What kind of markets have appreciated the most?

Wouldn’t it be great to know which Silicon Valley cities and neighborhoods have appreciated the most in the last twenty-plus years?  Better yet, wouldn’t it be great to know which types of Valley cities and neighborhoods have appreciated the most over that period?

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Let’s take six real estate sub-markets in the same area, West San Jose, and see how they’ve performed since 1994 over three booms and two busts.  Commute time, almost always a concern with home buyers, varies slightly among these six areas, but not enough to be a big difference-maker.  The real variables will be neighborhood quality (although unless noted this is fairly consistent among these areas), a hip downtown or lack thereof, and perceived school quality as suggested by test scores and school ranking websites such as GreatSchools.org.

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First, a quick thumbnail of each sub-market’s main selling point(s) (for more detail see West San Jose):

  • Bascom Gardens:  affordable and consistent
  • Cambrian:  affordable good schools, but a little further from the job centers
  • San Jose with Campbell schools:  fairly affordable, has some of the more highly-regarded K-8 Campbell schools
  • San Jose with Moreland schools:   also fairly affordable, also has highly-regarded K-8 schools
  • Willow Glen:  generally more upscale, has a popular downtown, perceived school quality varies by neighborhood but many are highly-regarded
  • San Jose with Cupertino schools:  consistently pleasant neighborhoods but who cares? it’s the schools that are the big–huge–draw, all the way from K to 12.

Okay, you’re dying to know which area turned out to be the best “investment” (I really don’t like to use this word when evaluating owner-occupied housing):  it was San Jose with Cupertino schools, with a nearly 500 percent increase in average sales price from 1994 to mid 2015.  The rest returned a “paltry” 300 percent +/- appreciation over the same period, except Bascom Gardens at about 269 percent.

If you’re the typical Valley home buyer you’re probably not surprised that San Jose with Cupertino schools, considered by many to be one of the best, if not the best, elementary districts in the area, out-performed.  It’s also the only area here that has highly-regarded schools all the way through high school; that’s hard to find, and you pay dearly for it when you do.

What’s really interesting to me is that in 1994 there was maybe a 34 percent delta between the most affordable area, Bascom Gardens, and the most expensive, San Jose with Cupertino schools.  Today there’s maybe a 100 percent difference.

Note that my thumbnail of Bascom Gardens didn’t mention schools.  The local K-5 for most of this period, Trace, doesn’t have the highest test scores or the greatest GreatSchool.org rating, although if you go door to door, as my clients did, you may find that parents generally like the school.  But no buyer has ever told me “I want Trace”.

So that’s the scoop:  buy the most highly-regarded schools you can.  At least if you think the next twenty years are going to be just like the past twenty.

copyright © John Fyten 2015

 

 

 

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