The latest home value rankings once again confirm Atherton as the nation's most expensive housing market for the sixth consecutive year. Seven out of the top ten rankings for the nation's most expensive zip codes were in California. Atherton’s paramount price of $7.4 million for its median sales price is nearly 50% higher than the second most expensive zip code, Beverly Hills, with a median home sales price of only $5.1 million.
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As the leading buyer's agent in Atherton for an extended period, as well as a past resident of the town, I have had the opportunity to experience the numerous attractions of Atherton firsthand and understand why affluent buyers are drawn to living there. From my observation, here are the four aspects that buyers value most in Atherton:

Natural Beauty: Atherton boasts a more verdant and park-like environment than rustic oases like Woodside or Portola Valley. Driving through Atherton is a delightful experience that alleviates stress and sets the tone for your arrival at your estate, where you can unwind in your own lush backyard.

Ease of Building Your Dream Home: Atherton's building codes and regulations are considerably less restrictive than those in nearby affluent cities. This ease of redevelopment has led to strong appreciation in Atherton's property values, making the town increasingly prestigious and in high demand. No other town in the Bay Area sees as much new construction as Atherton, thanks to its developer-friendly building codes. The robust demand is evident through the successful sales of two large Atherton lots for $25 million each this year, with both sold by the DeLeon Team.

Exceptional Police Force: Atherton is home to arguably the best police force in the Bay Area, known for its rapid response times and unique services not offered by other precincts. These additional complimentary services include property checks during your vacation and the option for residents to register their cameras with the police department, creating a collective chain of surveillance with security cameras around town. The Atherton police also do not charge for monitoring your alarm, and the city is the first in the Bay Area to deploy a drone for real-time data on crimes in progress. These policies produce great results, as even with its extreme wealth, Atherton's violent crime rate is only one-third of the national average according to bestplaces.net crime data.
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Sought-After Schools: Silicon Valley is renowned as the global epicenter of innovation, which is built upon education. Thus, it comes as no surprise that Atherton generally offers excellent schools. In fact, Oak Knoll Elementary, Las Lomitas Elementary, Hillview Middle, and La Entrada Middle all ranked in the top three percent among California's schools in Niche.com's recent rankings. Menlo-Atherton High School, with its robust gifted programs, wasn't far behind, ranking in the top six percent of California high schools. 

Having personally cherished my time living in Atherton, I can attest to its exceptional quality of life and the prospect of long-term appreciation. My profound love for this beautiful town makes it easy for the DeLeon team to sell properties here. Michael Repka and I take pride in being the top agents/team in Atherton (see Atherton 2023 sales YTD below). Please reach out to us to learn more about how our top team can assist you in buying or selling a home in Atherton.

During this slow season around the holidays, our CEO, Michael Repka, and I flew the DeLeon turbo-prop airplane around the western United States to meet top agents in some of the destinations our clients are moving to the most, such as Austin, San Antonio, Santa Fe, and Scottsdale. Through research, personally interviewing the top agents, and spending time in these cities, we can give our clients informed and unbiased recommendations to the best agent in each area for their particular needs. While I have enjoyed learning about different regions’ housing markets and how much tax savings one would enjoy when moving there, I still think that my favorite region in the world, and where I will eventually retire, is the Carmel/Pebble Beach area. This region, where I have happily owned a beach house for over ten years, provides an unbeatable combination of stunning natural beauty with the proximity of being only a short drive away from everything Silicon Valley has to offer.  

I would love to introduce my clients and readers to the many benefits of living in the Carmel/Pebble Beach area, which is an ideal second-home location and eventually a great place to retire. The many reasons to purchase a home in this area include its unparalleled natural beauty, vibrant art scene, its many diverse and enjoyable festivals and events, and a renowned cuisine culture. Plus, buying a vacation home long before one is ready to retire gives years of appreciation and the probability of significant property tax savings thanks to Prop 13. 

The relaxing natural beauty of this region belies the multitude of events and offerings this area provides. The area plays host to the  PGA’s Pebble Beach Pro-Am tournament where pros, local amateurs, and celebrities play together on the legendary Pebble Beach golf course, ranked the best public golf course in America for the last 50 years. Pebble Beach is also host to Concours d’Elegance, my favorite event in the Bay Area and arguably the best car show in the world, featuring century-old classics showcased by the ocean. Other annual attractions include the Monterey Jazz Festival and Pebble Beach Food & Wine, a delight for epicureans who can also dine at a Michelin-starred restaurant in Carmel. 
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Carmel

California arguably enjoys the most natural beauty of any of the continental states, and within California, Carmel is the town with the most untrammeled beachfront beauty. Condé Nast agrees, recently ranking Carmel as one of the most beautiful towns in America and the only town in California to make the short list. Carmel is a stunning hybrid of the raw, natural beauty of Big Sur intersecting with a very charming downtown brimming with quaint, European architecture lined with galleries and boutiques. The expansive Carmel Beach, fittingly located at the end of Ocean Avenue, is both a beachgoer’s and dog lover’s paradise. The wide stretch of sand and beautiful blue-green waters provide a stunning vista to enjoy while walking on the path along the appropriately named Scenic Avenue. The beachfront homes are a delightful mix of distinct styles ranging from contemporary homes with walls of glass, to Frank Lloyd Wright’s only oceanfront house, which is designed like a ship; in fact, its prow literally breaks the waves during high tide. 

