“Be fearful when others are greedy, and be greedy only when others are fearful.” – Warren Buffett

Investopedia defines “herd instinct/mentality” as a phenomenon where people join groups and follow the actions of others under the assumption that other individuals have already done their research. Herd instincts are common in all aspects of society, even within the financial where investors follow what they perceive other investors are doing, rather than relying on their own analysis. 

I wrote in my last real estate article on 5/4/22 about Huge Decrease in Supply in Q1 and Spike in Demand. Over the last few months, we have seen a material decline in the financial stock market, a spike in inflation, and an increase in mortgage interest rates that have really impacted the local real estate markets. Some have estimated that 30-40% of buyers who were actively looking to purchase during Q1 have postponed their search due to the macro dynamics. Real estate prices have declined in recent months, but that’s from a large rise of 15%+ for SFRs (condos didn’t see quite as much) in most areas during the 1st 5 months of 2022 so prices are still meantingfully net higher than from 2021 values.

Certainly, any buyers whether 1st time or move up who elect to wait and see how various aspects of the market and their personal situation shakes out until things stabilize would be totally rational.

  1. In the high technology-centric Bay Area, many people’s liquidity/down payment are invested in the NASDAQ stock market which is down 21% YTD. People who rely on stock options from a single company to fund down payments may be down even more.
  2. We are hearing about layoffs regularly these days, so there may be a bit of uncertainty as to job stability.
  3. Jumbo fixed 30 year mortgage interest rates have risen from a low of 3% last year to over 5% raising monthly payments and thus affecting loan amounts.
  4. There is always a fear that prices may decline further (suppose not much different than in rising markets either!)

Above, I reference a famous Warren Buffet quote and start this article defining herd mentality. There is one strategy around investment theories to not follow the herd and always do what the herd do. The following would be some reasons to actively seek to purchase an owner occupied home when others may want to wait a bit.

  1. Most people’s financial situation has been negatively impacted in the last few months, but to the extent that your financial situation makes it tenable to still make a purchase, there is significantly less buyer competition. In Q1, most every SFR in a good neighborhood at $3m and under often yielded 3-15 offers while buyers had less than a week to decide. Currently, there are more of choices for buyers with much less or no competition.
  2. Buying a house to live in yields intangible emotional benefits above and beyond just a financial return. This is a perspective I tell all my owner-occupied buyers regardless of market conditions.
  3. It is nearly impossible to perfectly time a financial or real estate market. In the SF Bay Area, like the general financial markets, over a 7-10 year medium term horizon, Bay Area estate prices are generally always net higher.
  4. For the move up buyer who currently own a property and wish to wait for their own value to rise again first, just a reminder that if your smaller property rise, your move up property will likely also rise, but at the higher price point.
  5. The higher interest rates no doubt has affected payments and mortgage amount. All of this macro trends has directly and indirectly affected real estate values to account for that dynamic. Two things to consider: 1) read my article from 5 years ago on Historical Mortgage Rates that even at our current rates, it’s actually not considered that high (my 1st house purchase, my mortgage was over 7% and I refinanced a year later at 6%! Crazy, huh?!), and 2) if and when mortgage rates start to drop again, there is always the possibility of refinancing to a lower rate in the future, so the current rates is likely not locked in for the entire 30 years.

Of course, if your liquidity was all in cryptocurrency or in a single recent IPO unprofitable company who has lost most of its value this year, then now may not be the right time to purchase. If your company has gone through a couple rounds of layoffs and you are not feeling confident, it may be best to hold off. There are pros and cons for every individual situation. While I am a realtor, I have the unique background where I have lived in the SF Bay Area for last 25 years going through multiple periods of growth and recessions, in past life been VP at several high profile technology companies that had major exits and blowups so I understand our local technology markets, and finally, I hold two degrees in Finance. Thus, I always am happy to brainstorm with clients and friends on evaluating the risk and rewards of various options.


Wow, what a Q1 2022. Just an astounding first few months of the new year. The market is RAPIDLY shifting, if you are about to buy and/or sell, it’s critical that you work with someone who has the pulse of the market and who you trust to provide you with unfiltered advice.

  • Even a couple month ago trends/date is often outdated
  • So called “experts” are just looking for soundbites and do not know the fine nuances of the market
  • Real estate is highly localized and the submarkets may be materially different from one another

Below is a matrix summarizing SOLD data for single family residences from February 1 to March 31 from 2020, 2021 and 2022 in San Carlos, Belmont and Burlingame. I chose those 3 cities as representative of mid-Peninsula, but should be directionally similar to other cities. The matrix is quite telling:

Burlingame, San Carlos, Belmont All SFR – Sold between February 1 and March 31

# Sold9015067%79-47%
Avg List2,154,5572,304,8457%2,515,1449%
Avg Sold2,221,5982,512,96313%2,930,63717%
% Above List3.1%9.0%16.5%
Avg $/sq. ft.1,1461,25610%1,50120%
  • Q2 2020 was the start of the pandemic and shelter-in-place
  • 2021 had 150 sold transactions to start the new year with a 9% average increase from list to sold price and the average $/square feet increased YOY of 10%, as buyers demand rapidly increased 
  • Start of 2022 saw a MASSIVE decrease in # of sold transaction by 47% (almost half of last year’s volume) which led to a $/square feet increase of 20% with incredibly competitive multiple offer bidding wars for most houses jumping 16.5% from list price (my most popular blog post from 9 years ago is still highly relevant https://taosiliconvalley.com/2013/08/26/microeconomics-101-for-real-estate-2/)

As I write this at the start of May, we still see strong buyer demand, but this has flattened a bit, due to the following:

  • Spike in mortgage interest rates impact the loan qualifications
  • High inflation affects consumer confidences
  • NASDAQ has dropped nearly 20% since start of the year which affects down payments due to high technology centric buyers
  • Buyer fatigue from losing out multiple times in past 6 months

My Incredible San Mateo Village Listing from Q1

I had a sweet listing of a 4bd/3ba completely modernized home with high end finishes and exquisite design details. I helped pick out some of the finishes including tile work when preparing the house for sale. Check out the full listing pictures/details. https://www.zillow.com/homedetails/3630-Santiago-St-San-Mateo-CA-94403/15538642_zpid/

  • Approximately 250 people attended the only weekend of open houses. It was an absolute madhouse.
  • 18 groups requested disclosures packages
  • List price was $2,198,000, we received multiple offers, and it closed at $2,680,000 to very excited buyers.

