How much does it cost to build a home in Silicon Valley? (2016)
themiyoung.com
themiyoung.com
That would be also based on replacing the existing structure, which is single-story, no basement.
What almost always happens when an older house is sold in this area, is that the property sells for between 1M and 2M, is immediately scraped and replaced by a two-story-plus-full-basement (with home theater and au-pair apartment), which then sells for 6M-8M with a profit of circa 1.5M.
I found an up and coming architect so my design fees were substantially less than my GC fees... by about 8-10x.
> I know people who GC the projects themselves to save a great deal of money.
Do not do this unless you know what you're doing. One bad contractor (and you will be hiring many) can trash the whole project. The value of the GC is that he brings a stable of quality contractors that he knows and works with.
I've gone both ways, it really depends on the situation.
I live in the pacific NW where there are a lot of old craftsman style homes. High quality woodwork details is the theme.
I started by calling high end custom furniture shops and asked them if they could do built in cabinetry work. They did not, but they recommended a number of woodworkers that moved on from furniture into contracting (carpentry, custom window sashes, storm windows, etc...).
Then, I asked them what GCs they have worked with in the past and which they would recommend.
A few names came up often, I spoke with them, picked one, and was really happy with the work.
I guess the tl;dr is, good GCs use highly skilled subs, so find the subs then ask which GCs they recommend.
2. If you've run out of people to chat up, try going to your city's build permits department and see which builders have been getting permits in the last few years. Not a guarantee of quality, but gives you a list to interview.
3. Ask for referrals from your architect or engineer. And then ask the referrals for references.
But even if you do this, finding a good GC in Silicon Valley is very hard right now.
I tried getting contractors to bid almost a year ago. From 25 calls/emails, I got replies from about 8. Of those, half said some variant of "sorry, too busy to take on new projects right now."
I can't imagine how much crazier it'll be this year with the hotter housing market and the added demand for rebuilding after the fires.
Maybe I'm getting my numbers from the wrong place.
Really senior engineers can certainly make more; 500k for a top 10% performer.
For reference I just got my tax statement for last year and I’m over 300k.
More likely, you can afford a $1m mortgage on a double income of $150k which, IMO, is a lot more common.
The reality is that a lot of people (single and married with kids) rent with the hopes they will be able to afford a mortgage.
Maybe a different region would have better balance, even at lower pay. I know people who own a newly constructed, large house with a garden, two cars, and raise kids in Romania on a meagre salary compared to yours. In the Bay area most of the profit and hard work goes to pay the exorbitant housing prices - just making the landlords and constructors rich.
Reminds me of Andrew Ng who expects "70-90 hours a week" from his employees, and is talking up "importance of velocity" with his new fund. That's 15 hours of work per day and one day off per week. Crazy! Why bother to do that, it would be a disaster for balanced life. (https://techcrunch.com/2018/01/30/andrew-ng-officially-launc...)
It's a bit tight at the beginning, but since salaries seem to be increasing at a crazy pace, and your housing costs would be locked in, it gets easier in a few years. Or everything goes to hell, and at least California is a no-recourse state, so at worst, you can walk away with ruined credit and no further obligation to pay.
For example, today there are only 44 homes (3+ bed, 2+ bath) in Sunnyvale [1]. That means you need only 44 successful bids to cover entire Sunnyvale market. Now consider number of E5/L5 SWEs in FB/Google and their equivalents across LinkedIn, Microsoft, Apple etc. Also consider double income couples where one person is somewhat junior with a spouse contributing further to gross family income. Also consider other high paying roles in similar companies like Product Manager, Sales etc. There would be thousands of families passing the bar of 300-400K gross annual income.
It is in fact a surprise that median price of those 44 homes is less than 1.3M [1], given the proximity of Sunnyvale to all these companies. Home prices are really determined at the margins of income distribution and not at the averages.
[1] https://www.redfin.com/city/19457/CA/Sunnyvale/filter/min-be...
There are also some other factors which tend to push up Bay Area home prices. Due to building restrictions, the market for homes is undersupplied. Due to prop 13 and the nice weather, people are less likely to leave even if they don’t need to be here for work anymore. So the market for homes is not very liquid and prices are sort of a one-way ratchet (barring economic meltdown). Really, only the top 10-20% or so of earners are in competition to buy a single family home at all in the area, and that number is shrinking.
Consider a random engineer at Google who bought their home seven years ago for $1M and it’s now worth $2M, while they paid off the mortgage with their RSUs. This person is no bigwig, but they might get approved for a mortgage on a $5M house and afford the down payment no problem.
This is the Dir/VP/EVP + founders + high equity;low digit employee id exitors.