Carmel’s  lifestyle attracts many celebrities, including former Mayor Clint Eastwood, and Brad Pitt, who just paid $40 million to buy a historic oceanfront home. Carmel and Big Sur have a strong literary and artistic history, with authors including Jack London, Robert Louis Stevenson, Sinclair Lewis, and Henry Miller, as well as artists such as Ansel Adams, Salvador Dali and more recently, Thomas Kinkade, the famed “Painter of Light," all having spent time there.

Carmel Valley

Although not as famous as Carmel or Pebble Beach, Carmel Valley provides an ideally balmy Mediterranean climate where Carmel’s coastal fog burns off and residents enjoy a great lifestyle, sans ocean views, at a relatively affordable price. At less than half the cost of Carmel, a beautiful home can be purchased in the Valley with relaxing views of a golf course for $2-3 million. Carmel Valley has a charming downtown, while the wineries dotted throughout the Valley provide enjoyable and intimate tastings reminiscent of Napa 20 years ago. 
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Pebble Beach

Perhaps the crown jewel of the Monterey Peninsula, these estates allow you to get a large home and acre lot with ocean views at prices that have appreciated greatly since the pandemic, yet still sell for two-thirds of what Palo Alto homes sell for on a dollar per square foot basis ($1,947 per square foot for Palo Alto homes on small lots, $1,337 per square foot for Pebble Beach homes on an acre-plus lot). The only negatives of Pebble Beach are that it has a foggier microclimate than Carmel and it is not as pedestrian-friendly, as walking paths are limited. 
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Appreciation Projections

Second homes have become good investments, and there are many reasons to purchase one. From enjoying it with your family (I can personally attest to the enjoyment my 4 kids and I have had on Carmel’s beaches), to locking in Prop 13 benefits if you keep it as a retirement home, owning a second home makes more sense than ever. 

If you’d like to learn more about Carmel and Pebble Beach, please reach out to me or my wife, Alexandra, who attended high school in Pebble Beach and knows the market well. It’s a small piece of paradise right here in California – so close to Silicon Valley, yet a world away!
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Generally, only the most elite neighborhoods such as Old Palo Alto or West Atherton can command eight figure prices. Yet as Silicon Valley continues to be the epicenter of the nation’s innovation and tech companies continue to thrive, high-end listings are cropping up in many different neighborhoods. 

It takes a bold developer to be a pioneer and seek to break through ceilings that have yet to be broken. The Dragonfly Group is one such developer that is setting new ceilings in neighborhoods. Previously, in the Sharon Heights neighborhood of Menlo Park, the highest sales price ever reached was below $7,500,000. So, when the Dragonfly Group listed their new Sharon Heights home for $9,950,000, all of the naysayers were waiting for them to fail. But when they succeeded and the home sold this year, the question then became: what neighborhood will be next?

Barron Park, a charming and rural neighborhood of Palo Alto, is the next frontier. Dragonfly Group is seeking nearly $10M for 995 Los Robles Avenue, which will be a contemporary home that is 6,485 sq. feet on a lot that is barely over 13,000 sq. feet. While cheering for them, this also makes our upcoming listing at 953 Roble Ridge Road in Barron Park a steal of a deal.

In the estate section of Barron Park, where these few homes often have lots which can greatly exceed an acre, 953 Roble Ridge Road is a completely remodeled and expanded 6-bedroom, 4.5-bathroom home of over 6,000 sq. feet, plus it has a two-bedroom guest house that is over 700 sq. feet. The lot, the second largest in Palo Alto excluding homes in the hills, is over 71,000 sq. feet. This home, which will be listed at $7,988,000, will assuredly sell and Barron Park will continue its rise, as buyers love the centrality and rustic beauty of this stunning neighborhood.

With great natural beauty and a large lot size, this home provides the privacy and peace of Woodside, but with Palo Alto convenience. In addition to being next to Bol Park and the bike path that leads to Gunn High School, downtown Los Altos or California Avenue restaurants, this home is also exceptionally close to all major employers of Silicon Valley as the map below illustrates:
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1. VMware HQ
2. Wilson Sonsini Goodrich and Rosati
3. Stanford University
4. Google
5. Facebook HQ

There are no easy solutions to the Bay Area housing shortage, which has resulted in high home prices and long commutes. Facing pressure from both state regulators demanding more housing construction and requests from citizens, several Silicon Valley cities have eased the restrictions on building an accessory dwelling unit (“ADU”). This article details how these regulations have loosened and also posits that those cities who more easily allow owners to build ADUs will see greater home appreciation going forward. 