What was the secret formula?

  • Totally renovated house that had some interesting style, unique high-end finishes
  • Terrific location in heart of San Mateo Village
  • Coldwell Banker and my aggressive marketing program absolutely blasted online, email, television, neighborhood mailers, and print advertising. Anyone looking in the mid-Peninsula saw this listing!
  • Underrated part of optimizing results is marketing the high value parts of property, understanding buyer psychology and creating a process to motivate offers from qualified buyers, and being able to talk to buyers and their agents explaining the nuances of the property.

My Upcoming Listings in May/June

  1. Woodside Plaza in Redwood City – we are in the final preparations on putting this exquisite 3bd/2ba 1650 sq. ft. house with a totally sweet 350 sq. ft. ADU/Cottage w/full bathroom, and has the best backyard entertaining area I’ve ever seen (not located in Hillsborough or Atherton!). The backyard has this large vaulted covered patio area that has an entire outdoor kitchen, recessed lighting, heat lamp that can be used all year round, that then extends to another patio area with a built-in BBQ area next to a hot tub and grass area on an oversized lot. This is a must see just to check it out.
  2. A large 5bd/4ba Daly City house – we are preparing this house for early June. Terrific location nearby Serramonte Mall, and transportation options. Upstairs is 3bd/2ba, and downstairs has permitted large living space with 2bd/2ba and living areas.

If you or know anyone interested, feel free to contact me at Peter.Tao@cbnorcal.com, and I can try to allow showing as we get closer to coming on market. Or call me if you just wanted to talk real estate, travel or the Golden State Warriors!

My SF Peninsula 2022 Real Estate Predictions Based on a Busy 2021 Year

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Reading many so called “experts”, “analysts”, and fellow Realtors predictions for residential real estate in the SF Peninsula market over the past weeks leads me to write my annual end-of-year/start-of-new-year observations and predictions. 2021 was one of my busiest years as a Realtor in the SF Peninsula and I expect strong deal flow in 2022. The following are 7 major topics often discussed in mainstream media – some of which I concur with but others I believe to be significantly overblown or will not materially affect our local markets.

Source: Mortgage Bankers Association
  • Current run up of real estate price appreciation is only minimally due to low interest rates – although a lower interest rate is a mathematically positive factor, other macro factors significantly influence pricing in our area more than rates. A very large number of Bay Area buyers have some combination of savings due to frothy stock market allowing for high down payment and/or well paying high salaries, so potential creep up with rates will not affect price points as much as most people are predicting.

  • People moving out of the Bay Area has had minimal impact. A couple of my seller clients in 2021 moved to other states. The supply and demand imbalance quickly absorbed any small incremental new inventory due to a geographic move.
  • There continues to be a high demand, low supply imbalance going into 2022 for single family residences. I am aware of an influx of listings coming on the market in the next few months, but there are also many buyers who were not successful in purchasing a home in 2021 and some new buyers ready for aggressively look in 2022. The link is my most read post that still gets dozens of random readers who find it through Google organic search. https://taosiliconvalley.com/2013/08/26/microeconomics-101-for-real-estate-2/
  • Many people in SF Peninsula work in high technology and have high liquidity from a frothy stock market and the many 2021 local IPOs. Buyers have capital for a large down payment making for increasingly strong buyer profiles – this is unlike in 2007-2008 at the height of the last market boom where many buyers “qualified” for large subprime loans with minimal to no down payment. There has been a softening of Nasdaq to start 2022 so we will see what happens to the broader financial markets.
  • Location and lot have always been arguably the most important factor in real estate; the pandemic may have put even more of a premium on those factors as homeowners value a nice outdoor space in good locations. Where I have seen very high sale prices often were with houses that had large flat lots and/or views and/or premium locations.
  • As I wrote in a recent blog post article, construction costs and project timelines have increased precipitously. All contractors and suppliers are backed up thus making even cosmetic remodels much more challenging and expensive. Thus, move-in condition houses in good locations command a premium relative to fixer uppers.  https://taosiliconvalley.com/2021/09/23/real-estate-construction-costs-skyrockets-in-sf-peninsula-what-is-impact-to-real-estate-prices/
  • I helped several clients purchase rental property or 2nd homes in 2021 as they seek to diversify their investment assets while taking advantage of low interest rates. Many residential agents, even top producing ones would not know how to advise on cap rates mean and its interplay between appreciation potential vs near term cash flow as well as understanding of property management and leasing. Here is one of the first blog posts I wrote 8 years ago on an “investment that didn’t make sense for a friend’ that helped articulate some of the many variables on buying an investment property. https://taosiliconvalley.com/2013/12/06/an-example-of-a-real-estate-investment-that-just-didnt-make-sense/. The 2nd home markets like Sonoma/Napa, Lake Tahoe, Monterey/Carmel real estate values skyrocketed in 2021, from the many Bay Area buyers.

