Silicon Valley home sales go to extremes
Soaring prices echo California’s equity wealth gap
The turkey was done, or getting close.
So my Aunt Mimi and my Aunt Marie opened the oven to take a look, and decided to lift it onto the counter for closer inspection.
The turkey had other ideas. It jumped out of the roasting pan and skidded across the kitchen floor as if it was trying to escape.
That was in Sunnyvale, which sits in the heart of a Silicon Valley that did not exist when I was a kid. My Uncle Pete was a mail carrier, my Aunt Mimi was a homemaker, and they lived only a mile or two from where, three months ago, a house sold for nearly $800,000 above the asking price.
The coming holiday reminded me of the turkey, and it reminded me that I meant to find out more about that house. As I wrote at the time,
the three-bedroom, two-bath ranch was listed for $1.68 million and sold, in a bidding war, for $2.47 million.
According to sales records, the property tax at the time of the sale was just above $1,500. Not per month. Per year. Thank you, Proposition 13.
The annual tax bill was so low, I figured the previous owners had lived there a long time. So I called the listing agent to see what I could find out.
Dave Clark, a Keller Williams agent who’s been in the business for 30 years, said the house had only one owner prior to this year’s sale. A couple bought it brand new in 1963, raised two kids and held onto the house until recently, when the gentleman followed his wife in death and their son and daughter sold it.
“I think they paid around $25,000,” said Clark. “So it went up in value about 100 times.”
That’s astounding. But median incomes, unfortunately, have gone up only about 10 times over the same period.
Incomes at the top of the pay scale, meanwhile, have exploded. An op-ed in the L.A. Times last week said Jeff Bezos, Bill Gates and Warren Buffett have more wealth than the bottom half of the country combined. The op-ed, by Chuck Collins and Josh Hoxie, said today’s 400 richest Americans are 10 times richer than 1983’s richest people were, but median family income has declined in that time.
For working folks in California, flat wages and housing scarcity — which drives up prices — are at the center of the affordability crisis. People are forced to live farther from where they work and pay ever-increasing percentages of their income on housing, which leaves less for education, healthcare and everything else.
My Uncle Pete, long deceased, wouldn’t be able to buy a house anywhere near Sunnyvale today on a mail carrier’s salary. News about working people living in RVs and cars has become routine in Silicon Valley, including a recent story about a San Jose State University professor whose home is her vehicle. Meanwhile, nurses, teachers and laborers are commuting great distances.
“Every day, people are on the road for an hour, two hours, each way. We’re wasting so much talent and skill, and the disparity in income is just ridiculous,” said Clark. “The government’s job is defense, and building roads and schools. But another part of the government’s job is income distribution, and too much of it has gone to the superwealthy.”
Clark said it used to be that the areas with the best schools got the highest real estate prices, but now short commutes are just as coveted. That means there’s gold in Sunnyvale, which is not far from Google, Apple and Facebook.
“The buyers are almost always in high tech and they have good incomes, but not unbelievable incomes,” said Clark. “What enables them to buy houses is their stock options.”
In September, when the house sold for $782,000 above asking, dozens more sold for at least $200,000 above asking. Clark said that trend appeared to have been stabilizing, but he just had another big week.
He sold a house, also a three-bedroom in Sunnyvale, for more than $600,000 above asking. It was listed at $1.88 million and sold for $2.55 million.
“It’s in escrow,” Clark said, and the story gets crazier. Clark said he sold that same house in May 2014 for $1.54 million. So the house went from $1.54 million to $2.55 million in just 3 1⁄2 years.
This kind of equity, by the way, is a huge source of wealth among Californians lucky enough to own houses, enjoy the benefits of Proposition 13 and mortgage deductions, and then sell to the highest bidder.
In a column coming soon, I’ll give you more on that topic and how equity wealth could help finance more housing for ordinary working folks. But I’ll give you this little teaser now:
People with current mortgages in San Jose, Santa Clara and Sunnyvale are sitting on more than $239 billion in equity, according to Frank Nothaft, chief economist at CoreLogic.
Clark, the real estate agent, put me in touch with Bill Malcolm, an Irvine lawyer who grew up in the Sunnyvale house that sold for $782,000 above asking.
“It was absolutely amazing,” said Malcolm.
When he has visited his old turf, Malcolm told me, “what has plagued my thoughts” is the question of where regular folks are living. “When I go into the Safeway or the gas station or Costco, I think, ‘How do these people afford it?’ ”
Malcolm thought about holding on to the house he grew up in, given soaring prices, but said his parents would be pleased that it was sold to a couple with three young children. For $2.47 million. And exactly how much did Malcolm’s parents pay for it in 1963? The price, he said, was $27,500.