ADUs were once amazingly rare and required an exceptionally large lot to even have a chance at approval. For those rarified parcels large enough to build an ADU, what was allowed was usually very small and was subject to many regulations. The restrictiveness of past regulations and the ease of new rules is evident by comparing the older regulations that Los Altos had versus the more liberal regulations that the City Council recently approved.
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Other Silicon Valley cities have also loosened their restrictions on building ADUs, with the greatest change being the elimination or reduction of the minimum lot size. As another example, Palo Alto recently eliminated the “minimum lot size” requirement for allowing an ADU. With this change, the number of permits issued by Palo Alto for ADUs went from just 4 per year to 25, and another 29 ADU permits reviewed recently (see, Palo Alto Weekly, August 24, 2018). To further encourage construction for even more ADUs, the city council is exploring reducing or even eliminating the steep permitting fees that the city charges for ADU structures. Given that these fees can approach $10,000, waiving or eliminating these fees would further spur additional ADU construction. 

Given the strong and pent-up demand for more housing in our land-constrained peninsula, ADUs seem to be one of the most effective and least intrusive ways to add local housing stock. While it is still too early to tell, I project that cities that are more amenable with the construction of ADUs will see more construction and even greater appreciation as buyers will want the option of having a secondary dwelling on their property. While many owners are using these dwellings as rentals for our local tech community, they also provide more space for visiting family, guests, or an au pair - choices that are very appealing to today’s buyers. While many new construction ideas face a backlash, I view the ease of regulations for building an ADU a positive for Silicon Valley housing and an easy way to address our chronic housing shortage. 

“If I can make it there, I'll make it anywhere.”  This line from Frank Sinatra’s aspirational “New York, New York” reflects the long-held belief that New York is the epicenter of American commerce and progress. Yet, as technology pervades more industries and becomes the ubiquitous driving force of innovation and wealth creation, has Silicon Valley and the San Francisco Bay Area surpassed the Big Apple as America’s preeminent region? While the San Francisco Bay Area has only 7 million people compared to New York’s metropolitan population of over 20 million, multiple measurements of wealth, culture, and education indicate that the Bay Area now comes out on top.

One metric illustrative of the success of Silicon Valley’s tech companies would be the increase in market cap value of the top three companies headquartered here versus New York. This pits the combined market cap growth of Apple, Alphabet, and Facebook versus J.P. Morgan, Pfizer, and Verizon. The comparison is startling, and demonstrates how much technology companies have grown recently. According to Ycharts.com, since the stock market rally from President Trump’s election on November 8, 2016, Apple is up $309 billion in market cap value, and now worth an unprecedented $901 billion. Alphabet is up $235 billion in market cap growth, with a total value of $780 billion. Facebook has added $163 billion in market cap, and is now valued at $521 billion. While these tech titans, three of the five most valuable companies in the world, collectively added $707 billion in value in the last 15 months, the top three New York companies collectively added only $223 billion in market cap value, or less than one-third as much. With more value creation now stemming from Silicon Valley’s tech innovation rather than New York’s financial markets, expect the Bay Area to continue to expand and add wealth more than New York or any other US region.

With wealth and education come the desire for cultural amenities and improvements. New York was always viewed as the center of the nation’s culture and food excellence. But just as there has been a flow of innovation and prestige from the East to West Coast, so too has the growth of gastronomic delights followed. While cuisine is highly subjective, there is quantitative data to support this contention. The preeminent of which is the number of three-star Michelin restaurants in each region. According to Eater San Francisco, since 2011 New York has not gained a single three-star restaurant. In this same timeframe, the Bay Area has gained five three-star restaurants. The Bay Area now has seven three-star restaurants versus New York’s five.

Mirroring the trend of tech overtaking finance, Stanford has a brighter future than Harvard. While I would still consider Harvard the world’s preeminent university, Stanford may appropriate that role in coming decades. According to Philanthropy.com, Stanford is the leader in fundraising in recent years, collecting over $2.5 billion in the last two recorded years—more than Harvard and more than double New York’s Columbia University. In addition, according to Times Higher Education, since 2000 Stanford has been ranked as one of the top two universities, along with Princeton, for creating Nobel laureates. While the past belongs to Harvard, Stanford and its excellence in the sciences and entrepreneurial innovation will likely be the leading light for the world in coming decades.

Clearly, which region in America is the most innovative, creative and successful is difficult to answer and everyone will have their own perspective. Yet this article poses more of a question than a clear conclusion. The fact that the Bay Area can even be compared to one of the top cities in the world with three times the population illustrates how amazing this area is which we all get to live in and enjoy. Let us be thankful and appreciative of all that the Bay Area provides: a world class economy set in a stunning natural environment coupled with the benefit of a highly educated population. While it is perhaps the best region in America or even the world, at a minimum, it is a great area to call home.

Being a Palo Alto resident for the last twenty years, I have come to love Palo Alto as I truly appreciate how uniquely exceptional it is. Residents of other communities cannot understand why buyers will pay such a premium for Palo Alto homes (the Listing side of our team had 5 of our Palo Alto listings last year jump by over a million dollars!). Palo Alto’s secret sauce is that it can paradoxically combine many great attributes such as the cosmopolitan nature of a world class community, while still maintaining its small-charm appeal. While so much of Palo Alto’s appeal cannot be articulated or empirically illustrated, the supreme ratings of our schools are an easy metric to show how exceptional our schools and, indirectly, our community is.

