It occurs to me that with all this muttering about how “foreign investors” are driving up prices these days, and about how you need to be a Silicon Valley homeowner with plenty of equity to buy in this market, it might be useful to see who, in my experience, is buying now.
So I’ll look at my own fourteen sales over the past twelve months. We’ll see if the buyers were “foreign investors” leaking cash as they walked through open houses. We’ll see if they were previous home owners dripping with equity, or first-time newbies. If they were using equity from the sale of their home, we’ll see if the home was located in Silicon Valley or in some far lower-cost market (which is virtually every market) since this will affect the amount of equity they have. Note that twelve of these buyers were my clients, while two were buyers of my listings.
You statisticians in the audience will notice that exactly 0 percent of those fourteen buyers were “foreign investors”.
Eight of fourteen (57%) were foreign-born. I threw this in to check my hunch that the motivation needed to buy a home in Silicon Valley these days is similar to the motivation needed to compete with hundreds, thousands or millions of others for another scarce resource called education aka “opportunity”.
Nine of fourteen were previous homeowners–aha!–but just seven of fourteen were Silicon Valley homeowners. Still think current homeowners have the edge in buying, particularly if they own in the Valley? Let’s turn this statistic around: 36 percent of these buyers were first-timers, virtually identical to the 38% national average according to a National Association of REALTORS survey updated this July. The historical average is 40%. Doesn’t look like first-time buyers are faring that badly, at least if they’re willing to adjust their expectations. A good agent helps too.
Half (six of twelve) of my buyer clients got a home on their first offer. Interestingly, only five of fourteen buyers had to compete with other buyers, although the two clients of mine who made pre-emptive offers (the third was made on a listing of mine) would almost certainly have faced multiple offers had they not made pre-emptives. And certainly the one buyer client of mine who bought off-market–a Palo Alto SFR, no less–would have faced competition.
So what does all this suggest?
- The effect of “foreign investors” may be overstated, at least in the markets in which I typically work and in which you typically buy.
- Foreign-born home buyers–people who’ve been here for years, often coming for advanced education, and U.S. citizens in every case I know of–make up a significant proportion of today’s successful home buyers.
- Yes, it does help to already own Silicon Valley real estate, although to me this is an incentive to get into the market, not to sit it out. If you want to go to the dance, buy a ticket. But I also think that part of their advantage is experience: buyers with homeownership experience know that local real estate is good to you–often very good to you–over the long run. This takes the unreasonable fear out of buying a home.
- You don’t need to spend a year making offers to get a house in Silicon Valley. In fact, half my buyers got their house on their first try. Of course, their agent may have had something to do with this 🙂
The executive summary? You don’t need to be a foreign tycoon or a long-time homeowner to buy in Silicon Valley.
copyright © John Fyten 2015