
Sai,
Have you thought about Almaden area - with Williams/Bret Harte/Leland?
Gosh--the prices there are really dropping! Not to mention, you can get a large SFH, on the "newer" side in comparsion to the flat style roofed homes in Cupertino for a mil.

Also--wanted to point out realtors told me the same thing "homes prices in Almaden will never go down much--schools are too good!". Well, they were wrong. Not saying the same prediction for Cupertino. I would seriously wait ,at least for another couple of months. From what my *friends* (who happen to be in the RE biz) tell me, true prices haven't dropped much in Cupertino but DOM are increasing & homes there are sitting much longer. So, it's only a matter of time before they take a drop. If the market turns around quick (which we know isn't going to happen) that could change.
Good luck! I'm curious to know what you decide to do...keep us informed!

I own in Cambrian & kicking myself for listening to all the realtors who told me "homes in my area--with great schools etc--won't go down much. Well, so far it's taken about 15-20% hit. Now I will just rent it out since our house pymt/taxes are so low and rental market here is strong.
0 votes
Jt, Both Buyer And Seller, San Jose, CA
Mon Sep 29, 2008
I would wait for a SFH.
I have lived in a townhome & believe me - it's not fun living their with a family! We shared a common wall and unfortunately, we had renters who were party animals, next door. They smoked, drinked, and this was in a very high-end, ritzy area!

What are your condo fees? Bear in mind these HOA fees will only increase. You might find you can afford a SFH with the same pymt you'd be making on your condo.
Prices will come down in Cupertino, no doubt about that with all the market turmoil out there.
Remember, realtors will not admit this. I do NOT believe they won't fall 50% or anything--unless we have a depression.
Once you do buy just be sure you have enough savings put aside so you can make your house pymt if you get laid off. Better yet--make sure one of your salary covers the house pymt.
0 votes
Mary Pope-Ha…, Agent, Los Gatos, CA
Sun Sep 28, 2008
Rising interest are NOT good for buyers - they make affordability tougher not just for housing, but virtually everything. Interest rates can cause home prices to go down, but they don't always. I have seen buyers and sellers hurt when rates rise and buyers are suddenly told, just before close of escrow, that their loan has been withdrawn because they no longer qualify for it due to the new rate.

The comment about "life being on hold" came to me straight from some of my buyers who chose to purchase in this market. I thought it was insightful because if you're renting, you may or may not be in the same neighborhood (and thus have the same schools) when you buy. You may "settle in" on one street, one part of town, or one part of the valley only to later purchase at a distance and really uproot the family in terms of relationships at the school, the stores, the library, the soccer team, you name it.

Renting is a viable option, and a preferable one, for many. This is especially true if someone wants to be in a place only a few short years (less than 5). But if someone wants to be in a community long term - 5 or 10 years or more - buying a home is virtually always a good idea if it's affordable. One of the saddest things in my career was when an owner of a rental property had me sell his house and the tenants had been there for 30 years. They'd been there long enough to own it - or something nearby - but instead, they had no equity and in their 60s, really did have to start over. They had a loss of control and had to leave the home they felt was theirs since they'd been there so long.
0 votes
John, , Los Angeles, CA
Sun Sep 28, 2008
Let's discuss Mary's answer:

1) RISING INTEREST RATES ARE GREAT FOR HOME BUYERS. Think about basic economics--the higher the cost of something, the lower the demand. It's basic economics. The higher rates go, the lower the demand there will be for mortgages--which means there will be less sales and lower prices.

We have fairly low interest rates right now, and home sales are at a crawl. What will happen if rates rise? Lower sales and much, much, much lower prices.

(additionally, if you buy a home at a certain price, you can never renegotiate. BUT if interest rates fall, you can always refinance--that is why higher rates are manageable, and higher prices are not)

2) CAN YOU HAVE A LIFE IF YOU DON'T OWN A HOME? Mary says that your life is on hold if you don't own a home. Really, Mary? You mean Sai can't volunteer for his children's little league team if he doesn't own a home? Really?

If Sai goes over to his local block party, will people ask him, "Sai, do you own your home? If not, you aren't welcome here." GIVE ME A BREAK. Life doesn't begin when you own your own home. Sai can be a valuable, wonderful member of his community whether he owns his own home or rents.

Mary--is there anything else you would like to say?
0 votes
Mary Pope-Ha…, Agent, Los Gatos, CA
Sat Sep 27, 2008
Sai, you asked if prices will fall 20-30% in Cupertino in the next couple of years. No one can say for sure what will happen, but I doubt that prices in Cupertino will decline that much. They may decline a little, though.

Unless you are buying a home "all cash" or with a very small loan, it's wise to also factor in the cost of the loan. Affordability isn't just the price of the house, but also the price of the loan (which is really something you are "buying".) Right now, if you can obtain a loan, the rates are not bad. My educated guess is that loan rates will get worse (go up) over the next couple of years.

So if prices go down a little, and rates go up, it may well be that your best "net" is to buy now. I do think that's the case. Not only that, but this is your home, it's shelter, not just an investment. If you want to keep your life on hold for a couple of years, that is an option, but I think there's a lot to be said for buying a home and making a life in that community - getting involved in the schools, the neighborhood, the parks. I would not wait to purchase.
0 votes
Sai, , San Jose, CA
Fri Sep 26, 2008
Thanks for all the responses. John's pcture is ideal - prices will fall sufficiently so we can buy a big SFH in Cupertino for under a million in a couple of years. I would like to believe that will happen. But I am worried it is wishful thinking. What does everyone else think? Will prices fall 20-30% in the next couple of years in the South Bay (the good areas which have kept going up while the rest of the market tanked).
0 votes
John, , Los Angeles, CA
Fri Sep 26, 2008
Sai,
Why not rent? Prices are dropping like a rock, and the foreclosure problem is just starting in the best areas of Silicon Valley. In fact, there is a nice-size home in the best part of Sunnyvale is going up for foreclosure auction in a few weeks. A great, luxurious home in Los Altos Hills is set for foreclosure auction in late October. Several others in Los Altos are also headed for foreclosure in the next 10 weeks.