Palo Alto being ranked as the top school district in the entire state is impressive, although not shocking. What was amazing was how dominant Palo Alto schools are at all three levels. Out of 6,222 California elementary schools ranked in 2018 by niche.com, Palo Alto has eleven of the top twelve elementary schools! Palo Alto has the two top middle schools in California as well. Gunn is ranked as the best high school in the state and Paly is strongly in the top 5. Given that California’s population hovers near 40 million and our GDP is the sixth largest in the world, for Palo Alto to dominate the state rankings at each educational level illustrates one facet of why we all love Palo Alto and how DeLeon Realty can get home buyers to pay so much for our listings.

Congratulations to our exceptional faculty, with our teachers being ranked by niche.com as the best in the entire state as well. Not too surprising given that the proof is in the pudding and these amazing results speak for themselves. On the private school side, Castilleja is the 29th best high school in the nation per niche.com out of approximately 18,500 private high schools in the nation!

Palo Alto is also uniquely exceptional in that it has birthed or been a large part of the history of many of the region’s most innovative companies. These luminaries, whose market cap exceeds $1.5 trillion, include Google, Facebook, Hewlett Packard, Tesla, VMware, Paypal, Intuit, and Palantir, all who were once or are headquartered in Palo Alto. While the media, real estate attorneys and other real estate experts often comment on the innovative approach we have brought to the real estate industry, I know that we are a product of our environment. DeLeon Realty’s innovative goals and client centric focus are consistent with Palo Alto being the epicenter of the world’s innovation. DeLeon Realty has the honor of being the only major brokerage in Silicon Valley headquartered within 10 miles of downtown.

DeLeon Realty’s sales volume in Palo Alto continues to climb every year as we have optimized the preparation and marketing of our great Palo Alto listings. Personally knowing and loving all that Palo Alto has to offer allows us to so effectively showcase and sell its many virtues. With our focus on Palo Alto and our values being consistent with our founding city, DeLeon Realty’s sales volume in Palo Alto continues to grow every year and now we are selling around six times as many listings as the second ranked team in Palo Alto (per broker metrics for 2017).
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Despite our small size, DeLeon Realty is already the second largest brokerage in Palo Alto, ahead of all of the combined independent contractor agents of Coldwell Banker, Sereno, Intero or Keller Williams (per Brokermetrics for the period from January 2017 until February 2018). We look forward to continuing to provide our Palo Alto clients with even more services and becoming the top brokerage in Palo Alto.

While a rising tide will lift all boats, in real estate these boats (or neighborhoods) will not all rise at the same velocity.

Though there are some mega-trends driving the housing market in Silicon Valley, there are also micro-trends and dynamics that come into play with the cities relative to each other.

The status of which city is the hottest and most frenzied in Silicon Valley changes according to a push-pull dynamic, and the defining quality of a good buyer's agent is to spot the next hot city before the market does. In this article, I will discuss how the interrelationship between cities works, illustrated with a current example, and I will also predict the next city buyers will focus upon and how property values will rapidly rise.

As the only top agent who works exclusively with buyers, and with over $1 billion in recent sales with these buyers alone, I have gained insight into buyers’ goals and preferences. I have observed that buyers will often consider several cities in their search. For example, buyers who are drawn to Palo Alto will often be attracted to Los Altos, Menlo Park, or Mountain View as well. Therefore, the pricing dynamics of each of these cities will impact one other.

In 2016, almost all cities fared better than Palo Alto. With all of the uncertainty of the election, the housing market did not do well, but in descending order Mountain View, Menlo Park, and Los Altos all appreciated, whereas Palo Alto dropped by 2.3 percent from the year earlier on a price-per-square-foot basis (all statistics in this article come from the MLS). Thankfully, 2017 was a much stronger year with all cities appreciating, but the appreciation was not evenly distributed. From January to August, Palo Alto only appreciated by four percent, versus Mountain View which rose by 10 percent, with Los Altos and Menlo Park also rising more than Palo Alto.

By September of 2017, the upward movement of prices in Mountain View (up over 16 percent since 2015) and other cities versus Palo Alto’s 1.7 percent appreciation over the same timeframe made Palo Alto a relative bargain. This discrepancy pulled buyers back from Mountain View and Los Altos to Palo Alto. Since September, Palo Alto has become the region’s hottest market with the price per square foot jumping from $1,565 when averaged from January to August, to $1,797 per square foot for sales between September and December, leading to an increase of 14.8 percent just in the last few months. Palo Alto still has strong momentum, with one of our South Palo Alto listings selling for more than a million dollars above list price at over $2,300 per square foot!

Dissecting and analyzing the past is interesting, but prognosticating the future is much more insightful and valuable. So, what city will become the latest value play and soon see a push-up in pricing? I predict that this will be Menlo Park.

