patrick.net

Cupertino is staying up because of 1. Chinese immigration 2. Apple and similar employment.
Ever hear about those random Chicoms who are corrupt and exit China with considerable dough? They buy places in San Francisco, Vancouver, Cupertino, etc.
My Chinese ex-girlfriend was arranging to get her family to pool money to buy a house in California.
You already know that Chinese often invest in those empty apartments and so-called ghost cities in China.
Some who have a family member here want to do the same in California. Our American property rights are much better than in China where you never ever own land under your place and an actual house is very expensive.
Hong Kong forget it, prices are astronomical compared to even Cupertino.
The weather in Cuperitino is vastly better than Hong Kong, Shanghai and Beijing. Actually I think the weather anywhere on earth is probably better than Beijing.

Goran_K says

Thanks for the info SFAce. Really puts it in perspective especially with the graphs.

There's 29 SFH for sale in 95014 and 13 of them are pending. 16 not pending. That's less than 1 month supply.

http://www.redfin.com/homes-for-sale#!market=sanfrancisco&region_id=39365&region_type=2&sf=1,2&uipt=1&v=6

Katy Perry says

It's just different there.

When someone says this, all the more reason to run! The was the motto back before the dot com implosion, and also the motto before the housing bust. When all people have to reason the over-inflated prices is "things are different", then they have nothing at all. Cupertino got its fair share of low paying jobs and crappy houses. Even the $1 million dollar+ houses would be valued at 150K in any other part of the country. Just because a small percentage of the people have high paying jobs just means the drop is a little behind. Falling prices in neighboring cities will eventually have an effect. Logic says that anyone looking in Cupertino is now also exploring other close by areas. The little demand will seek out the best values. Unless, you assume that people in Cupertino are not reasonable?

Based on my few Chinese friends, they'd hang onto their Cupertino "investment" until the bitter end, and never bail out strategically. I would call this tenacious clinging to beliefs while the previous poster may call this being "unreasonable" :)

RentingForHalfTheCost says

When someone says this, all the more reason to run! The was the motto back before the dot com implosion, and also the motto before the housing bust. When all people have to reason the over-inflated prices is "things are different", then they have nothing at all.

That's generally sound advice when the claim doesn't make sense.

But do you actually think that there should be no price difference between different cities based on real factors like location, access to jobs, great schools, safety, etc?

Should Inglewood, Compton, West Oakland, Richmond, and Cupertino just be similar priced or is Cupertino "different" in some way?

Goran_K says

RentingForHalfTheCost says

When someone says this, all the more reason to run! The was the motto back before the dot com implosion, and also the motto before the housing bust. When all people have to reason the over-inflated prices is "things are different", then they have nothing at all.

That's generally sound advice when the claim doesn't make sense.

But do you actually think that there should be no price difference between different cities based on real factors like location, access to jobs, great schools, safety, etc?

Should Inglewood, Compton, West Oakland, Richmond, and Cupertino just be similar priced or is Cupertino "different" in some way?

compare price/rent of cupertino today versus price/rent of richmond today. so you get something like this:
cupertino P/R(today)
------------------ = cupertino premiium(today)
richmond P/R(today)

then compare the P/R for cupertino and richmond from 10 years ago:
cupertino P/R(10 years ago)
------------------ = cupertino premiium(10 years ago)
richmond P/R(10 years ago)

the cupertino premium has inflated greatly.

meaning cupertino prices have increased much faster than richmond prices over the last 10 years.
the rate of increase is surprising.

it's suggesting cupertino today is much more desirable (and maybe it is) relative to richmond. the question is: is that huge increase justified? maybe. maybe not.

I think that's the important question.

Is living in a neighborhood with far better schools, safety, and access to jobs worth the premium?

I know for a fact even if Compton went way under rental parity and they were practically giving them away (like in Detroit), I wouldn't buy there and would prefer Cupertino even if that premium of Cupertino was 10x higher.

There are those factors that are hard to quantify because everyone's tolerance is different when it comes to certain characteristics in a neighborhood or city.

