Buyers paying $400-700K and up for homes next to Santa Clara County jail

[Human Torch]

Sales of homes brisk despite jail
COMPLEX NEXT TO ELMWOOD FACILITY WILL HAVE ALMOST 700 DWELLINGS
By Kimra McPherson
Mercury News

http://www.mercurynews.com/mld/mercurynews/news/local/15379431.htm

When construction is done on the new Terra Serena development in Milpitas, the gated community will boast almost 700 housing units surrounded by parks, swimming pools and tennis courts. It will sit next to another gated community: the Elmwood Correctional Facility, a Santa Clara County jail. Nonetheless, buyers are flocking to the $700,000-plus homes, $500,000-plus townhomes and $400,000-plus condos at Terra Serena -- even though their neighbors down the street aren't exactly the Joneses.

The KB Home development -- which city leaders courted both to bring more housing to Milpitas and to pin the jail into its current quarters -- has attracted droves of prospective buyers. A recent Saturday open house brought in 1,700 of them -- well above the 300 that South Bay KB developments typically see at similar events, KB spokesman Craig LeMessurier said. Almost all of the 40 single-family homes and 40 townhomes offered for sale so far have sold, LeMessurier said. Only 15 condos have been put up for sale, but more than half of them are already claimed.

When the complex is done, 165 single-family homes and 203 townhomes will sit on the property next to the jail. Three buildings with a total of 315 condos are being built on the other side of Abel Street.

Elmwood houses about 2,300 medium- and minimum-security male inmates and about 550 female inmates of all security levels, jail spokesman Mark Cursi said. ``It's not like it's San Quentin,'' townhome owner Joaquin Ramirez said.



Elmwood and its long, winding double-security fence can be seen just across the road from the gated Terra Serena development in Milpitas.

[sandnsea]

1. Someone explain how they pay for these

Because I just do not understand how one makes a mortgage on a $400,000 home. Is it all lawyers and engineers in these places? I don't get it.

[skids]

2. "Upgrades"?

I do not doubt that there are cases of people who really cannot afford these homes being given mortgages on them -- no money down, interest only, soft second mortage -- figuring they will hold them for a year, then sell them at profit. Big surprise waiting for them.

(You would think that now that the pending crash is getting media coverage these types of buyers would run for the hills, but there are some people who just inherited the pollyanna gene I guess. "Flip that House" is still playing on TV.)

At this end of the price range, though, my guess is the buyers represent the few homeowners these days that still have a good amount of equity built up already in their current home (e.g. they haven't needed to draw back out of principle for living expenses) and are "upgrading" by selling the old house.

Eventually the only people that will be able to buy will be immigrants from the countries that hold our debt. I do notice the latest Century 21 TV ad seems to target that market, quite cooincidentally...

[sandnsea]

3. That's an awful lot of upgrading

And somebody has to be able to buy out the old home at an increased price so that they can buy these. I don't know, it really just doesn't add up to me at all.

[skids]

5. Oh, well the sale of the old home is easier...

...because the price of that home is lower, it is much easier to find a patsy who's bank will finance him despite the fact that he just cannot afford it.

[sandnsea]

7. Yeah, but who are those people?

At some point it is clear that people with $30-40,000 incomes cannot buy the older homes at $250-$300,000 - and I've seen parts of CA where you can't even get a home for that price. Lawyers and accountants aren't buying the old ones or the new ones, so who is buying all these homes?? That's the part I don't get.

[skids]

8. Yes, they are selling $250K homes to mid-income people.

Just read up on some of the high risk lending that's been going on. Less so now that interest rates are up, but during the free money years it was pretty astounding what they were getting away with.

[sandnsea]

10. Money only goes so far

And a $40,000 salary doesn't pay a $1500 mortgage, no matter what kind of sham lending practices are going on.

[cboy4]

11. If you are "only" pulling in $40,000 in the Bay Area, you are living

in poverty.

[cboy4]

4. Keep in mind the 400K "home" is a condo. No, the "lawyers and engineers"

live in multi-million dollar homes.

It would not be unusual for a middle income family (in Bay Area standards) to live in a $700,000 home in Santa Clara County.

[sandnsea]

6. And pay for it how?

That's what I'm asking.

[cboy4]

9. Below is a link to job openings in Santa Clara County and the pay....

you can see the pay is more than in other parts of the country to help compensate for the high cost of living.

Keep in mind I'm not saying it's easy to make ends meet in the Bay Area.

It's not.

http://agency.governmentjobs.com/santaclara/default.cfm

[sandnsea]

12. Those are higher incomes

But there are also more professional openings than I generally see at govt sites, so that explains a lot too.

[lapfog_1]

13. Silicon Valley

These are usually not first time buyers, but people that own a home they bought 4 to 8 years ago.

The rise in equity of that home plus a DINK income of $150K or more (a good software engineer here makes $130K or
more, and most families have 2 incomes) allows one to qualify for a decent mortgage rate. Still, even with the
$100K down, rising interest rates dictates that people spend up to 40 percent of their after tax income on the
mortgage (or more). Which, if there is ever another down turn in high tech (and we know that there will be),
will mean a lot of foreclosures at some point in the future. Also, a lot of people are starting to think that
now is the last time to "flip that house" and get out before they sit on the market for years or they have to
sell them for little or no equity gain.

I think the housing market is about to tank here. Maybe worse than in the 1990-1992 downturn where a lot of
people found themselves upside down on their mortgages.

[fed-up]

14. Joe buyer bought a house pre-2000 for 200K, now worth $400K, he sells

and is really only financing the additional $200K.

Or Joe buyer sells his home that he paid $100K for in the 70's for $800K and pays all cash for the smaller condo.

Or Joe buyer inherits $800K from the sale of his parents house and buys two condos.

Or two teachers with combined salary of $120K buy the house.

[sandnsea]

15. Two teachers here

might have a combined income of $90,000, if they've been teaching a while. First year teachers earn $30,000. We don't have the incomes here like the ones posted above. Buying with the equity from a previous home requires somebody to be a first time home buyer somewhere along the line, and incomes that I'm familiar with are not enough to buy those homes. In fact that's the problem in my town right now, incomes aren't enough to buy the smaller homes that are priced at $200,000 which is starting to crunch the market. The jobs at the Santa Clara county site all start at about $4,000 a month and up, which is a big difference from my town.

[fed-up]

16. My home is on the market for $400K, and it most likely will NOT sell to a

1st time buyer here in Chico, northern CA. My neighbor's house just closed yesterday and sold to a recently divorced guy from Washington State that used to live in the area. I don't know his occupation, but I am assuming he sold a house to purchase that one. Most of the houses in my area are owned by those of more independant spirit and many are either self-employed, teachers, realtors, contractors or people that have lived in their house for a long time. Turnover for decently priced houses in my area is low. Many run in the $800K range. Of course one can buy the $3 Million house that is just a few miles up the road...hahaha

I am buying down if/when mine sells and $250K will just barely get me a smaller 3 BR or duplex in town, but I will not need my car as much and can bike or walk almost anywhere I need to go. It also puts my son w/in walking distance of the bus to college. It will be nice to be almost debt free!!!