As recently as 2012, the gap between Menlo Park and Mountain View on a price-per-square-foot basis was 10 percent, and now that gap has narrowed to 1.7 percent. With this latest surge in Palo Alto pricing, plus the past strong appreciation of Mountain View and Los Altos, buyers will soon be pulled to the great values, good schools, and high quality of life Menlo Park offers.

While all of these cities have excellent fundamentals for long-term appreciation, getting into the next hot city before others do can save you hundreds of thousands of dollars. You will want to work with a skilled and insightful buyer's agent who has the expertise and acumen in economics to properly predict market appreciation.

The pandemic has fundamentally reshaped several aspects of societal life, which will have enduring effects. An aspect that often goes unnoticed is the change in the preferred type of residential real estate among buyers, and these changes are poised to influence the historical and present appreciation of distinct asset classes within residential real estate.

There are three major asset classes of residential real estate that consumers may purchase for themselves: single-family homes (“SFH”), townhomes, and condominiums. Before the pandemic, each of these three asset classes had strong demand and would follow roughly the same appreciation trajectory; conversely, each of these asset classes had distinct pros and cons with benefits that were equally attractive to buyers in the past.

While some buyers preferred the yard and space a SFH provides, others preferred condos due to their closer proximity to downtowns and urban attractions. Interestingly, the strength of demand for townhomes and condos is highlighted by the somewhat surprising fact that these property types experienced slightly higher appreciation rates than SFHs in Silicon Valley prior to the pandemic, as evidenced by the following data..

San Mateo County Appreciation in Dollars per Square Foot from 2010-2019:

SFH - 50.9%

Townhomes - 55.7%

Condos - 52.7% 

Just as the pandemic changed our viewpoints of safe activities for our families, it also changed how home buyers viewed their future purchase. The allure of city attractions and urban conveniences associated with condos became less significant, as downtown areas shuttered and communal spaces lost their appeal due to health concerns.

Instead, buyers sought privacy and space over density and convenience. Having a SFH with a private backyard safe from COVID became many buyers’ new focus. This shift in preference propelled formerly tranquil towns like Woodside and Los Altos Hills, known for their spacious properties, into strong housing markets that have maintained their vigor.

The shift away from density and urban amenities triggered by the pandemic translated into reduced demand for urban condos. The most extreme example would be San Francisco, the second-most dense city in America, where prices have dropped precipitously (and likely will take a decade to recover). Within Silicon Valley, this shift in criteria has separated the trends and appreciation levels of each of the three asset classes. Post-pandemic, SFH are more in demand and are appreciating much more rapidly than the other asset classes, as the following statistics show:

San Mateo County Appreciation in Dollars per Square Foot from 2020-2022:

SFH - 17.2%

Townhomes - 12.3%

Condos - 4.5% 

Anticipating the future, I feel SFHs will continue experiencing greater appreciation for several reasons:

1. The trend of buyers preferring space over density seems to have legs and will last for quite some time.
2. The supply of SFHs remains stable or is even diminishing, as certain SFH lots are being repurposed for higher-density endeavors such as multi-family apartments or condos. The supply of condos and townhomes is increasing as the greater density of these developments brings larger profits for the builder. 
3. California is allowing more optionality for SFH, which increases their worth and desirability. Measures granting additional square footage for Accessory Dwelling Units (ADUs) and eliminating SFH zoning, combined with the introduction of SB9 allowing SFH lots to be split, are broadening the potential for redevelopment of SFH lots.

This article underscores the pivotal nature of selecting the right real estate investment, as appreciation outcomes can significantly vary based on the chosen property type. Leveraging my Math-Econ background and insights learned during my time at Stanford’s Graduate School of Business, I am dedicated to accurately predicting future appreciation at both a city and neighborhood level. By scrutinizing present trends and extrapolating their trajectories, I project that the greatest appreciation potential lies in purchasing larger lots with older homes where the majority of the property’s value is in the land. 

For tailored insights into the Silicon Valley neighborhoods and properties poised for the most pronounced appreciation potential, please don't hesitate to reach out to me.

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For those steeped in Silicon Valley lore, Silicon Valley Bank (SVB) was a foundational player in the start-up world and a pillar of the Valley’s venture community. When I was an attorney at Wilson, Sonsini, Goodrich, & Rosati, we would advise nearly every start-up to consider banking with SVB, as they understood the Silicon Valley ecosystem and the needs of its entrepreneurs.

So how and why did this storied bank with 40 years of steady growth suddenly go bankrupt in a span of 36 hours, and what will be the impact upon Silicon Valley and local real estate prices? My analysis and conclusion may be counterintuitive, but I project that the loss of SVB as well as First Republic Bank (FRB) will benefit the Silicon Valley real estate market in the short term, but may lessen housing appreciation in the long run.  

How Did This Happen?

SVB’s business model was based on lending to venture backed start-ups and then growing with them as they scaled upward. SVB was flush with cash from the tech boom that occurred in 2020 and 2021, and they put their extra funds into long-term bonds that provided higher yields than short-term bonds. When the boom ended and venture fundraising dropped late last year, the same VC firms and start-ups that were plowing money into SVB started taking their deposits out, resulting in SVB getting concerned over their lack of capital.