We'll beat this dead horse a bit more. Check out Cupertino census data from 2000 & 2010 here. School age kids (5 to 17 years) increased from 10,403 to 12,902 over a ten year span. This is also reflected in the increase of 'family households with children under 18' which went from 7,570 to 9,275. Total population increased from 50,546 to 58,302. Without a lot of building, that translates into pressure on home prices and rents.

EBGuy says

We'll beat this dead horse a bit more. Check out Cupertino census data from 2000 & 2010 here. School age kids (5 to 17 years) increased from 10,403 to 12,902 over a ten year span. This is also reflected in the increase of 'family households with children under 18' which went from 7,570 to 9,275. Total population increased from 50,546 to 58,302. Without a lot of building, that translates into pressure on home prices and rents.

Basically S vs D at its most basic.

Hysteresis says

the question is: is that huge increase justified? maybe. maybe not.

This is the central issue to a lot of discussions here.

I would say that, yes, it seems to be justified to ENOUGH people. If the prices were unjustifiable, nobody would buy at those prices, prices would drop to a justifiable level, and people would then buy them. The market as a whole seems to support these sensibility-offending prices.

You don't necessarily have to be wise with money to make a lot of it, and people that are not great with money will usually overpay for things, or just plain buy things they they don't actually need. If you happen to have lots of people that are great at making money and pull $200k+ household incomes, but not so great at using it wisely, you will end up with house prices that offend sensible folks. That is my general opinion about why prices are what they are in certain areas. We have enough of these folks in the SV that I don't really prices in places like Cupertino coming down.

I forget who said it, but this seems like the best summary: "You can't compete with stupid."

Goran_K says

people who have lived in Hong Kong, Taiwan, Singapore, and Shanghai

bmwman91 says

You don't necessarily have to be wise with money to make a lot of it, and people that are not great with money will usually overpay for things, or just plain buy things they they don't actually need.

What they are paying for is not the house, but access to a "public" K-12 with high standardized test scores ("API"). Note where the Goran says they mostly came from: they have brought the Gaokao Culture with themselves.

ContStinks DeGroot says

And nobody is. Precisely the reason housing sales are at 15 year lows.... and falling.

We're talking about Cupertino. 60 houses on the market and 200 sales in the last 6 months. That is a healthy market moving what inventory is coming up.

I was going to comment but Bellingham pretty much said what I wanted to say. Cupertino is not at some imaginary 15 year low.

RentingForHalfTheCost says

The picture will look much different in 5-10 years in Cupertino. Apple will also look different, not in a good way. Spin the wheel and take your chances. Good luck

One thing I've noticed is with Jobs dead, the company raping record profits off the backs of their Chinese slaves, and them now being run by the scumbag who initiated allot of its evil policies; Apple is at a edge now.

The very edge of how far they can push their immorality before there is a consumer, public and political backlash. Though they are few now, the ranks of people who will not give money to Apple just out of principle is growing, and could become a tide. That is if the sheeple ever wake up, fat chance. :P

That is the only way Cupertino will ever exit its reality distortion filed. (Posted on my six year old Quad G5 btw)

clambo says

Hong Kong forget it, prices are astronomical compared to even Cupertino.

Comparing Hong Kong to Cupertino, now, hah. Perhaps, while you are at it, you should also point out that Paris, France is more expensive than Biloxi, Mississippi.

dunross, I am not a fan nor apologist for Cupertino.

But really, living like rats in those high rises where things like dengue fever and SARs happen, compared to the "wide open spaces" in Cupertino.

SFace says

Purchases are dominated by high income family who uses Cupertino as a de factor private school without the private school cost.
As I advocated many times, school district is a pass-thru cost with the only incremental expense are the increased interest and property tax. That is significantly less than private schools.

Its very easy to see the cost of private school, they are published and open to the public. Back that out and compare to other cities in Santa Clara County.. its pretty obvious you have a highly inflated costs. Private local schools have a long history of success.

B.A.C.A.H. says

dunross, I am not a fan nor apologist for Cupertino.

But really, living like rats in those high rises where things like dengue fever and SARs happen, compared to the "wide open spaces" in Cupertino.