The start of 2022 will be quite interesting to say the least. The initial group of properties that hit the market in the 1st couple months will really set the tone of this year. This article represents my personal insights and not related to any companies I am affiliated with. Additionally, the local markets can and will change rapidly due to macro and microeconomic factors. Thank you to my clients and friends who worked with me and/or referred me to their friends in 2021. I look forward to hearing from many of you in 2022 and get an update how you are all doing.

I can be reached at peter.tao@cbnorcal.com.

Real Estate Construction Costs Skyrockets in SF Peninsula…What is Impact to Real Estate Prices?

Yes, yes it does, but in different ways depending on the segment. First, let’s discuss why costs/budgets have significantly increased over the past year .

  • During the pandemic, while people were shelter-in-place, the need to renovate their existing home increased precipitously so there was an increase in demand for contractor labor.
  • With the combined increase in demand for labor, as well as some migration of contractors out of the area, skilled contractors started getting booked up months in advance creating a labor shortage.
  • As general contractors and sub-contractor’s job pipeline get backed up from 3-6 months in advance, they start to increase their bids/estimates on job proposals increasing pricing.
  • Early in the pandemic when imports totally stopped at the ports/borders, there were major supply chain problems with many industries. Materials like cabinets, countertops, fixtures and many other key house materials stopped coming in from countries like China, inventory became scarce in certain areas. 
  • Good example was in early 2021, lumber prices increased by 5-7x – not a typo. Fortunately, lumber prices have come down.
  • With low inventory, prices began to increase.
  • There are shortages of key finish items, such as high-end appliances with “smart features” that are seeing lead times of 6 months. Apparently, a backed-up supply chain issue created by a shortage of “chips” that is a key material in the production of certain appliances.
  • So with all these delays, cost increases, labor shortages, general contractors must then factor in just more time, effort, challenges, delays that they also need to increase their projected margin to somewhat factor these issues into the equation.

What do any of these factors impacting construction costs have to do with real estate values? Here are some examples of the impacts I have seen first hand as both listing agent and buyers agent in the San Francisco Peninsula marketplace.

  • Home buyers know about rising costs and long lead times that many buyers who would have considered a fixer upper, no longer will contemplate one. Thus, move-in condition homes are in higher demand than ever before.
  • Conversely, fixer uppers in good neighborhoods that may have sold a few years ago with multiple offers, may not still sell right away or command as many offers and the spread between a fixer upper and recently renovated home have widened.
  • Homeowners are finding it much more challenging doing a substantial home renovation or an expansion project due to this significantly increasing cost and longer project timeline. I have two different clients who have been planning an expansion project in  the Peninsula over the past year including architectural renderings and general contractor estimates. Unfortunately, the estimates over the last 6 months increased by more than 50% making the financial economics of a home expansion not as clear cut as in the past.
  • For example, let’s say a homeowner bought a San Mateo SFR 5 years ago for $1m that was a 3bd/2ba 1400 square feet that is now worth $1.5m. They want to expand to a 4bd/2.5ba 2100 square feet for $700k; after completion, it will be a beautiful fully renovated house worth $2.5m imputing $300k of “sweat equity”. However, let’s say the new budget for that project is now $1.0m. Then, the “sweat equity” benefit is negligible and the benefits would be the finished product being to the precise taste of the owner and ability to remain in the neighborhood; the downside is over 1 year of planning, decisions, project management and moving into a temporary apartment. The alternative is to just buy a bigger, nicer one for $2.5m and sell the smaller one. Of course, the decision is much more financially, psychologically and logistically more complex than that, but you can now see the dilemma.
  • The net is that there are more move-up buyers in the market, which is why the $2-3m price point in good school districts with renovated houses and usable backyards to be highly competitive.
  • Interestingly, I am seeing more houses listed by developers be put on the market to be sold with approved plans for a home buyer to construct. Their reasoning is they are too busy with other projects to start which likely is true. However, I am pretty certain the other reason is  their tightening projected profit margins is squeezing builders.

As always, feel free to contact me at peter.tao@cbnorcal.com if you wish to discuss anything real estate related. Any advice from those who have recently undergone a renovation project? Any feedback or real world renovation war stories?

Real Estate Case Studies from My Very Busy 1st Half 2021

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As a Realtor, the 1st half of 2021 has been incredibly busy despite many challenges for buyers, sellers and Realtors. While I am always happy when I optimize sale price on a listing or successfully win in a multiple offer situation for buyers, I have been particularly fulfilled in the last few months navigating an incredibly competitive SF Peninsula real estate market. I completed a diversity of transactions/situations that few agents ever work on let alone just in a few months which made for very interesting and rewarding transactions. The following are a few case studies highlighting a few deals.

War Story #1 – S. San Francisco Duplex

Clients: Buyers who I helped buy their 1st mid-Peninsula house many years ago on their first offer are about to start a large expansion project.


Situation: Clients will need to move out for a year for construction on existing residence, so they asked me to look for a 2BD condo for up to $1.4m to purchase and move into; after completion of renovations,  they will move back to their house, and then rent out the condo.

Challenge: There are condos within their budget in good locations. However, due to low cap rates for condos in prime locations, and a high monthly HOA, the unit would have negative cash flow as a rental with a mortgage.

Solution: As they had advised that part of the reason for purchase was to diversify their investment portfolio away from the stock market, I described the possibility of a duplex and some of its advantages if they had financial flexibility to do so.

Result: Rather than spend $1.2-1.4 million for a a 2bd/2ba 1k square feet condo in an older building with monthly HOA of $500+, they raised their budget by a few hundred thousand and acquired a beautiful Spanish Meditteranean-style duplex with 3bd/2ba floor plan on each side that had been recently remodeled just a few years ago. We were able to get it at under list price, and they got a vacant unit rented out within a week of purchasing.