These foreclosures are going to bring prices down, BIG TIME. Instead of getting stuck in a condo, why not rent for a year or two, then buy a big home for 20, 30 or 40 percent less.

The last thing I would do is buy a condo or buy a home in a lesser area of Silicon Valley. I know the area inside out and you are going to have major opportunities in a few years to buy a beautiful home.

Good luck,
J
0 votes
Alan Bologlu, Agent, Los Altos, CA
Fri Sep 26, 2008
Good Day Sai,

There are always alternatives.

Cupertino is fairly well protected in these challenging economic times. Negotiation is key and you need to make sure you align yourself with realtor who has a strong background and solid strategy.

If you are interested in discussing things in detail feel free to contact us at anytime .
Web Reference:  http://www.campiproperty.com
0 votes
Nina Daruwal…, Agent, Cupertino, CA
Tue Sep 23, 2008
Hello Sai,
Just my thoughts/views......
1. Is the condo big enough to comfortable house the six members of your family? 2600sqft seems good, but how many beds/bath, and does that meet your needs??
2. What are your personal preferences in terms of Condo, v/s A Single Family Home? Is it better for your personal lifestyle ( both full time working couple?) to live in a Condo, where most of the outside maintenance, atleast is taken care of? There will be some lawn/space for kids to play....does the place have a clubhouse, gymn etc? I would be happy to come help you check it out, and negitiate on your behalf!
3. It is obvious you would like the schools attached to this place, so unless you are flexible in finding a Single family home in another Cupertino school area, I have yet to find one for a million dollars in the MV area. Next best bet is a Townhome or then a Condo.
4. In saying so, buying any home in Cupertino, specially with MV, you cant go wrong! Yes, you have reservations, so will the future Buyer of your place, but if guided well by a good Realtor, who will take the time to fully understand your personal needs, you should make the choice that is good for you!

I live and work at Coldwell Banker, Stevens Creek and Mary Ave, in Cupertino, my kids go to schools here....and I know my City very well. I can guide you through the process of purchase well. So, please check out my website at http://www.ninadaruwalla.com and do contact me, lets talk! I am also a Public Safety Commissioner with the City of Cupertino.
Be well and safe, regards,
Nina
Web Reference:  http://www.ninadaruwalla.com
0 votes
CJ Brasiel, Agent, San Jose, CA
Mon Sep 22, 2008
Sai -

The condo vs single family detached home becomes a discussion of lifestyle. In that price range, I am sure you can find a good size detached home for the family of six. If no one like yard work, then a condo may be the right choice. Assuming there are kids in the family, take in consideration where they will play or hang out. The condo is a limited size. Is there a detached home that has opportunities to expand?

From a re-sale there appears to be no predictable decrease in the demand for Monte Vista schools. With the technology hub and good schools, I am sure it will not be difficult to re-sale.

Negotiation is more important now than ever. Strategy with an agent on all the items of an offer will help make the most of your dollars. Assistance with closing cost from a private seller with equity may allow you to get into a larger single family home. It is worth a try!

Good luck,
CJ
0 votes
Mario Pinedo,…, Agent, Cupertino, CA
Mon Sep 22, 2008
It is a good price per square foot. And if you want the kids to go to those schools - awesome as they are - then the solution would be the condo in Cupertino. That being said, it will be a tough resale. The same thought processes that you are going through (ie: how much can we discount the price? it is a good investment, etc) the buyer of your condo will go through. And when buyers do this, it eliminates many of them and makes the rest make lower offers. The question is, is it worth the risk to you? I cannot answer that. An offset - i would suggest, would be an older townhouse unit with a garage. The two story townhouse style unit and the garage parking, go a long way to acceptability amongst many buyers in that market.
0 votes
Vicky Le, Agent, Cupertino, CA
Mon Sep 22, 2008
Cupertino is renowned for its great schools and family oriented community. Even in this down market, Cupertino is still on top of its game with great demands/multiple offers, especially in Monta Vista school district. It's definitely worth buying in Cupertino right now b/c we are still in a buyer's market, a great time to negotiate. Prices on a brand new condo from a builder are usually non-negotiable, but you can negotiate on buyer's incentives for free upgrades or credit towards buyer's closing costs.

As for condo vs SFR, there are more resale value in a SFR then in a condo. There are definitely a clear advantage of owning a SFR over a condo, but you have to decide what is best for you and your family. A family of 6 will be more comfortable in a SFR than a condo. There are a few 3-4 bedrooms SFR in Monta Vista for under $1.2M. It's definitely worth checking out before you decide to go for the condo.

Feel free to contact me if you would like a showing on these SFR in Cupertino.

Vicky Le, Realtor
Intero Real Estate
Office: 408.342.3085
Email: vle@interorealestate.com
0 votes
Susan Fagin, Agent, Los Gatos, CA
Mon Sep 22, 2008
If you are an all cash buyer or can qualify for a mortgage - I would absolutely say the condo is worth buying. Cupertino is one of the areas of Santa Clara County that continues to hold and/or gain value year after year. You will not have a problem selling a property in Cupertino feeding into Monta Vista HS. Hope this helps.
0 votes
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