Wow, what a strong 2017 in terms of price appreciation and stock market gains – will it continue in 2018?

images-2

I wrote a post this time last year discussing uncertainty in the real estate and stock market post Presidential election, along with potential for increase in interest rates. Similar sentiments of uncertainties existed even 2 years ago. The uncertainties turned out to be unfounded as the S&P 500 appreciated EVERY month in 2017 ending at 19%+ higher than start of year. https://seekingalpha.com/article/4134832-stock-market-1st-90-years. Going into 2018, many Wall Street analysts predict the stock market to continue rising, albeit not quite as rapidly as last year. https://www.cbsnews.com/news/can-stock-market-in-2018-possibly-match-perfect-2017/. So what does that mean for real estate?

Our current SF Bay Area real estate boom roughly started at the end of 2012, which has now spanned more than 5 years. The bubble burst occurred approximately 2008-2011. As my BS and MBA degrees were in finance with heavy dose of economics, I recall that the financial and real estate markets over the course of history generally run in full 7 to 10 year economic cycles. We are currently right in the middle of this time span, but yet there are not many indications of an impending slow down.

images

Two years ago, I wrote about unicorns – how private company valuations do not necessarily represent liquidity events for a high majority of non-founding employees of these companies. https://taosiliconvalley.com/2015/12/15/the-epic-story-of-unicorns-and-dragons/. With that being said, many investment bankers and financial pundits do forecast some of these unicorns to go public in 2018. https://www.marketwatch.com/story/ipos-in-2018-here-are-six-tech-companies-that-could-go-public-2017-12-26. Many of these potential IPO companies are based in San Francisco, Peninsula or South Bay. Should even a few of these companies go public, we can expect some thousands of employees unlock previously illiquid paper wealth into cash that will motivate some of them to enter the real estate market, upgrade houses and/or buy investment property. This would have a material impact on real estate demand, and thus valuations.

My most popular blog post titled “Microeconomics for Real Estate 101” is the #1 ranked Google search result if you type Microeconomics Real Estate! Search Engine Optimization (SEO), baby…and I didn’t even try! 5 years later, same dynamic of a) strong demand and b) tight supply yield consistent price appreciation. For example, in Belmont and San Carlos, two appealing cities with top public schools, great location and strong community (as of January 23, 2018), there are only 13 single family residences (houses) Active in MLS at all prices. What if you are a 1st time buyer under $1.5 million? There are only 2 (yes, not a typo, two) houses listed under $1.5m across 2 major cities in the Peninsula.

For the last 2-3 years or so, EVERY buyer client of mine asked if they are buying at the peak of the market. No one has a crystal ball and can predict with certainty. We all have our personal predictions/opinions of course. It’s tough on 1st time buyers looking at historical price appreciation of properties in the SF Bay Area. I always like to fall back on my own personal situation. Back in 1999, we were looking to purchase our 1st house in mid-Peninsula. We outbid many other buyers and were paying record prices for a small house. I told my wife that we may be buying at the peak of the market, but that the Bay Area would be our long-term home; regardless of whether the market goes down in the near term, I was confident over the course of the medium to long term, Bay Area real estate would prove to be a great investment. We ended up buying a larger house in the area, and sold this original house in 2005 with an ROI of over 400% (due to leverage)! The market had in fact deflated approximately 2001 but then came roaring back shortly thereafter.

The key to psychologically overcoming the SF Bay Area market is to view any real estate investment in the medium to long term. If you plan to be a SF Bay Area resident in the long term, is it higher risk to be in the market or out of the market? And keep in mind, unlike buying stocks, bonds, mutual funds and ETFs, you actually also gain enjoyment and comfort with acquiring property as opposed to financial securities. As always, anyone who wishes to talk real estate with me, ping me anytime.