Takeaways: There is demand for multifamily properties but not the wild bidding wars of SFRs. Super low interest rates make investment real estate appealing for those with capital for down payments. Clients were successful because they are numbers-oriented, knew the type of asset they wanted, and had a good plan to become landlords

War Story #2 – San Mateo Village with Outdoor Oasis

Clients: Sellers with a growing family unit who I helped buy their 1st home several years ago wished to upgrade to a larger house.

Situation: Clients were undecided about selling 1st before buying or buying 1st before selling. I helped them assess the advantages and disadvantages of both options as well as the financial risk factors and life logistical challenges for each.

Challenge: The $2.6 to 3.3 million price range for a 4BD house in a good school district has been a highly competitive segment. Selling first would put them in a better financial position to compete in a multiple offer situation, and allow them to look for a house at a higher price point. However, both clients work demanding jobs and have a young toddler; thus, being “out of the market” and having to live in a temporary rental given their situation is just not tenable. 

Having looked at houses at a lower price point where they did not need to sell their current house first, they realized they could not get the space they needed based on their existing lender preapproval.

Solution: Clients had been told a maximum price they could afford without selling their existing house first. However, I realized the lender they were working with did not specialize in “purchase mortgages”, so they did not have the breadth of products addressing my clients’ situation. I outlined scenarios of lenders who had more options who would factor in that their current home would either be sold immediately thereafter or used as a rental home. They got pre-approval from a different lender at a higher price point.

Result: They bought a larger house they sought and needed While they considered keeping their 1st house as a rental, they decided they did not have time to become a landlord so they decided to sell. We then had time to fully prepare their current house to list on the market after it was vacant. This allowed me and sellers to do some renovations and stage the house, so it showed really nicely accentuated by an incredible backyard. After my full marketing program blasting the marketplace, we received 9 terrific offers and very happy sellers and buyers.

Takeaways: Using a mortgage lender who specializes in purchase transactions is important, as is having a real estate agent who knows the intricacies of mortgages and financials. Move up Buyers face a very tricky and scary challenge in this real estate market, but can be successfully navigated. Being able to do prep work, staging a property, coming up with an appropriate list price is key to optimizing value on a listing. 

War Story #3 – SF Dogpatch New Construction Condo

Clients: Buyers sought out a pied-a-terre in Sonoma or possibly San Francisco..

Situation: Clients who were long time friends were interested in investing in a 2nd home in Sonoma where they viewed it as a near term pied-a-terre and a medium term retirement home.

Challenge: After viewing many houses in Sonoma and coming close to making an offer, clients realized that prices in Wine Country were being driven up by multiple offers at a price point higher than what they wanted to spend. They then discovered their teenage children were not as keen to spend time up in Sonoma as they had expected..

Solution: As I knew my friends enjoyed good food, drinks and entertainment, we started discussing the condo market in San Francisco. On a last minute decision, I suggested we visit a few SF condos on the way back from a Sonoma visit one weekend

Result: They are now happy owners of a 2BD/2BA new construction condo in the red hot Dogpatch neighborhood walking distance to Chase Center, AT&T Park, restaurants, coffee/boba shops, and all that SF has to offer. They acted quickly in submitting an offer as their particular unit had access to a larger outdoor space than normal. I represented my clients and secured the unit which ended up getting multiple offers; I also negotiated upgrade credits too. Best of all, their children are very excited to make use of the condo on weekends.

Takeaways: Vacation areas like Sonoma, Carmel, Lake Tahoe are red hot with skyrocketing prices. Buyers are returning to the SF condo market after a 2020 slowdown, but value can still be had relative to single family residences. I am able to represent Buyers for new construction buildings but need to schedule and attend the 1st showing appointments.

High Level Predictions for 2nd Half 2021

  • Buyers had been severely hindered with their ability to view properties without public open houses. Finally, open houses are back.
  • Expect there to be a significant summer slowdown in activity with fewer listings and buyers in the marketplace due to what looks like a busy summer vacation travel season.
  • As employees slowly return to the offices full or part time, traffic on the freeway, roads and bridges will slowly pick up again, albeit not as bad as pre-pandemic.
  • There will continue to be an imbalance between strong demand to purchase real estate and limited supply in the <$3m price point despite news of people moving out of the Bay Area.
  • Crazy low interest rates certainly help fuel the real estate values. However, eventual movements higher with interest rates will have little impact.
  • As buyers who lose out multiple times with single family residences, demand for condos will increase as buyers become frustrated.

The insights and opinions are my own and not that of any companies I am affiliated with. The SF Peninsula real estate market is rapidly changing, and each property is unique. As always, don’t hesitate to call me for any real estate purpose or otherwise. 

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Some of My Sold Properties During Shelter-in-Place 2020 – Six Key Takeaways that are Underreported

Home 1
686 24th Ave, San Francisco (Represented Sellers)
Sold for $1,675,000 w/12 fantastic offers at 20% above list
Home 2
Dartmouth Ave, San Carlos (Represented Buyers)
Won against competitive multiple offers on Buyers’ first house offer
Home 3
2047 Ticonderoga Drive, San Mateo (Represented Sellers)
Sold for $2,055,888 at 8% above list price
Home 4
547 18th Ave, San Francisco, CA (Represented Seller)
Sold for $2,022,200 in 7 days

Many real estate articles during this unprecedented 2020 have espoused data with misleading conclusions. Between my BS/MBA degrees in Finance and my busy year representing multiple buyers and sellers, here are my 6 observations on the supply and demand dynamics for the SF Peninsula real estate market.

1) Given previous major imbalance of high demand and limited supply, the exodus out of Bay Area has had only marginal little effect on purchase price for single family residences.

2) Renters may have accelerated their timeline to buy real estate than normal times, as SIP highlights one’s desire for more space.

3) Families living in an apartment or condo are more eager to purchase a property with outdoor space and/or more square footage. There seem to be more motivated move-up buyers who want a backyard.