If you want open spaces go to New Zealand or Brazil. You can find good weather down there too.

There are very good fundemental reasons why cupertino prices should of skyrocketed in the 80s and 90s by the same degree as we have seen in the past 10 years.... but those same reasons dont exist today. No its doesnt make any sense.

B.A.C.A.H. says

dunross, I am not a fan nor apologist for Cupertino.

But really, living like rats in those high rises where things like dengue fever and SARs happen, compared to the "wide open spaces" in Cupertino.

Yeah, Cupertino really is cheap compared to HK. It basically doesn't matter how much money you have in HK...you can't get a SFH because there are like 17 of them in the whole SAR. $1M (US) will get you a 700SF flat on HK island, maybe, and something a tad bigger out somewhere like Tuen Mun. Anyway, HK isn't as terrible as you make it sound, but I suspect that you know that.

With that said, I really like HK. I would live there over SF or NY any day. The great public transit is a big part of the reason. The other part is the people; people there have self respect, and don't act trashy like they do here in the US (minus the spitting thing...). Add to that the little stuff like the abundance of outdoors recreation (~50% of the SAR is undeveloped, mountainous land), environmentally conscious population, CHEAP unprocessed food, nicely maintained beaches and most people speaking some English & all signage being in English + Chinese. All of that almost makes up for the yucky weather you get 10 months out of the year!

For those that don't know, HK /= China. There is a world of difference. You cross the border from one to the other...yup, different world.

dunnross says

If you want open spaces go to New Zealand or Brazil. You can find good weather down there too.

This is not a snide remark or sarcastic question, but an honest one: Have you ever been to HK?

It does not sound like it, but I might be mistaken.

thomas.wong1986 says

There are very good fundemental reasons why cupertino prices should of skyrocketed in the 80s and 90s

>>>> There are very good fundemental reasons why cupertino prices should of skyrocketed in the 80s and 90s

It is "Should HAVE" not "Should of"

thanks for the correction.

bmwman91 says

For those that don't know, HK /= China. There is a world of difference. You cross the border from one to the other...yup, different world.

LOL! kinda like Cupertino and Gilroy...I wonder how many here been to Gilroy.. not not during just the garlic festival.

bmwman91 says

dunnross says

If you want open spaces go to New Zealand or Brazil. You can find good weather down there too.

This is not a snide remark or sarcastic question, but an honest one: Have you ever been to HK?

It does not sound like it, but I might be mistaken.

I've been there twice. Nice place.

ContStinks DeGroot says

Goran_K says

I was going to comment but Bellingham pretty much said what I wanted to say. Cupertino is not at some imaginary 15 year low.

Sales in Cupertino is at 1997 levels. That's plainly a fact.

Why would you lie to Patrick.net readers about it?

Living in the empty skulls of realtors. Rent-Free.

That doesn't explain everything. Cupertino inventory is super low, around 30-40 houses at any one time, and what is out there gets bought.

Goran_K says

That doesn't explain everything. Cupertino inventory is super low, around 30-40 houses at any one time, and what is out there gets bought.

I view the low sales as a negative, not a positive. There would be much more sales if prices were rising or even stable. People are trapped with negative equity and can't sell, while others are thinking that they can wait for it to correct later. Time will tell on this one and people will be forced to sell. Cupertino is not special. It is filled with overpriced houses. The parents can only hope to learn from the kids that are getting great scores. I predict that by the time the well educated kids are hitting 15-16 they will look at the parents and say, "Man you were just a fool for buying this crappy house for million+. It would have been cheaper to hire a tutor for me".

I'm not saying Cupertino is not overpriced, I think it is. But the demographics of the people who buy there have changed in 15 years, and their value system is a lot different than mine or yours. If you're a business man from Hong Kong, and $2,000,000 buys you a 2,500 sqft house in Cupertino, or a 1,100 sqft apartment in HK, the choice starts to make sense.