 

Advertisements

2017 – the year of uncertainty with mortgage rates, stock market and the new President…

Average
1990 10.13%
1991 9.25%
1992 8.39%
1993 7.31%
1994 8.34%
1995 7.93%
1996 7.81%
1997 7.60%
1998 6.94%
1999 7.44%
2000 8.05%
2001 6.97%
2002 6.54%
2003 5.83%
2004 5.84%
2005 5.87%
2006 6.41%
2007 6.34%
2008 6.03%
2009 5.04%
2010 4.69%
2011 4.45%
2012 3.66%
2013 3.98%
2014 4.17%
2015 3.85%
2016 3.65%

The above chart is compiled by government entity Freddie Mac on 30 year fixed rate mortgages. See link for source. http://www.freddiemac.com/pmms/pmms30.htm. In November 2013, when mortgage rates went up to the low 4% range, I wrote a blog post on mortgage rates and highlighted key considerations for home buyers as well as offer historical and life perspectives on how to factor that into home buying decisions. I just re-read the post for 1st time in a few years, and I stand by all the key points mentioned. In fact, since it was published, rates for most of the last 3 years hovered below 4% and only recently increased to the low 4%. You can read my original blog post at https://taosiliconvalley.com/2013/11/08/mortgage-rates-have-risen-since-its-all-time-low-should-this-impact-your-timing-to-buy/.

As you can see, low 4% by historical standards is still incredibly low. I was cleaning out my garage last month and came across files from 1999 when I bought by first house. My first mortgage stood above 7% (yes, that is seven). No joke. Then when I refinanced later at 5-6%, I thought it was the lowest it would go, then refinanced again at 4-5%. Never during those times did I ever think it could ever get below 5%, let alone 4%. Two key considerations in today’s market would be 1) rates are still very historically low, 2) no one can completely predict where interest rates will go.

In my original blog post, I calculated payment differences on a sample mortgage based on an increase in interest rate. Will increase in mortgage rates affect average housing prices? Mathematically, yes. But there are other factors that also factor into housing prices such as local economy, supply and demand dynamics, stock market, and macroeconomic factors creating “noise” in housing prices.

This blogs most popular post was also from 2013 titled Microeconomics 101 for Real Estate. This post actually gets quite a bit of traffic, as if you Google “microeconomics real estate” my blog shows up in the #1 slot of Google results! SEO traffic baby! So basically, supply in SF and San Mateo counties is very low. That is somewhat to be expected as we are only in late January, but historically we do start seeing more listings come on the market starting about now.

There also seems to be a sentiment of uncertainty with respect to a new President. A highly controversial President is probably creating  uncertainty as well. 

I don’t have a crystal ball on what will happen. I continue to tell my friends, family and clients that no one can predict what will happen to the stock market or real estate prices. If they could, they’d be able to take advantage of it in the markets and retire from it. I’ve read many economists predict that there will be higher interest rates and inflation in 2017. I certainly believe this to be a strong possibility. However, some predicted that last year too. What I am bullish on is the overall strength of our local Silicon Valley economy. Who knows what will happen in 2017 as there could be short term movements in real estate values and stock prices up or down? But if the SF Bay Area is a medium to long term home for you, my belief is it’s a higher risk to try to time the market perfectly and be out of the market than it is to jump in. In my very 1st blog post, I wrote about buying my 1st house in 1999 in San mateo where I thought there was a high probability I was buying at the markets high point. Wow, 20/20 hindsight and the thought that I was worried I overpaid is quite amusing. 

Here’s to a fruitful, safe and healthy 2017 to all.

The Epic Story of Unicorns and Dragons

Unicorns are everywhere in SF Bay Area! It seems like we read about new “Unicorns” being created every week. The mythical Unicorn is described as a beast with a large, pointed, spiraling horn projecting from its forehead. Ancient Greeks and other European folklore reference the unicorn throughout history. I even have a first cousin who built a hugely popular Unicorn propelled vehicle where he rides around at Burning Man, the Maker Faire and parks around Davis, CA drawing hoards of attention. We all love unicorns. But alas, I don’t speak of the legendary beast. I reference those privately held technology companies with private valuations of over $1 billion dollars labeled as a “Unicorn”. As tracked by the Wall Street Journal and Dow Jones Venture Source study, there are now approximately 116 Unicorn companies, including Uber, Snapchat, Airbnb, and Dropbox with a large percentage of them based on the SF Bay Area. Are Unicorns real or mythology? Does working for a Unicorn equate to wealth and happiness in life? And how does the Unicorn SF Bay Area economy translate to the local real estate market?