4) Houses that are renovated and move-in condition are commanding more of a premium than even before. Buyers are less inclined to delay a move to do renovations.

5) Competitive multiple offers for houses that are nicely renovated, in good neighborhoods, and priced right. Others may sit on the market longer. In Sept, I had a beautiful 3bd SF listing that had 80 groups visit leading to 12 offers. The house next door with a couple issues went through multiple price cuts.

6) Buyers always try to balance between buying for lifestyle purposes and optimizing as an investment. SIP has greatly shifted the real estate buying decision to a quality of life value proposition.

Feel free to contact me anytime if you wish to talk real estate or say hi. Please “like” my Facebook Real Estate Page at https://www.facebook.com/PeterTaoProperties to stay updated on Bay Area real estate.

Top 6 Things I Hope Remain After Shelter-in-Place Ends

Please “like” https://www.facebook.com/PeterTaoProperties to see my latest SF Peninsula real estate updates and latest listings.

Shelter-in-place (“SIP”) started mid-March which has been challenging for everyone. While walking my dog daily, I have spent more time reflecting and observing. As the world hopefully gets closer to a vaccine, there are a handful of by-products of SIP that I hope will remain in some form post-pandemic: 

Old School Fun – Children are playing in the streets during the day and playing board games with their families in evening. I used to rarely see kids playing outside in the neighborhood given all the pre-scheduled activities. I am that cranky old guy lamenting about how I grew up riding bikes with friends and playing football/basketball/street hockey/ultimate frisbee, and whatever crazy games we made up. 

Less Traffic – Highway 101, San Mateo/Bay/Golden Gate/Dumbarton bridges and main local roads had gotten progressively worse since ten years ago. In the high technology-centric SF Bay, we were already leaders in remote work, but hopeful that more employees can work from home more regularly. Check out my good friend Ken’s company blog post on the “Future of Work” (https://e-m-marketing.com/2015/03/17/the-future-of-work-looks-bright-4-trends-to-cheer-about-infographic

Home Projects – My house is the most organized it has ever been. I have a) purged a dozen boxes of useless items in the garage and created a workout/yoga/game room, b) organized my drawers, closet and kitchen pantry, c) done more gardening, and g) done some interior painting while upgrading some design features in house.

Healthier Living and Yoga – Not eating out at restaurants has allowed for more nutritious meals at home. My BBQing game has ramped up a notch. During the 1st month of SIP, my lower back was in worse pain due to sitting for longer periods of time. I finally started yoga following Youtube videos; this has been a game changer as pain has significantly dissipated. I now own a yoga mat.

Basketball Shot – The kids and I have been practicing and playing a lot of basketball at our house. We’ve been regularly doing sets of 50 3 pointers and I’m now shooting 60-75%. I really miss playing pick-up basketball with my Bay Club friends. I hope my newfound shot and healthier back translates to on court performance.

Catching up with Friends and Clients – Zoom calling with out of town friends more frequently has been a primary source of meaningful social interaction. I have also gotten quite a numb of calls from friends/clients wanting to get my thoughts on various aspects of real estate such as remodelling, adding an ADU, possibly buying bigger property, investing or just seeing how the market is doing. SIP has really highlighted one’s home living conditions given both a remote work and distant school learning situation. I will have a separate blog post from a real estate perspective shortly based on my recent listings.

Anything you would add to your list post-pandemic?

Please “like” https://www.facebook.com/PeterTaoProperties to see my latest SF Peninsula real estate updates and latest listings.

Accessory Dwelling Units aka ADUs, Granny Flats, In-Law Units Growing in Popularity and Interest in SF Peninsula

Modern 600 square feet ADU

Over the past month, multiple clients/friends have contacted me about what I thought about them adding an Accessory Dwelling Units aka ADUs, granny flats, in-law units. The past few years, I estimate about one 1 in 3 Buyer clients of mine indicate that they would be interested in a house with an ADU. Why the trend towards having an ADU or adding one on? Why am I getting more calls about it during current Shelter-in-Place (“SIP”)? What are some considerations from a real estate perspective? Even more interesting is California passed legislation that facilitates a more efficient process by which homeowners can attain city permit approvals to build an ADU at the start of 2020.

We are not referring to the illegally constructed and poorly built playroom/storage/tool shed with dangerous electrical wiring dangling. Many of those were built decades around; they may still be useful as a storage unit or tool shed. However, they are far inferior to quality, utility, functionality and value, as today’s discussion for a highly modernized 300-750 square feet ADU with full bathroom and kitchen which can be lived in, worked out of, or rented out that many now desire.

The following are trends and current SF Peninsula dynamics creating demand for ADUs:

  • Many companies allow employees to work from home and having a separate space to do so would be a material benefit. With current SIP, this accelerates future flexibility for more employees to work from home.
  • For families with children, a separate living space when grandparents or nannies come help take care of young children would be really nice.
  • Many grandparents looking to retire close to their adult kids are challenged with local prices to buy a condo for $800k+ or rent a small apartment for $3k/month. A nice In-Law would be very appealing financially and logistically.

Because of a significant shortage of housing units in many cities, the CA State Legislature passed AB 68, AB 881 and SB 13 that went into law in 2020. Those bills provide homeowners more flexibility with their ADU projects by loosening building constraints, easing bureaucratic processes, and ultimately helping with financial costs and time. They mandated those cities which had tighter restrictions and more onerous processes to modify and abide by those new laws. https://www.nolo.com/legal-updates/new-california-laws-for-2020-expand-homeowners-rights-to-build-accessory-dwelling-units.html

The ADUs being discussed allow for those properties that qualify to be able to either add new structure or transform existing structure into a liveable In-law unit that has a full bathroom and a kitchenette. Many properties have the lot size and capacity to be able to fit a 300-750 square feet beautiful structure.  I have seen floor plans and space as small as 250 square feet that is a really sweet space.