While earning a master's degree at Stanford’s Graduate School of Business, I studied many models for purchasing bonds, but the key component SVB missed was not hedging the risk of bond returns rising and the value of their lower yielding bonds declining.  

At the close of the stock market on March 8, SVB announced that to raise funds to cover these capital outflows, they sold over $20 billion in bonds and lost nearly $2 billion in value due to not hedging against the risk of higher rates. That same evening, Moody’s downgraded SVB’s stock and liquidity concerns started mounting. Many prominent venture capitalists advised their portfolio companies to withdraw their funds, resulting in a loss of $42 billion in deposits. The next morning, regulators shuttered SVB and fears abounded that the funds of VC firms and start-ups would be frozen. A few days later, the FDIC informed SVB depositors that none of their deposits, even amounts in excess of the FDIC limits, would be lost and they would have immediate access to their funds.

Many regional banks soon had a run on their deposits due to the fear that they would be the next domino to fall. FRB has been hardest hit due to having some of the same qualities as SVB. Even though they had different business models, both banks had prosperous clients, which went from being a positive to a negative. After all, these clients are the ones most concerned about a bank run since the FDIC guaranteed deposit protection is only up to $250,000 per person, and $500,000 per couple, per bank. 

With the fear of FRB instability, perception became reality, and even a $30 billion dollar infusion by some of the nation’s largest banks to FRB could not stem the over $70 billion in customer deposits that were lost over the next week. Just as this issue of The DeLeon Insight went to print, in fact, FRB's assets and deposits were seized by federal regulators and sold to JP Morgan Chase Bank. 

Short-Term Impact 

Paradoxically, this turmoil in the banking system should actually improve the market for the vast majority of homes priced below $20 million. With the economic uncertainty caused by SVB imploding and other banks being at risk, the Federal Reserve now has to be more circumspect about increasing interest rates further, as the pain of these increases and its impact on bond prices is what indirectly led to SVB’s and FRB's collapse.  

Before the banking crisis, most analysts predicted the Fed would increase rates by two more quarter-point increments; now, most analysts see only one more quarter point increase. Additionally, mortgage rates, which are largely driven by the bond markets and not the Federal Reserve, saw large decreases. Mortgage rates from Wells Fargo and other large lenders have dropped by nearly half a point, with some rates now being below 5%, and many analysts are now predicting a much stronger spring selling season due to this unexpected drop. I, personally, am seeing a stronger market with many homes getting multiple offers and selling above list price, sometimes by more than $500,000.  

Affluent buyers who do want, or need, a mortgage will be hardest hit by the SVB/FRB bank meltdown.  These individuals are often the ones with much of their income coming from non-traditional sources, such as Restricted Stock Units ("RSUs"), options, and inconsistent large bonuses. My experience has been that over half of these buyers would be pre-approved with either FRB or SVB. 
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‍Long-Term Impact

SVB was a small player in the mortgage world, but a foundational player in facilitating start-ups through providing liquidity when no other bank would. I have concerns that the Silicon Valley ecosystem will have a vacuum to fill if another entity does not replace the pivotal role SVB played for start-ups. With SVB being acquired by North Carolina-based First Citizens Bank, I doubt it will provide start-ups with its former flexibility in underwriting. If this void is not filled, VC firms will have to better capitalize their start-ups more, allowing for less leverage and consequently fewer start-ups being able to obtain funding. I hope that a savvy Valley person such as Marc Andreessen steps in to create a SVB replacement, for I feel that much of Silicon Valley’s competitive advantage is that all start-up advisors such as SVB played a unique role in helping these companies succeed, and their loss is a loss for Silicon Valley. Another possibility is that one or more of the large private banks (or divisions) will develop products focused on the needs of the Silicon Valley elite. 

And while my clients will enjoy the lower rates that have resulted from this banking crisis, my hope is that we find an alternative to fill SVB’s role in the Silicon Valley ecosystem so the long-term ramifications aren’t as bad as many fear.

The pandemic ushered in unforeseen consequences that are impacting consumer tastes and housing market valuations with unprecedented celerity. This article explores the trends caused by the pandemic that will have both positive and negative ramifications upon the Silicon Valley housing marketplace. While it is too early to tell how these trends will impact local housing prices in the long run, they boosted both home values and the number of sales in 2020. As we enter 2021, we are in a period of greater uncertainty than ever before, but we are hopeful that the resilience of Silicon Valley home prices will allow our market to continue holding up as the following housing trends unfold:
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1. The pandemic has made technology companies become more valuable. Many experts have hypothesized that the pandemic accelerated technological adoption by as much as a decade. New societal norms now include Zoom meetings, Netflix movies, DoorDash dinners, and overall, more time for social media and internet searches. Tech separating itself from all other industries is evidenced by the Nasdaq gaining 44% in 2020 versus just a 6% increase in the Dow.  Many prime Silicon Valley stocks fared even better in 2020, with Apple gaining over 80%, Tesla gaining an unprecedented 700%, and IPOs such as DoorDash and Airbnb also doing well. The greatest predictor of future appreciation in Silicon Valley historically has been the Nasdaq's rise or fall, so rising stock prices in 2020 bode well for rising home prices here in 2021.
   