dragon

But have you heard of the growing “Dragons” within the mid-Peninsula? It used to be that there was only one Dragon in the mid-Peninsula, but now the Dragon community has grown to several more just the past year or two. Confused? Yes, the creatures with the serpentine and reptilian traits that may even spit fire and fly! Dragons are in Greek Mythology and prevalent in Chinese culture – sometimes in fierce settings and other times symbolizing wealth and power. Well, Dragons in this untold story are mid-Peninsula cities with houses that now command a minimum of $1 million for a small 1,000 sq. ft. or larger house (as defined as single family residence). Although these 1,000 sq. ft. houses are not large, they are highly appealing due to a great convenient location to SF and Silicon Valley in the mid-Peninsula, and have strong school districts. There is a small, but growing list of cities that I now call a “Dragon” city. Just 2 years ago, the only city that may be labeled a Dragon was Hillsborough. You can now add Belmont, Foster City, Burlingame and Redwood Shores to the list. Do note this categorization includes on SFR and not condo/townhouses that may be had for less than $1 million. By the way, I believe I just invented this new terminology, “Dragon”, which is probably why you have not heard of it before.

In Belmont and Redwood Shores, often linked together given the same highly ranked Belmont-Redwood Shores school district, a year ago had one last neighborhood of Sterling Downs/Homeview where fixer-upper small houses could be had for $850-900k. However, in 2015, the same small 2/1 or 3/1 1000 sq. ft. with 5,000 sq. ft. lot houses in the neighborhood were selling for between $1.0-1.2 million. The top ranked school district certainly has propelled Belmont prices in past few years. See my earlier post on Belmont at this link. https://taosiliconvalley.com/2014/06/17/why-belmont-housing-is-hot/

Up until a year ago, there were some pockets of homes in mid-Peninsula where there may have been a few under $1 million fixer upper houses, particularly in Lyon-Hoag, Burlingame Gardens and the neighborhoods between 101 and Caltrain tracks. However, Burlingame is firmly a Dragon now. In the past 180 days, there were 112 SFR properties sold in Burlingame and only 2 of them sold under $1.2 million ($1.06 and 1.198mm). Yes, the Burlingame Dragon is fire-spitting fierce.

Those who are familiar with mid-Peninsula might be asking why isn’t San Carlos or Menlo Park included as a Dragon? In San Carlos, there is one last bastion of houses that can still be had for between $900k to $1 million in the Clearfield Park neighborhood walking distance to Laureola Park. That is the neighborhood located between El Camino Real and 101 on either side of Holly street. Make no mistake, houses that are upgraded goes above $1 million, including a recent sale on very busy Holly street that went above that threshold. However, there have been some recent sales below $1 million for fixer upper 2 bedroom 1 bath around 1000 sq. ft. houses. So if you want to get into the San Carlos school district living in a house, you may consider this neighborhood. And in Menlo Park, right next to the Facebook headquarter campus, there is a neighborhood called Bellehaven that may have houses just below $1 million. Both of these cities may very well be a Dragon within the next year if the real estate market continues to appreciate.

There have been recent articles in the Economist discussing the Unicorn valuations and the difference between private company valuations vs. realities that many/most of these private companies never see true liquidity events for the non-executive employees to truly cash out, as well as the inflated private valuations that provide preferential structures to VC and PE firms as well as founders that ultimately dilute the common shareholder should there be a acquisition or future funding round or IPO.

http://www.economist.com/news/leaders/21679194-correction-startup-valuations-would-be-good-news-technology-sector-gored

http://www.economist.com/news/business/21677192-fable-unicorn-theranos-much-hyped-medical-startup-plagued-doubts

I have been lucky to be part of two great start-up companies back in my former start-up corporate life. I had been a VP-level executive at a high profile Internet company that went public in 1999 during the first dot com bubble and reached over a $1 billion market cap – this is 16 years ago when $1 billion was a really, really big number and impressive. Then, I held a senior position in 2007 for another high profile Internet company that sold to a private equity firm for $1.2 billion valuation which was one of the 1st companies to achieve a huge return for VC investors post bubble.

