Publication Date: Wednesday, Sept. 20, 2000 & Friday, Sept. 22, 2000

Breaking into the market

by Jocelyn Dong

So you're looking to buy your first home in Silicon Valley. How do you get into the market?

"Stock options," says real estate agent Chuck Atwell dryly. "Being a multi-millionaire."

He's speaking only partly tongue in cheek, of course. Atwell, who specializes in the Mountain View housing market, is familiar with today's real-estate maxim that those who have the most money win. But first-time homebuyers who haven't cashed in on the high-tech boom can take heart. While $2.5 million properties grab newspaper headlines, more modest deals can still be had for a half-million dollars or less.

Another real estate truism comes into play, however; it's all about the location. "Finding any single (family) home under $300,000 in Silicon Valley is very, very difficult," says Marcy Moyer, a real estate agent with Alain Pinel in Palo Alto. "There are still some homes in Sunnyvale between $400,000-450,000. For that same price in Mountain View, you get a fixer upper."

Atwell is even more frank. For $500,000 in Mountain View, he notes, buyers get "a property that should be torn down on a 4,000-square-foot lot, in an industrial/high-density area."

In Menlo Park and Redwood City, says real estate agent Elyse Barca of Seville Contempo Fine Homes and Estates, entry-level homes hover around $500,000 in the North Fair Oaks and the Avenues neighborhoods. There are $600,000 two-bedroom homes in the Willows and West Menlo Park areas.

And what of Palo Alto? During a recent phone interview, Moyer searched real-estate listings on her computer. The lowest priced property on the market that week was listed at $499,000, for a 582-square-foot home that had been condemned by the city. It sat on 4,700 square feet of land.

The next cheapest property was a three-bedroom, two-bathroom house for $649,000. "That's the lowest (priced) non-condemned house in Palo Alto," Moyer commented.

So where are the "cheap" properties, the ones that first-time homebuyers without stock options can afford? Take a look at condominiums and townhomes, real estate agents urge. Moyer, for instance, is preparing to list a 2-bedroom, 2-bathroom condominium in Mountain View for $299,000.

For even less--$250,000--buyers might find a 600-to-700-square-foot, one-bedroom, one-bathroom apartment-type condominium in Mountain View. For a condominium that's in a good complex and located in a better area of town, Atwell says that buyers can look at a two-bedroom place for $325,000 and three bedrooms for $460,000.

It's not just for the cache that people want to move into Palo Alto. Some want access to Palo Alto schools, and for them, Moyer suggests the Greenhouse condominium complex on San Antonio Road. "If you want to get into the school district and are on a budget, the Greenhouse is the way to go. Depending on the quality of the inside finishing, it can cost from $400,000-550,000 for two or three bedrooms." In addition, studio condominiums in downtown Palo Alto occasionally go on the market in the $400,000 range for 700 square feet. Condos in Palo Alto Central, located in the California Avenue district, are also running between $400,000-500,000, says Moyer.

In Menlo Park, two-bedroom condominiums generally start at $400,000, says Barca. Many are located in the Sharon Heights area.

Townhomes offer an in-between priced alternative to condos and single-family homes. Atwell notes that townhouses start at $500,000 in Mountain View, and for the price, buyers can expect a better location and property than an equally-priced single-family home. For the same number of bedrooms, Atwell says, a house could cost upwards of $800,000.

Knowing the market is one step to homeownership; another task for homebuyers is calculating how much they can afford. As a rule, mortgage lenders recommend that no more than 28 percent of a person's or family's monthly gross income be spent on housing.

Patrick Little, a senior loan officer with Coast Capital Corp. in Palo Alto, offered the following calculations for a hypothetical home purchase:

For a $400,000 home, assume that the buyer is paying 10 percent of the cost--or $40,000--upfront as a down payment. The homebuyer then applies for a $360,000 loan to cover the rest of the mortgage. A standard type of loan is the 30-year fixed mortgage, and current interest rates run at about 7.75 percent. At that rate, principal and interest will cost approximately $2,500 a month. Taxes and insurance could add an additional $600.

Paying $3,100 per month for housing means that a person or family would have to have an annual gross income of at least $133,000 to afford a $400,000 home.

There are many types of mortgages and financial options that the first-time homebuyer will want to research. Banks and mortgage-lending companies, even city and county housing departments, can help homebuyers achieve their goals.

Atwell of Alain Pinel in Los Altos offers a final piece of advice to those hoping to make the leap from renting to buying: "Do not have unreasonable expectations. Nobody gets exactly what they want. Nobody--not even Bill Gates. If you stick your heels in the ground till you get exactly what you want, you'll end up being your landlord's best friend and paying for the landlord's mortgage. Successful buyers are ready to move at the drop of a hat to take advantage of the market."