SF’s Marina district

Fun, sentimental story…when I first moved to the Bay Area from NYC after graduate school nearly 25 years ago, I rented a small San Francisco in-law apartment in the very popular Marina district that was only about 300 square feet big. My friends may recall that it was an ADU in the rear of a duplex Marina property near corner of Franklin/Chestnut. It had only 1 small window yielding minimal sunlight, and my friends called it “The Cave”. I would catch the 30X bus off Chestnut street dressed in my full business attire ready to do M&A deals in the financial district. With a half a dozen friends living within 5 blocks and right next to Golden Gate bridge, Crissy field and Marin Headlands, I loved my time at The Cave! 

Below are links to some various SF Peninsula city ADU websites:







What is the cost to build an Accessory Dwelling Unit? This is a very complex question with a big $ range. There is a big delta between building a new structure versus just converting a current space such as downstair basement, large attic, garage, or other bonus space to a legal ADU. The lot configuration including whether it’s flat or on hillside matters. As with any construction, the interior size, material quality, location, contractor, and timing are factors. Plus, every city has different codes, and requirements that can affect costs. Let’s say a base case range from $250-450 per square feet – it can certainly be a lower or higher, as this is just a rough estimate. The low end would be converting an existing structure with only minimal structural changes. With an average $/square feet for many SF and Mid-Peninsula single family residences at $900-1200/square feet, regardless of one’s viewpoint of how a nice ADU’s $/square feet compares to a main structure, sweat equity and positive ROI is created no matter how one values it.

From an investment standpoint, an ADU can be rented out. You can run the analysis of cost to build relative to potential rental income. Do note, however, that many cities will prohibit the ability to do short-term rentals (e.g. Airbnb) and may require language added to your deed.

To make sure there is no misinterpretation, predicting incremental value of an ADU to the main house structure is inexact science. For a super nice ADU as described above, a buyer can justify placing value in the space at or near that of the main house. Then there are some older ADUs that are functional, just not at the same quality; those will have value but at a lower $/square feet than the main house. And on the low end, those that are “unwarranted” and done without permit from long ago which is merely just an enclosed space of some kind will be minimal or even no value. At the end of the day, value for anything is what a buyer is willing to pay for something from a seller.

A listing of mine in San Mateo Village a few years ago for a house transformed from a 3/1 to an expanded 3/3 w/high end kitchen and great room.

If one has a fixed budget to do a house addition of some kind, practicality and function should be factored in. For example, let’s say a homeowner in the Sterling Downs (Belmont) or San Mateo Village neighborhood has the financial budget to add 600 square feet of space and the choice is to expand the existing home or to add a nice 1 bedroom ADU to the backyard. I cite those neighborhoods because many of the original houses built around 60-70 years ago were approximately 3 bed, 1 bath, 1000 square feet on a nice rectangular, flat 5k square feet lot. If your house was the original 1000 square feet, it would be a no brainer to use the funds to expand the house to a 3/2.5, 4/2 or 3/3 1600 sq. ft. with new open kitchen/great room area. However, if you already have an expanded home whose size/layout already suffice for your family, then the functionality of having an awesome ADU might be quite compelling and fit very well in the rear corner on your 5k square feet lot.

Houses with super nice ones  just do not come up on the market often. With the new 2020 legislation, the valuable SF Peninsula lots, and needs with people’s living and working situation, I expect more and more homeowners adding an ADU to their property. Forbes magazine had an interesting article https://www.forbes.com/sites/sherikoones/2019/02/06/the-rise-of-accessory-dwelling-units-in-the-u-s-and-canada/#b7fa4337a089. Quick disclaimer: I am a Realtor and have real estate development experience so know more about this than most, but I am not a licensed general contractor or structural engineer. The codes and laws change regularly, so consult local building experts if you are truly considering any construction project. As always, feel free to contact me anytime about anything.

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Covid-19 Near Term Impact on Economy, Risk Factors and SF Peninsula Real Estate Perspectives

The following is meant to provoke thought and provide perspectives on buying or selling real estate within San Francisco and San Mateo County marketplace during the pandemic and its affect on the economy and all areas of lifestyle.

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Rollercoaster Stock Market and Economy:

  • S&P 500 index as of mid-April is down approximately 15% from previous recent high. This affects some Buyers down payment which could lower their purchase power or even take some out of the market
  • According to USA Today, as of mid-April, since mid-March, there has been new unemployment filings in CA of ~127k people which accounts for ~4% total workers. This is likely understated.  
  • 2020 IPO window is basically closed which employees at some local companies were anticipating for a liquidity event.
  • Uncertainty of economy will make some buyers delay any major purchases

Presidential Elections:

Lost in Covad-19 news is the November 2020 Presidential elections. It’s safe to state that whether Trump or Biden wins in November will have a significant impact on the direction of the USA. The combination of the next 6 month uncertainty, and then the results of election will affect the stock markets, and people’s confidence or skittishness of the economy. This could either delay or accelerate people’s actions on real estate.

Uncertainty of the Pandemic:

Bay Area counties generally have SIP through May 3. The date is not fixed and could extend longer. The longer SIP is extended, the worse businesses and people will be negatively affected. Those who believe the pandemic will be mitigated sooner, rather than later are more bullish that things will recover rapidly. Those who think things will take much longer than anticipated will be more bearish. This is uncharted territory so who knows.

Bay Area Population:

Over the last 8+ years, we have seen tremendous job growth in the area and a migration to SF Peninsula faster than new housing units, thus driving up real estate values and average rent. Question is how many thousands of people will leave the Bay Area with companies currently laying off employees, fewer new job postings, fewer private company liquidity events, and a slow down in new VC investments in start-ups? One tangible positive effect to this possibility is hopefully a decrease in traffic on 101/280 freeways and area bridges!