Although there was a nice financial gain in aggregate, in both instances the upside was severely capped due to stock being illiquid. One had a 6-month post IPO lockout, and the second had been bought by a PE firm who bought majority stake, with the minority stake and unvested portion remaining privately held. Eventually I found out the second Unicorn went through difficulties and company recapitalized with the value of my share holding down to zero; thus, I will now have a $3k capital loss write off for the remainder of my life recouping the AMT tax I paid to Uncle Sam over 7 years ago. Thus, as you read about all these Unicorns being created, just note that majority of non-executive/founder employees at these companies have not yet profited from their stock options.

uncle-sam

Why do I say I was “lucky” even though my private stock options never yielded the financial homerun that I held on paper? Three reasons. First, to this day, I am really good friends and business confidants with many of my former colleagues that I value more that money. Second, those were really fun formative years where I grew professionally and personally and felt I was part of something revolutionary. And third, those experiences in the high tech start-up world has allowed me a very unique perspective to the SF Bay Area real estate in a in strongly technology driven marketplace where I’ve “did it and done it” that allow me to adeptly navigate the competitive landscape of real estate.

On the real estate side, I have owned real estate located in the mid-Peninsula since 1999, and have seen huge returns. My clients who purchased properties in the past 5 years are obviously all extremely happy they are “in the market” now. I get asked nearly every week what I think the real estate markets will do in the near term. I have inclinations and my thoughts. However, no one can truly predict and time the market perfectly. Two considerations I like to provide is a) that if SF Bay Area real estate is a medium-to-long term hold (similar to the US stock market), over the course of time, the SF Bay real estate market has proven it’s ability to appreciate over the course of a 7-10 year economic cycle and b) particularly for 1st time buyers that unlike other financial investments, even in a downturn, at least the investment in a property can be enjoyed through day-to-day living and that provides some immeasurable intrinsic value.

So to my 1st question of whether Unicorns provide wealth and happiness – it can possibly create wealth, but it is not guaranteed and it can possibly provide some happiness but that is also not guaranteed. And I think most would agree that monetary wealth doesn’t automatically guarantee happiness.

Certainly, the technology industry creating Unicorns does have a direct impact to the creation of Dragons. Regardless, as they say, home is where the heart is; purchasing real estate in expensive SF Bay area is both a decision on financial investment considerations and creating a home to settle in. I suppose housing prices in this area is still lower than the cities in NYC, London, Hong Kong and Toyko; we may need to create a different terminology for those cities, but alas, I’ve used up all my creative writing juices.

r169_451x253_14254_Dragonhouse_2d_fantasy_illustration_dragon_house_children_picture_image_digital_art

Where’s the Beef? Er, I mean listings on the market more than 2 weeks….What does this mean for potential sellers?

Wheres-the-Beef1

The year was 1984, and a new Wendy’s television commercial caught fire.  An elderly lady with this raspy voice would yell into her telephone asking “where’s the beef?” to some competitor burger joint of Wendy’s complaining about the small hamburger size of their product.  I remember as a kid, everyone in school would use that line for almost any situation. “Where’s the beef?” catchphrase kept going for years after launch.

Current year 2015….over 30 years later…I was just looking at one of my MLS saved searches (on 4/17/15) – single family residence (house) listings Active on MLS in cities from Millbrae down to Palo Alto under $2 million list price that has been Active on MLS for 20 days or more. There are 12 cities in the search.  Guess how many houses there were?  75-150 might be a reasonable guess given the low inventory, high demand real estate market in the mid-Peninsula market.  There were only 25 houses that have been on the market for more than 2 weeks and not pending sale.  That equates to approximately only 2 houses per city.

Although I am not precisely tracking data by recording in a spreadsheet, I have had this internal MLS sort for approximately 4 years now. I do not remember another year, regardless of month of year, where SFR 20+ days in this mid-Peninsula area of 12 cities was able to fit on the 1st page of my web search. Properties sell within 1-2 weeks on the market given low supply and high demand. So, what does that mean for sellers and buyers?

For sellers, you may think this might be all great news.  Both yes, and no.  If you are seller moving out of the SF Bay Area, this should be great news.  Sell your house and be able to buy a bigger house for less money in nearly anywhere else in the US (NYC excluded). Even though other parts of the US also is showing strong appreciation with low inventory situation, it is unlikely to be at the same level as the SF Bay Area.