Also, low sales would generally be a negative, but this isn't a normal situation. Cupertino hasn't had new construction for a long time, and won't for the foreseeable future. Also Cupertino has become a prime location in the past 15 years. Couple both of those facts, it's natural that inventory would be low, which would mean sales numbers would be low. Low sales numbers by themselves don't explain everything as I was explaining to the "everyone is a dirty realtor" guy.

Cupertino is a light version of San Marino down here in SoCal. Another area that has a huge demographic of rich Chinese. It's a very small town, with very limited supply of housing, and whenever a home pops up on the market it's gone in 10 days or less, even if it's a 1,50o sqft ranch home built in the 50s priced at $1.2 million.

It doesn't make sense to you and I, but it makes perfect sense to them.

Goran_K says

RentingForHalfTheCost says

When someone says this, all the more reason to run! The was the motto back before the dot com implosion, and also the motto before the housing bust. When all people have to reason the over-inflated prices is "things are different", then they have nothing at all.

That's generally sound advice when the claim doesn't make sense.

But do you actually think that there should be no price difference between different cities based on real factors like location, access to jobs, great schools, safety, etc?

Should Inglewood, Compton, West Oakland, Richmond, and Cupertino just be similar priced or is Cupertino "different" in some way?

Rule #2. When someone says that they understand rule #1 but it doesn't apply to this area, again run for the hills. This is a case of 2nd derivative denial. It is the worse case of denial and where the larges losses transpire to unsuspecting newcomers. Remember, the people that want you to believe in the fairytail valuations are all on the side of taking some of your money in the transaction. i.e. Realtors, home sellers, banks, title companies, insurance, city taxes, etc.

Goran_K says

It doesn't make sense to you and I, but it makes perfect sense to them.

Another bad attempt at explaining why you should pay 2x for something. This same logic was applied by others 5 years ago and look where it got us.

And on top of the Chinese thing there does happen to be BIGGEST US MARKET-CAP CORPORATION ON THE PLANET (15% larger than Exxon right now) totally based there, and building its new mothership on the eastern fringe of Cupertino.

RentingForHalfTheCost says

I predict that by the time the well educated kids are hitting 15-16 they will look at the parents and say, "Man you were just a fool for buying this crappy house for million+.

LOL At that age...

Boys: "Heyyyy.....girls have boobs, how can I get them to let me touch them.....and I wonder how fast a car can go? Mom & dad are fools, they don't understand me!"

Girls: "So, like, Sabrina said that my hair isn't as nice as hers, and I was, like, psssh WHATEVER! That bitch probably doesn't even have a boyfriend yet. Mom & dad are fools, they don't understand me!"

You have some potentially valid points about other reasons why the housing inventory there is low. Teenagers lecturing their parents about real estate purchases, however, seems sort of unlikely lol.

RentingForHalfTheCost says

Goran_K says

It doesn't make sense to you and I, but it makes perfect sense to them.

Another bad attempt at explaining why you should pay 2x for something. This same logic was applied by others 5 years ago and look where it got us.

Okay, why don't you explain why places like Cupertino and San Marino have actually risen in prices since 2006 when every other market around he country has experienced a 25-50% decrease in price?

RentingForHalfTheCost says

Another bad attempt at explaining why you should pay 2x for something. This same logic was applied by others 5 years ago and look where it got us.

He is not trying to give an explanation for why rational people should buy there. He is explaining why the people that continue to keep prices jacked up there keep doing such an irrational thing. The "common sense" that you and most others here feel should exist in the market doesn't apply to everyone. There are enough fools with enough money that they will keep doing silly things, like paying $1M+ for a smallish house on a smallish lot in generic suburbia. School scores aside, the big draw Cupertino exerts is "because it is expensive." Once an area hits a "critical mass" of sorts with pricing, it will start attraacting attention from the masses of consumer idiots that don't understand the difference between price and value. People, and I see this a LOT in China, assume that if something costs a lot, it must be the best.***

A good analogy is moths to a flame. All of us prospective house buyers are the moths, and Cupertino is the flame. Clearly, we are all PAYING ATTENTION to Cupertino, and there are plenty of moths that are dumb/bold enough to fly right into it without regard for the consequences.