Financing Impact:

Back in mid-2010’s, we saw the explosion of sub-prime, no down payment, no documentation loans that led to the mortgage meltdown and economic recession. Coming out of the recession, we saw lenders clamp down on their underwriting such that only the safest and most stable borrowers could qualify for a mortgage. Over the next 8 years or so, we slowly observed lenders becoming more creative and looser in the type of loan products that were available to borrowers allowing more buyers to qualify. This is especially important for the expensive SF Bay market. 

Given the upcoming issues with people’s ability to keep up with mortgage payments if they’ve lost their jobs or are small business owners, lender underwriting has already started tightening underwriting standards and eliminating the more aggressive products. Some Buyers will have a more challenging time getting qualified than just last year, even though interest rates remain low.

Medium-to-Long Term Perspectives…Why Might One Consider Real Estate Now?

For those who are regular readers of my blog posts, I always emphasize that it is not possible with 100% certainty to predict and time the stock and real estate markets. Those who can are probably long retired! Given all the challenges the world is experiencing right now, some may question why anyone would want to still aggressively look at Bay Area real estate during these unprecedented times of Shelter-in-Place. The following are some financial and non-financial reasons for these owner-occupied Buyers:


Buying owner occupied real estate isn’t just a financial decision, it’s a lifestyle decision. I am happy to have a house these days where my kids are able to kick a soccer ball around the yard and shoot some baskets during SIP. Real estate is most people’s single biggest financial investment in their lives, but it is also where one that directly impacts quality of life. Kids will go to their neighborhood school and make friends, and where people are part of a community. Being quarantined now highlights the meaningfulness of a “forever home” even more.

Employment Prospects:

Regardless of one’s viewpoint on the current economic uncertainties, we are still in the high technology and biotech capital of the world. We are at the footsteps of Cal Berkeley and Stanford University. Companies who value a highly educated workforce will always want to have a major presence in the area to tap into intellectual and financial capital. Google, Apple, Visa, Oracle, Genentech, Gilead, Electronic Art, Facebook, and even Wells Fargo….oh my. Major VCs and Angels are here. 

Beautiful Landscape and Climate All Around:

There are slew of reasons why people love it here, besides jobs. No matter where one lives in SF or San Mateo counties, you are within 45 minutes away from mountains, beaches, city life, suburbia, from Michelin rated to hole-in-the-wall ethnic restaurants, various religious sects, airports, bridges, too many things to list. Diversity of people. Year round mild weather. Spectacular SF skyline and Golden Gate bridge views. I have traveled to 26 countries in the world and 25 US States and SF continues to be my favorite city in the who world.

Lack of Land:

Specific to the mid-Peninsula and San Francisco, there just isn’t excess of land that hasn’t already been developed. Supply of new housing units are contrained which makes it challenging to keep up with recent historical job growth during strong economic times. This is partially why real estate prices had skyrockets during the most recent boom times such that buyers had to more often than not compete in multiple offer situations. This is also why those buyers who are committed to living and working in the SF Peninsula may now be seeking this as an opportunity to buy into the real estate market now despite uncertainty in short term.

Interesting Datapoint from the Last Recession in 2008-2011

Let’s revisit the last recession during the mortgage meltdown from approximately 2008 to 2011. Case-Shiller is widely recognized for data within real estate for major metropolitan areas. Based on different iterations of the data and dependent on how broad SF Bay is defined, I’ve seen the SF Bay real estate bubble burst by an average range of between 30-40% from 2007 to 2011. But this is across the entire Bay Area across all price points and asset classes. For example, at one point in parts of East Bay’s condo prices were down up to 60% from their previous high water mark.

For a narrower analysis that represents a sweet spot for the type of owner-occupied Buyers who may be looking right now, I ran MLS data on just 3 cities in the mid-Peninsula of San Mateo, Belmont and San Carlos for just Single Family Residences (houses) in the 1000 to 2000 square feet size. Basically, this is your very solid 2-4 bedroom house catered to 1st time home buyers or move up buyers. Take a look at chart.


In peak 2007, the average $/SF was $634. The bottom of real estate in 2011, the average $/SF dropped by only 21%. From the bottom in 2011 to 2019’s $1,076, the market rose 115% – more than double. Even if someone bought at the previous cycles high of $634, and then rode it down in 2011 and kept living in the property through 2019, the gain would have still been an astounding 70%.

Without getting into more complex financial theory and measurements, assuming one took out a mortgage, the leveraged ROI is multiples higher than 70%.

And here’s the other factor as discussed previously of why someone might just jump in and buy in 2008, 2009 or 2010 when the market was still not at the very bottom? Rather than try to wait a few years before buying to try to time the market (very difficult to do), the Buyer actually gets to move into their home and actually enjoy their purchase rather than live in either a rental or a smaller property. It’s hard to put a dollar amount on quality of life standards and stability.

Of course, the 21% decline didn’t include a larger geographic territory and didn’t include the larger properties and smaller condos which would have had an effect on the pricing decline during this time. But that number is just an interesting different perspective particularly for the the type of Buyers who might still be in the market right now.

Final Thoughts:

We are all praying for Coronavirus to be contained and vaccine to be developed. Shelter-in-Place has been challenging for all. I hope everyone stays safe out there, and that those greatly affected will be able to rebound from any set-backs. As always, my doors and/or Zoom call is always open and available to talk real estate, upcoming NFL draft or anything else, I am around and would look forward to speaking to you.