However, if you were a seller looking to purchase a bigger house in the same area, then there might be challenges. They are not insurmountable, but definitely trickier: 1) buy bigger house 1st if you qualify for 2nd mortgage or can purchase all-cash, then sell current home after purchase, 2) sell current house 1st, negotatiate rent back, and aggressively seek to find AND secure new house before having to move out with back-up plan having to move to temporary residence, and 3) buy bigger house 1st using alternative/hard money lenders, then sell current home after purchase and finally refinancing into traditional mortgage paying off alternative loan. Some other options exist, but those are most common possibilities.

As a seller, it may seem that you may need to do less work to prepare your house for sale. Yes, and No. That may be true to simply “just” sell the house. However, the best agents will still advise you on possibilities to be put your property in the best light to maximize your sale price. Because of my construction project experience, I almost always will talk to my seller clients about possible projects to do to the property prior to selling with some estimated rough range on cost and what the estimated ROI percentages will be on potential upside.  This provides a framework for my clients to decide if the wish to invest time and money into the house to potentially increase sale price. My seller clients really appreciate my outlining in detail their choices so they can make decisions even if they ultimately do the minimum required. Some agents will default to not doing any work or even convince homeowners not to do work, since they can get it on the market sooner and they still know it will sell and it requires less effort to them. Although timing is always a factor in the decision matrix, I believe it is still important for the homeowners to know their options and understand the risk/reward and possible financial outcome of each option.

As always, feel free to contact me if you wish to brainstorm anything related to your home.

 

Why I lectured some relatives about their smoke detectors over Thanksgiving…..

0205-fire-safety-pdf-5-728

I just returned from LA where I visited some relatives over Thanksgiving weekend. Good trip, great food and awesome weather. Some retired relatives have lived in their house for over 30 years. They’ve updated some items inside the house but other parts of the house have original details. One part of the house, they have unwittingly ignored is their smoke alarms. They do not work, and the smoke alarms are probably 10-20 years old – none of them have working batteries and it’s not certain the detectors even work at all. When asked why they don’t replace the batteries or detectors, they indicated that the ceilings are too high or that they simply forgot to do so. I spent the next 10 minutes lecturing them on the importance of smoke detectors/alarms and how dangerous it is to live without them.

In selling real estate, one of the California state laws require that “every single-family dwelling and factory built housing unit sold on or after 1/186 must have an operable smoke detector, approved and listed by the State Fire Marshal, installed in accordance w/the State Fire Marshal’s regulations….”  In fact, some local cities impose even more stringent smoke detector requirements. When I recently completed a bathroom remodel to my own house, the city inspector checked my house for working fire alarms and even instructed me to add a smoke detector to a part of the house before he issued the final approval. I was happy to comply.

As part of closing a real estate transaction, one of the disclosure documents that must be signed is a Certification of Compliance with Water Heater, Smoke Detector and Carbon Monoxide Device Requirement. Simplistically, the Seller/Owner signs the certification that they/the house is compliance prior to close of escrow. On the deals that I close as either the listing or buying agent, one of the real estate agents on the transaction ends up providing a working smoke detector on behalf of their client literally the day before close of escrow. Obviously, this is not the ideal scenario because it means the owner had been living on the property without proper working detectors previously.

Nowadays, it’s not just smoke detectors but also carbon monoxide devices. There are many brands that sell single units that detect both smoke and carbon monoxide.

The “chirping” of low battery life is annoying. Over the years, I’ve had to wake up in the middle of the night to dismantle the battery to stop and then procrastinate for weeks before replacing the batteries. I can only imagine the extra hassle it would be for an elderly person to carry a stepladder up the stairs and then have to replace batteries. Low and behold, they now make detectors that come with a 10-year battery life – hooray!

Smoke/carbon monoxide detectors are relatively inexpensive these days. You can see the link below from Homedepot.com that a combination smoke/CO2 detector with a 10-year battery life only costs $40. This investment now lasts for an expected 10 years and replacing the units is very easy. Below is a link for an example of one such unit.

http://www.homedepot.com/p/Kidde-Battery-Operated-Combination-Smoke-Carbon-Monoxide-Alarm-with-10-Year-Sealed-Lithium-Ion-Battery-21010262/204249510?N=5yc1vZbmgjZua

My relatives who I had to lecture were probably annoyed at me for the tone I took, but I am completely comfortable with having done so. It’s a safety issue, and I lecture only because I care and am concerned about their welfare. The only redeeming outcome of the exchange is that I now know what present to get them for the holidays. I will probably purchase nine new units and install if for them throughout the house. No, it’s not a fun gift, but one of necessity to all households alike. I don’t believe they read this blog so hopefully it’ll still be a surprise gift!

