SF Bay CA Real Estate

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Will YIMBY Create Increased Condo Demand?

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A recent look at YIMBY vs NIMBY said that a person’s attitude about high-density housing was strongly affected by how urban centers were widely viewed when that person was about 18. Boomers were about 18 years old at a time when urban centers had numerous problems reported. When other generations were 18, urban life was viewed as having more activities, parties, and nightlife. Other generations were 18 when suburbs were claimed to be resource-wasteful and caused excessive ecological damage.

Currently Silicon Valley house prices are growing faster than Silicon Valley condo prices. This could be due to a different proportion of renters vs owners for condos vs. houses. It could be due to houses typically being larger than condos.

It should be noted that increased mortgage interest rates have increased the cost of buying a condo. Flat prices do not mean demand is falling.

Will the attitudes of new generations drive the demand for condos and thus their prices up? More discussion is posted at https://julianalee.com/blog/nimby-yimby-condo-demand/

Real Estate Agent Commission

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In 2024 it became necessary for a real estate agent to get a written agreement with a potential buyer before they could tour a home with them. Claims had been made that sellers were forced to pay a commission to the buyers’ agent and that buyers should pay for their own agent. In Silicon Valley the default was that sellers pay all commissions but the sellers have had the choice how much to pay or even if they pay. Most sellers understood that a real estate agent is trying to earn money and is going to avoid working for no pay and accepted the default arrangement.

A benefit of the seller paying all commissions is that the buyer does not have to use his cash to pay a commission which would reduce how much he has for a downpayment. Having a larger downpayment enables the buyer to qualify for a larger loan and thus be able to purchase a more expensive home.

Home buyers are accustomed to not making any commitment until they are ready to make a purchase offer. Real estate agents representing buyers now have to overcome the buyers’ expectations. This could lead to lower commissions. It is likely that experienced agents who typically represent sellers will gain an even more advantageous position over buyer agents due to the reluctance of buyers to sign an agreement.

The written agreement between the buyer and their agent must specify the agent’s compensation (commission) and the length of the agreement. It should also describe the services the agent provides. Typical services would be finding properties, showing properties, analyzing property values, and preparing and submitting purchase offers.

Many home buyers believe they can find the home and don’t need any assistance doing that. The median days on the market, DOM, for Silicon Valley homes for sale is about 10 days. For Belmont homes the median DOM varies significantly but is about 9 days. Even with the available automated alerts, it could be challenging for a home buyer to respond in time for a newly offered home.

Although detailed up to date plots of Silicon Valley real estate trends are publicly available, the understanding gained from the daily professional involvement of a real estate agent is only available by working with an active agent.

Burlingame House Price trends

Many of the trend plots publicly available are simply republished plots created by the Multiple Listing Service. A handful of Silicon Valley real estate agents create more informative plots of Silicon Valley and Burlingame real estate trends.

Burlingame Days On Market (DOM)

Building “Affordable Housing”

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Does the need for more housing that is affordable mean simply low-income housing? Projects that are being proposed focus on building small condos as the path to creating more affordable housing. That does not address what most residents want. If you look at the Santa Clara house prices vs. Santa Clara condo prices, you will see that the price of houses has been growing faster than condos. In fact, the price of condos has been essentially flat since 2018. The increase in mortgage interest rates would imply that recent condo buyers have higher payments but the demand vs. supply for condos is less than the demand vs. supply for houses, judging by price trends.

Reducing government fees and regulations is rarely done. Adding more fees and regulations is unfortunately the path our different governments take. Making housing more affordable is about removing costs, not adding them.

If our governements simply changed regulations to allow higher density housing, builders would probably mostly ignore studios and one-bedroom units and instead build three or more bedroom units. Doing that would make it easier to recover the building costs and would actually drive down the cost per square foot. (Kitchens and bathrooms are much more expensive to build than bedrooms.) Regulations that encourage building larger homes sounds like the government is helping those who are better off at the expense of those who are less well off, but is a studio condo or even a one bedroom condo appropriate housing for a family?

Is adding more regulations and spending more tax dollars on small housing units creating more housing that is affordable for families?

Price Appreciation vs DOM

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Although home buyers and home sellers should know days on market in order to make decisions, DOM is not a good way to predict house price appreciation.

House price appreciation in Sunnyvale has differed significantly from that in Daly City.

Days On Market has been low in Sunnyvale since 2012.

Although Days On Market in Daly City has had more volatility during 2023 and 2024 than Sunnyvale, it has also been low since 2012.