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Covid-19 and SF Peninsula Real Estate in Q1 2020…So Many Questions…

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Back in January, I wrote a detailed blog post around a state of union type article discussing the current SF Peninsula real estate market, as well as many of the key drivers of local real estate. The first 75 days of 2020 was off to a fantastic start across multiple spectrums. I helped multiple buyer and seller clients get into contract in highly competitive multiple offer situations. And there were a slew of other clients looking to make a move later in 2020. On personal side, my daughter’s 8th grade school basketball team which I assistant coached just won back-to-back county championships. And my son’s high school varsity tennis team, along with him and his #2 doubles partner were almost halfway through the season, undefeated, and tracking to win their first PAL title in 19 years. Carlmont hands M-A first PAL tennis loss in seven years

Then, everything came to a screeching halt.

Covid-19 – The World Changed Just Like That

Although Coronavirus had been in the news from other countries, there were only some suggested best practices and warnings in the United States. It was not until March 16, when the official shelter-in-place (“SIP”) came out in the Bay Area. This significantly affected schools, small businesses, large corporations, elderly, everyone and everything. Initially for 2 weeks, on March 31, the SIP was extended through May 3. More restricted constraints, and the CA governor and state school superintendent indicated it would be likely for schools to remain in an online learning environment for the remainder of the school year. 

Revisiting and Updating Topics from January Blog Post

First, the Forty Niners lost a heartbreaker in the Super Bowl to the KC Chiefs with all world QB Patrick Mahomes. What a season though and Niners has young nucleus for future.

Investors currently are riding the ups and downs of the stock market. Due to many businesses being closed down or dramatically affected, the DJIA, S&P 500, Nasdaq, and other equity indexes are below its previous high level mark – giving back some of the gains from 2019. We can surmise the 2020 IPO window to be temporarily closed. Specific to Silicon Valley, my venture capital and start-up friends indicate that VC funding will be tougher, particularly for late stage companies.

Mortgage interest rates are still low by historical standards. I have written about rates on a couple previous posts. Do keep in mind that when reading about the Feds lowering borrowing rates, they are referencing the short-term, overnight Fed Funds rate. Mortgage interest rates track to the medium term treasury yields.

Lots of Unknowns and Moving Parts for Local Real Estate

Real estate activity, typically peaking in the Spring has slowed down immensely. The SIP rules place major restrictions on the sale of real estate. This link provides some details to our local market. https://www.samcar.org/posts/coronavirus-faq-updates-1311.htm. At a high level, here is some legal and logistical impact on residential real estate:

  • Sale of real estate is considered an “essential service”, but properties can be listed only under very restrictive circumstances
  • No public open houses or broker tour
  • Showings done virtually and electronically, with exceptions under strict guidelines
  • Many property and appraisers are not working now 
  • Residential construction/renovations to be halted with some exceptions

Changes to Supply and Demand

For the past 5+ years, there has generally been higher buyer demand than supply of available properties in the spring selling season. Let’s break down what the current economic and pandemic situation means for real estate from a theoretical perspective:


  • Owners sell and list for several main reasons: a) move out of area, b) move up buyers, c) downsizing, d) financial/job issues, e) investors/developers who wish to sell
  • SIP limits most “ordinary” sales activity such that most sellers are delaying listing or changing their plans.
  • There is still some inventory on the market right now, mostly in those situations where a house is vacant.


  • Typically there may be five categories of open house attendees: a) serious, actively looking owner-occupied (“OO”) buyers, b) passively looking, early stage OO buyers, c) investors/developers, d) neighbors, and e) curious “looky loos”
  • SIP eliminates D and E
  • Most of C not actively looking due to uncertainties of shaky economy
  • Many of B who were early in the process likely disinclined to jump in
  • BUT…there are motivated owner-occupied Buyers with a medium-long term viewpoint seeing this as a buying opportunity with less competition. They may have lost out on a couple offers in the last few months and/or they may have school aged children who need to register for Fall school enrollment within a district

See one of my early articles on the Supply and Demand dynamics of real estate. This is my most popular blog post and receives #1 Google organic search ranking when typing in “microeconomics real estate silicon valley”. https://taosiliconvalley.com/2013/08/26/microeconomics-101-for-real-estate-2/

Real Estate Sold over Past 30 days:

There has been so much uncertainty and variables during the first few weeks of SIP. Deals in escrow were still closing on time. Transactions that had just gotten into escrow right around SIP may have been delayed due to inability to schedule appraisals and other factors. A few deals fell out of escrow due to buyers who were greatly impacted financially and/or job situation from SIP. 

What about properties that are more recently listed right when SIP got put into effect in mid-March? They did not have the benefit of a public open house and were limited by stringent requirements in private showings. There has been a significant decrease in active Buyers looking. However, there is also a segment of highly motivated owner occupied Buyers who view this to be a less competitive buying opportunity and want to get into the market. There is also a decline in Supply of properties as mostly those properties that are vacant are on the market. Thus, vacant houses that can be visited, in good neighborhoods and priced appropriately are selling. Some are even selling with multiple offers but just without the high overbid situations like we did only a couple months ago. 

On the other hand, some properties with more aggressive list prices that don’t show well, in less desirable locations will likely sit on the market longer than during “normal” times.

What Does This All Mean?

Hang on for a lot of changing dynamics for the remainder of 2020. There are just so many unknown factors that will drive what happens to real estate in our area. I have lived through and owned real estate during the dot com bubble, the dot com crash, the subsequent recovery, then a huge financial crisis from the subprime mortgage meltdown, and then then a substantial bull market and now Covid-19. 

No one has a crystal ball to totally predict how all this shakes out. Having experienced multiple economic cycles plus my undergraduate and graduate finance degrees provide me good perspectives on our current plight. In my next article which I will publish next week, I will provide some data and my perspectives on how potential buyers and sellers may think about the market. 

As always, contact me if you wish to discuss or brainstorm.

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