Have a fun, safe holiday season!

 

Are you Bearish or Bullish in Today’s Real Estate Market?

Bulle_und_Bär_Frankfurt

Recently I had a conversation with a local Peninsula friend of mine who I’ll call “Fred”. He is one of my go-to-friends for talking about the stock market, investment opportunities, technology industry, and general business topics. We hadn’t talked about the markets in over a year and compared notes about our opinions. He asked me how real estate was going and what my thoughts are of the current marketplace. I asked him his opinion of the stock market valuations and strength in Silicon Valley at a macro level. The local economy, stock market valuations, health of technology sector, regional job growth/decline, etc. are all strongly correlated with the current situation of local real estate markets.

My friend is a former law partner at a Tier 1 law firm turned technology executive of a company that went public several years ago who views business in a highly analytical fashion. Like myself, Fred has also been living in the Bay Area for 20+ years having been through the dot com bubble of 1999-2000, the subsequent bust of 2001, to Web 2.0 & subprime mortgages in mid-late 2000’s, then the economic depression thereafter, and the current surge of the technology sector, and real estate for the past several years.

There are similarities between 2014 and previous strong economic times in last 20 years.

  1. Early stage start ups getting VC funding thereby creating exciting opportunities for technical and even non technical labor offering attractive compensation packages of salary + equity
  2. Established Fortune 1000 players growing year-over-year, generating health cash flow, and reinvesting it in new jobs, capital investment, acquisitions to further stimulate the economy.
  3. Private equity/hedge funds/venture capital firms with surge of capital from insurance companies, pension funds, and endowments looking for attractive investment opportunities. Post equity investment or acquisitions, early employees often get an influx of cash that allows them to pay off debt, invest in equities, and/or buy their 1st home or upgrade houses.

A by product of all this is my observation of traffic on highway 101, airplane flights where there are rarely empty seats, and sub-contractors charging higher prices due to all the construction activity occuring.

Since I am in real estate, and given my financial background, I get asked all the time what I think of the stock market and real estate prices. Are we at a peak? How much higher can things go up? Is this the right time to buy/sell? The challenge is it is very difficult to truly time the market. For example, if someone believes there might be some technology stocks overvalued right now, that investor would want to “short sell” the stock. However, the risk is that even if the prediction of valuation is correct, it is hard to accurately gauge whether it will take 6 weeks or 18 months for the stock price to move in that way given the innumerable variables that factor into everything.

EconomicGreenfield-9-28-10-MacroMarkets-Projection-Chart

It is similar with real estate. I know a friend of a friend who around 1998 thought the real estate value was at its peak and they ended up selling their house to “time the market”, moved back with their parents with the goal that they would buy a bigger house at a lower price when the market correct. Unfortunately, real estate kept going up for several years and when they realized that they “timed” it wrong, they were not able to afford to buy back into the real estate market. What compounded it all was when they realized their mistake, they actually could have bought back in but would have had to purchase a smaller house than what they had before, but they kept holding out hope that they would eventually be right all the while the market kept running up in 1999 and 2000.

Neither Fred nor I really can predict what will happen. We certainly have some predictions and opinions on what is happening. But for me, I view my own house and my stock portfolio on a medium to long-term horizon. My stock portfolio goals is for capital appreciation in the next 10+ years that will serve to pay for my children’s college expenses and eventually my retirement. I seek out investment opportunities for companies that have strong fundamentals and will survive and thrive over time through recession and boom times. Same with real estate, I know I will live in the SF Bay Area for the long haul, and I wish to be comfortable in my own home. Regardless of my beliefs around short-term economic outlook, I continue to be long term positive on Silicon Valley and rest of Bay Area as a geographical location that has great weather, amazing outdoor opportunities, culture, and a hub of highly educated people that companies want to be located near so that will continue to create job opportunities. When I bought my first house in 1999, I thought there was a chance that I was buying at the peak. However, I knew I would be living in the area for a long time so justified it in my mind that over the next 10 years, I felt confident it would be a worthwhile investment regardless of short term movements. That first house turned out to be an amazing investment generating a large IRR and providing comfort to my living situation.