Days On Market does not appear to be a good indicator of house price appreciation.

From https://julianalee.com/blog/median-days-on-market/

Median Days On Market

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The roughly two-year-long pronounced difference in house price growth between Santa Clara County and cities near San Francisco invites us to examine other trends.

The volatility of “days on market (DOM)” makes it a trend that is harder to use when looking for changes in real estate trends. DOM is an important attribute to look at, however. It is what sellers, buyers, and agents feel. DOM is also widely available for Silicon Valley cities because our local MLS’s publish it and when listing agents begin listing a new home for sale, they will almost always look at it and share it with their home seller.

DOM has been quite low for Daly City houses since the beginning of 2023 up to the present (Dec 17, 2024). Even the median DOM shows significant volatility during this period, varying from about 11 days to almost 20 days.

Now look at DOM for a Santa Clara County city such as Sunnyvale. The median days on market for a Sunnyvale house has barely moved from 8 days to 7 days from the beginning of 2023 up to the present (Dec17, 2024). The median DOM had been low between 2012 and 2022 but showed noticeable volatility.

It would be easy to conclude that home sellers, home buyers, and real estate agents have good agreement for how much each house can be sold for.

What we see in Sunnyvale during this period is that 70 to 80 percent of houses are selling over list price, and the average sales price to list price has varied between 105% and 112%. It should be noted that average and median Sunnyvale house prices are very close to each other. The initial expected price does not seem as consistent as the agreed-upon price between seller and buyer.

It is hard to draw any conclusion about Sunnyvale’s (and several other nearby cities) median DOM other than that both home buyers and home sellers believe the best price can be reached within one week. Homeowners, whether current or prospective, have widely varying expectations and knowledge. It would appear that the real estate agents involved are providing information that is effective in reaching an agreement. The same does not hold as strongly for cities near South San Francisco such as Daly City. No connection is seen between DOM and house price trends at this time.

Can Protected Trees Be Removed

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Cities enact their own tree protection ordinances, which are specific to that city. A long-time Palo Alto resident recently posted about his protected tree removal attempts to force his neighbor to remove Coast Redwood Trees whose roots were damaging his foundation. We reached out and talked to him for several hours. One of the points that came up was that the city department in charge of managing protected trees apparently enacted regulations to appease the local tree preservation group Canopy. After two years of court cases and numerous discussions, the owner of the damaged house was left with the understanding that the city expanded its protection to other tree types and sizes to appease Canopy, reducing the organization’s opposition to the removal of specific trees. Even if you believe you understand current removal regulations, don’t assume you can count on them.

The owner of the damaged home had an especially difficult battle because a local realtor indemnified the recent buyer of the property which the trees were on, telling him, “according to information I have, this won’t really be a problem” and that if it were a problem, he would pay for the removal of the trees. The real estate agent used both his in-house legal team and an outside legal time in an attempt to shield him from the fallout of his agreement with the buyer.

Palo Alto’s Tree Removal Process (Residential)

A “Tree Permit” must be obtained from the Urban Forestry Section of the Public Works Department. The application must include a report by a certified arborist.

The allowed reasons for removal are:

  • The tree is dead, is hazardous, or constitutes a nuisance under PAMC 8.04.050
  • The tree is a detriment to or is crowding an adjacent protected tree
  • The tree is at risk for retrenchment or other tree decline coping processes or does not conform with right tree in the right place principles.
  • The tree is impacting the foundation or eaves of a residence or any covered parking required under PAMC Title 18

If a new home is going to be built two other reasons are listed:

  • The tree is so close to the proposed development that construction would result in the death of the tree, and there is no financially feasible design alternative that would permit preservation of the tree, where financially feasible means an alternative that preserves the tree unless retaining the tree would increase project cost by more than twice the reproduction cost of the tree or ten percent of the given project valuation, whichever is greater.
  • Retention of one or more trees would result in reduction of the otherwise-permissible buildable area of the lot by more than twenty-five percent, and there is no financially feasible design alternative that would allow for preservation of the tree(s). For the purposes of this subsection (a)(2), a financially feasible design alternative means a design alternative that preserves the tree(s) and would not increase the project cost by more than twice the reproduction cost of the tree(s) or ten percent of the given project valuation, whichever is greater. All tree protection zones impacting buildable area are included in the reduction of buildable area calculation.

When the City receives the protected tree removal permit, they will send out a Protected Tree Removal Notice and send it out again when a decision is made. The notice must be posted on the property for 14 days before removal can begin.