   Note that this is a bifurcated recession. While unemployment is relatively high at 6.7% and could go higher, those who are losing their jobs are generally not techies in Silicon Valley, but rather those concentrated in the retail and hospitality sectors. The continued success of tech workers has helped California tax revenues, which were $26 billion above projected levels due to increased stock prices and capital gains taxes received. The increase in unemployment paradoxically coupled with rising tax revenues from stock sales illustrates the bifurcation of this downturn. 
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2. Residential real estate as an asset class will appreciate in value, whereas commercial and retail real estate will decline. Think of real estate in sectors. Commercial real estate values are already declining as more workers prefer and already are working partially from home. Retail is in trouble as more buyers are becoming more comfortable with e-commerce. As less time and money is spent on commercial and retail real estate, this will translate into more time and money being spent on residential real estate, which will further benefit home prices. The home has been redefined as a family sanctuary and now an office.  As people are forced to and become more comfortable with staying at home, they realize they want larger homes with more optionality. As 2021 begins, there is a dearth of inventory in Silicon Valley and high demand, therefore it is projected that home prices will continue to increase over the next few months.
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3. There is an exodus out of the crowded urban cities like San Francisco and New York, resulting in an increased buyer demand in the less dense suburbs, including Silicon Valley suburbs. The media sometimes combines San Francisco and Silicon Valley; however, they are very different living experiences and housing markets. Silicon Valley suburbs are much less dense and offer more land and privacy. The hillside communities in Silicon Valley have done very well during the pandemic, driven by an increase in buyers who have and will continue to flee denser urban environments in favor of suburbs for greater space and a higher quality of life. Technology companies and their employees are often exiting San Francisco and coming back to Silicon Valley. It is helpful to note that the companies that have adopted the most aggressive work from home models (e.g., Twitter, Salesforce, Square, Slack) tend to be in SF or NY, where the most densely packed office buildings are located, versus the expansive nature of Silicon Valley’s sprawling commercial campuses.
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4. Mortgage rates are at an all-time historic low. Before the pandemic, rates were at 4.25% for a 30-year mortgage. Today, however, rates are as low as 2.875% for a 30-year fixed mortgage. In response to the cooling of the economy due to the pandemic, the Federal Reserve has been actively trying to lower rates. Buyers should act quickly, as rates are now starting to rise again.
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5. Housing inventory is near record lows as sellers do not need to sell in this downturn. A fundamental difference between the 2008 “Great Recession” and this economic downturn is that in 2008 it was the implosion of the housing market that precipitated the recession. Conversely, in 2020 when we entered the pandemic, the housing market was strong, and the trends wrought by the pandemic made it even stronger. In fact, instead of being a drag on the economy, the strong housing sector and tech are the two brightest sectors in the Covid economy.
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One large trend that will negatively impact Silicon Valley home values is the ability to more readily work from home. Many economists have suggested that the pandemic accelerated tech trends that were already occurring and that over the next 2 years, we may see 10 years’ worth of tech adoption. Other trends that may have been accelerated include working from home in general and leaving the Bay Area. Back in 2018, nearly half of the techies surveyed said they planned on leaving the Bay Area in a few years. The pandemic precipitated many to take this opportunity to finally move out and they may not be coming back.

The exodus out of California is very real and has been chronicled in many articles. Just a week ago, U-Haul released their 2020 data and California had the lowest percentage of all 50 states of inbound moves. The top states for incoming residents are as anticipated, all low-cost states, including Texas, Florida, Nevada, Tennessee, and Wyoming.

The question that is unanswered is whether tech workers will return to Silicon Valley or whether their moves to “Zoom Town” second home markets will be permanent. Many tech titans such as Google are exploring “flexible work week options,” where employees will spend three “collaboration days” on campus. This new normal is viewed as optimally providing the creativity boost that synergistic teams generate while giving employees the freedom to control the majority of their schedules.
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It is too early to tell how the trends wrought by the pandemic will permanently impact the Silicon Valley housing market.  Although the vaccine will eventually put the pandemic behind us, the new freedoms of working from home and the mindset that it is not as essential to live in Silicon Valley may pervade well beyond the pandemic. At DeLeon Realty we are constantly analyzing the market and with having more economic training and analysis (for example, my being an adjunct Economics Professor in the past), we will be able to spot and analyze trends and accurately extrapolate their trajectory to provide clients with the best advice in our rapidly changing housing market.

Go to deleonrealty.com to sign up for our frequent webinars to learn the latest in housing trends or tax changes.

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The booming nationwide housing market of 2020 was in large part driven by a spike in second-home purchases. Before the pandemic, demand for both primary and second homes was growing at moderately strong rates. Since the pandemic, interest in second homes has grown twice as fast as primary homes and demand has doubled since last year according to a major brokerage’s research. With the pandemic eliminating the need to go to the office until late 2021, the tech world has taken advantage of this opportunity to purchase homes in several of the most beautiful places in California and Nevada. This article explores how four of Silicon Valley’s second-home markets fared in 2020 and examines projections for the future.