*** My fiancee's cousin owns a wine bar / restaurant in Shenzhen. He had lived in New Zealand & other western nations for quite a while before moving back to China, and he is far more western than he is Chinese at this point. Last time I was visiting (soon to be) in-laws, I spent a good amount of time talking to him. He stocks wines from all over the world. However, it irritates him that "any Chinese guy with some money" comes in and blindly wants "the most expensive French wine he stocks." That's it. There is no thought process; "just give me wine: most expensive, from France." Branding and price are all that matter. He has tried to get them to try some very good tasting wines from CA and NZ, at a fraction of the price, but they won't even consider it.

He says that their tastes for even more expensive stuff, like audio equipment, is the same. "Give me Bang & Olufsen." It doesn't matter what kind of music they listen to, or if they plan to use the stuff for movies, they "want the best, give me B&O."

Yes, this is anecdotal. However, there is plenty of truth to statements about wealthy Chinese buying seemingly overpriced real estate in botique areas. There really is no thought process beyond, "I want the best....what costs the most, and how many people that I know have heard of this place?" Maybe a little more thought goes in since they look at API scores, but it is really an incomplete metric. As anyone that works with data knows, summing up something complex like a human education system with a single number is kind of silly. It can tell you SOMETHING, but it rarely tells you EVERYTHING. Looking at API scores doesn't imply much of a though process beyond, "how much $, and where?"

Exactly! I'm glad I'm not the only one who notices that. I work with some fairly educated people from Asia. This is of course anecdotal, but I feel still makes the point.

I drive a white Hyundai, it cost me $17,000. I think it's a great car. Every mid-level manager who is asian at my firm drives at least a Mercedes E-Class, and some of them drive some ridiculous cars including a Lotus, and a few Porsche Turbos.

These guys don't make much more money than me, some even less. We all hangout after work, and go to Yardhouse, or some other area to drink on Friday. It's like a pimp daddy's parade going out of the parking lot (except for my hyundai I suppose).

So I asked one of the guys one night, his name is Feng, "Feng, why did you end up getting a Porsche? Why not a BMW or a Lexus?"

His reply, "BMW and Lexus is so common. You know how much Porsche costs in Singapore? My same car cost double the amount in Singapore because of import duty. It's cheap here man, it's a steal."

That's the type of mentality we're dealing with. Even though the car is $100,000+ for us, and we think that's ridiculous, they think it's cheap because it's so much more expensive to buy in Singapore, HK, and Taiwan, etc. It's hard to explain, and based on our values and logic, it doesn't make sense. But to them it makes perfect sense.

Goran_K says

It's hard to explain, and based on our values and logic, it doesn't make sense. But to them it makes perfect sense.

Yup. It is a different culture, and a different mentality. Status is huge, and while to some extent this is true here, it is the law there: status is purchased, and no money = no respect. It isn't right or wrong, just different. And when lots of folks with that cultural mentality move in here, it can be really irritating since it is somewhat contrary to our culture and makes things like buying houses more difficult.

bmwman91 says

Yup. It is a different culture, and a different mentality. Status is huge,

There's a whole lotta regular folks from those places for whom status is not The Religion. But they're not the ones immigrating to Cupertino. So 'Tino has become a "self-selected" population of a certain sub-Culture.

With state budgetary woes, my crystal ball says there may be more parcel taxes coming in Fortress areas.

B.A.C.A.H. says

There's a whole lotta regular folks from those places for whom status is not The Religion. But they're not the ones immigrating to Cupertino. So 'Tino has become a "self-selected" population of a certain sub-Culture.

Agreed... may not have ventured to other parts of the BA area... stuck in the enclave of Cupertino/Palo Alto till end of days.

Goran_K says

So I asked one of the guys one night, his name is Feng, "Feng, why did you end up getting a Porsche? Why not a BMW or a Lexus?"
His reply, "BMW and Lexus is so common. You know how much Porsche costs in Singapore? My same car cost double the amount in Singapore because of import duty. It's cheap here man, it's a steal."

LOL! maybe its for the mother in law... you just wait until he has to get a break job on the 7xxi... its not cheap.