Why Belmont Housing is Hot

f3d7eb369018e88ca22229518c996fe9

Within my real estate office, I am one of the go to resources for all things Belmont and Redwood Shores with respect to the community. I have had a lot of questions recently concerning some quirky rules for the city of Belmont as it relates to real estate as well as nuances around the school district. Yes, San Mateo County, the “mid-Peninsula” real estate prices continue to increase due to low inventory and strong demand (see previous post https://taosiliconvalley.com/2013/08/26/microeconomics-101-for-real-estate-2/ ). The quaint city of Belmont has always had admirers, but remained a bit under the radar for those who don’t live in San Mateo County. Andecdotally, it seems Belmont has increased in popularity of recent years with nearly every listing generating significant number of offers from home buyers wanting to be part of the community. Why is this dynamic more precipitous than ever? Although this oversimplifies the dynamics….part of the explanation is around the many positive developments of what was already a strong school system. The attractiveness of Belmont includes Water Dog Lake Park, hiking/biking trails, proximity to transportation, and friendly, highly educated people. What ties all of these things together is the award winning Belmont Redwood Shores School District.

images-14

Yes, other nearby cities also have good to very strong public schools. The Belmont Redwood Shores School District has experienced overwhelming community support in the form of passing multiple bond measures and parcel tax measures in the past several years that has allowed Belmont to completely upgrade deferred maintenance, modernize facilities and advance technology investments in the elementary and Ralston Middle schools. Every Belmont elementary school saw major construction projects over the past 2 years that improved the schools significantly and expanded some as well. Within Redwood Shores, Sandpiper is relatively new having been built in the mid 1990’s and Redwood Shores elementary opened in 2010. These schools are nice, clean and (now) modernized. What parent wouldn’t want their kids go to a “newer” schools that rank highly in the state with active parents and a supportive community? It used to be that many of the elementary schools saw strong API scores and would attract homebuyers. Now people hear about the community activism of supporting children’s education above and beyond test scores, and then see the beautiful facilities, before deciding that they will do whatever they can to buy a house/condo in Belmont to be able to send their kids to the schools.

Below summarizes the Belmont Redwood Shores API scores from 2013:

    • Central 935
    • Cipriani 910
    • Fox 915
    • Nesbit 865
    • Redwood Shores 928
    • Sandpiper 938
    • Ralston Middle 907

Belmont and Redwood Shores passed multiple bond and parcel tax measures. Measure U in November 2008 raised $78 million to keep classroom sizes smaller and maintain some enrichment programs, Measures I and N in November 2010 raised $25 million for Ralston and $35 million for the Belmont elementary schools to improve and expand the buildings/facilities. Measure R in November 2013 maintained an expiring $174 parcel tax to support the schools. All of these measures passed with the voters on the 1st try showing a true testament to the community. Passing these measures took time from enormous number of volunteers to drive the campaigns, make phone calls, donate funds, and print marketing materials to educate the people. Then, the people responded overwhelmingly in the polls.

Additionally, there are 3 new City Council members elected/appointed over the past year. Eric Reed, Charles Stone and Cathy Wright all of whom are active in the schools, youth sports and general community happenings prior to them winning a seat on the City Council.

So it’s all positive right? What is the consequence of this popularity?  Simple….a projected continuing growth of school aged children in Belmont and Redwood Shores that will stress school site capacity in upcoming years. There are no easy answers. Many cities/school districts in the Mid-Peninsula face the same challenges. As an example, neighboring San Carlos is seeking new land to build a new school on and evaluating various options to manage growth in their school district.

The mid-Peninsula being midway point between San Francisco and Silicon Valley, nice weather, close to mountains/ocean/bay and really strong schools just offers a balanced lifestyle….and with little raw land to build on, there is just limited supply of new housing units to help absorb this demand. With many changes to the city, and the community support, Belmont may no longer stay sleepy in the shadows of their larger cousins nearby.