Like, I'm curious what drives the demand for homes in the ~$2M range in the bay area, if it's not the general software developer who's able to afford it.
My grandmother's home and my childhood home, both in Cupertino, just sold for upwards of 2.5 mil each to all-cash buyers. I can't verify the foreign money aspect for these sales but people I have worked with who have left the valley in the last few years indicate it is quite common. I left silicon valley nearly 10 years ago now but was born and raised in Cupertino.
I'm going to temporarily ignore the "superexpensive" properties, which I'll arbitrarily define as over $4M in SV. That's a different market... for the "global jet-set." Or the people who were the first X employees at a startup with a real liquidity event (and their founders treated them fairly).
Down on the valley floor, $1-3M is within reach of a lot of people in tech, especially double techies. (If you've been here since before the last 2 booms, you've got even more going for you.) Most big tech companies (FANG) stock is way up... Take that as a downpayment... multiple it 2,3, or 4 times and voila.
Markets that have really been hit by foreign money are Vancouver [1] and certain neighborhoods in Los Angeles [2].
Having been to those places (for extended periods of time), I can say SV doesn't feel like those to me.
One last bit of anecdata: I know of one house in SV that received at least 7 offers in the past month. Only 1 of those 7 was all cash foreign money... but they weren't the high bid. 5 other "locals" with loans had higher offers.
[1] https://betterdwelling.com/city/vancouver/foreign-buyers-45-...
[2] https://www.bloomberg.com/news/articles/2014-10-15/chinese-h...
The margins. The actual numbers of homes turning over at such prices is miniscule.
But this home was estimated north of $6M
"The total cost would be $6,562,500."
At least that is the way it works here in Stockholm where $1M houses frequently are bought by people with way lower salary than 180k, often not even 180k combined in the family. However, prices here are very inflated and rates are super low.
30% of $8500 is $2500. You can live very comfortably on $2500 a month if all your housing costs are taken care of.
More seriously, in general single-family houses should be on the order of 1000–2000 square feet. The rest is typically a complete waste (nobody I know who has a 4000+ square foot house actually uses most of the space – people with real on-site wood shops etc. put them in a separate space detached from their home, not in spare bedrooms), and serves to isolate households from each-other, force a car-centric lifestyle, drive up housing costs for everyone and force people working essential menial jobs to live far away and commute long distances, cost much more public infrastructure than denser alternatives, etc.
I have a several rich programmer friends (early facebook or whatever) who bought outrageously large houses in Silicon Valley as a status symbol, but work all the time, eat out every meal, and only go home to sleep. What a tremendous demonstration of unthinking excess.
You could turn a garage into a wood shop though if you don’t have a particular need to store your car in a garage.
The point of a large home is to turn it into your own personal oasis where you can spend days at a time without ever really needing to leave, and without feeling bored. The thing is, many people just don’t know how to live in a big house, because they spend so much time in cramped quarters until they can afford a home. A big house is all about features. Every room is an opportunity to have a space dedicated for something, if not for sleeping. Mindless excess is dumb, but thoughtful excess is amazing.
My godparents’ family lived with a dozen people in a few mud-brick + straw roofed rooms probably totaling 500 square feet, plus some outdoor space between buildings. Now that’s cramped.
> The point of a large home is to turn it into your own personal oasis where you can spend days at a time without ever really needing to leave, and without feeling bored.
In my opinion that is a depressing vain and wasteful way to live. YMMV.
The design and layout of a house is so much more important than just the sq ft. I wish more people would focus on that. We have a really well planned out 1500 sq ft. house and we have literally more usable rooms and space than many people I know with houses more than twice the size.
How many households are pulling this kind of cash down? Is that a common salary at a big tech company? Maybe for CxOs but not for run of the mill Director-level middle management.
Account for the fact that 2 million is much more attainable than 3, and based on income alone you get pretty close to 100k households.
Many people also store their assets in real estate. Add those in (people selling their old house to buy a new one), and you are definitely above 100k households able to afford a 2 million dollar place.
Even as is, we have an attainable 5 year plan to buy a home at the lower end of the listed range without being stupid.
I can either spend next 15 years, hoping that tech market doesn't crash again and using my SWE salary to pay off property taxes and mortgage on a crappy SV house, making rent-seekers of all sorts rich...
... or I can pocket the money, and be financially independent when I'm 35-45, and spend rest of my life with family and working on interesting open source/business projects of my choosing.
Tough one.
5k would need a 10k lot in palo alto. A 10k lot in palo alto goes for 3m to 5m depending on neighborhood.
So , yes, it's nuts.