Incline Village and Truckee

There is arguably no housing market booming more than the Incline Village/Truckee area of Lake Tahoe.  Home sales in Lake Tahoe jumped 87% from October 2019 to October 2020, more than any other housing market in the nation, resulting in a large increase in median prices.  One agent was quoted as saying, “The Lake Tahoe housing market is hotter than ever.  People are coming from San Francisco and bringing their Bay Area salaries with them – everyone here drives a Tesla now.”  

Amongst the hottest neighborhoods is Martis Camp, an exclusive enclave with a plethora of family-friendly amenities.  The neighborhood has maintained its natural beauty with stunning Redwoods and Cedars surrounding the $5M to $15M homes that range from Tahoe lodges to modern masterpieces, while the ski lift has back mountain access to NorthStar. We forecast strong future growth for the Tahoe area as its stunning landscape, once discovered, is hard to leave. In 2020, the price for a home in the Truckee area increased by 14% from the previous year, with further appreciation forecast.

We project stronger appreciation on the Nevada side, with 0% state income tax being complemented by a low property tax rate around .6%. There has been particularly strong demand in the upscale areas of Glenbrook, a gated community on the east shore, and Incline Village, the site of our first Tahoe office.  With a quick 35-minute flight in DeLeon Realty’s pressurized turbo-prop corporate aircraft, Lake Tahoe never seemed so close.

Carmel and Pebble Beach

Amongst the many draws to beautiful Carmel is the easy hour and a half drive from the heart of Silicon Valley. This proximity became forefront to Silicon Valley buyers again during the pandemic and both Carmel and Pebble Beach enjoyed the strongest demand and sales prices they have seen in a decade.  We project moderate growth for Carmel as the gains of 2020 are unlikely to be replicated in 2021, but strong demand will remain. Carmel had one of the strongest 2020s of any micro market, with the number of sales up over 25% and the average price of a home increasing by 17%.  This revival of Carmel real estate likely is sustainable, as less traffic is making this once two-hour trip down to just 1.5 hours. As the owner of a home in Carmel for over ten years, I have felt that it was undervalued until the pandemic reignited interest.
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Napa and Sonoma Counties

The powerful impact of the pandemic almost made me forget about the past fires in Napa and Sonoma.  It seems I was not the only one as home buyers’ interest in the areas sparked a renaissance of demand for Napa homes from June through September and prices rose significantly. However, the Glass Fire in October, which consumed more than 630 residences and wine country icons such as the Restaurant at Meadowood and Calistoga Ranch, left their mark.  Thus, while prices did go up in 2020, the appreciation is less than other regions due to the ongoing and seemingly worsening threat of wildfires. With climate change likely exacerbating an already arid climate, I am pessimistic on the appreciation potential of the Wine Country. My only recommendation to purchase a second home there is reserved for those clients who can pay all cash and afford the risk of self-insuring, thereby avoiding the astronomic costs of fire insurance, which can range from $20,000 to $100,000 annually on estate properties. While home prices in Napa and Sonoma County increased by 7% in 2020, we forecast much lower appreciation for 2021 as the wild fires seem like an inherent and frequent risk endemic to this housing market.
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Santa Barbara and Montecito

My love affair with real estate began whilst studying Mathematics and Economics at UCSB, where I would exhaustively analyze local market data of the area. I always felt this area was undervalued relative to other elite areas such as Aspen, Atherton, or Newport.  Within Silicon Valley, affluent buyers pay in excess of $20M to $30M, yet only acquire a little over an acre in Atherton with a newer home. In addition to a more tropical climate, you get a lot more home for your money. To point to this reality, take a Montecito estate, owned by a cofounder of Kleiner Perkins, which sold in December 2020 for $32M. Several of my clients expressed envy at the relative affordability of this palatial offering, a very gracious Renaissance inspired Villa of nearly 20,000 square feet on 12 flat acres. Despite the area’s experiences with natural disasters as evidenced in the, fortunate contained, fire in Montecito, but later tragic mudslides that killed 23 people and destroyed many homes, hundreds of millions of insurance dollars were used to address the root causes of the erosion and debris flow. With the insurance proceeds judiciously used to eliminate many of the fixable causes of the mudslides, the likelihood of future mudslides is extremely low. Though prices took a hit after the mudslides, the area saw a strong increase in 2020 and my assessment is that favorable appreciation will continue as Bay Area entrepreneurs and venture capitalists increasingly recognize that the stunning American Riviera can be reached in less than an hour by private jet. Typically, a second-home market for LA residents, agents are reporting burgeoning interest from Silicon Valley buyers. With average sales prices increasing by 16% in 2020, this market still seems poised for double-digit appreciation in 2021. Recently, I enjoyed flying down in an aircraft and showing clients beautiful oceanfront homes at relatively reasonable prices.

“The real voyage of discovery consists, not in seeking new landscapes, but in having new eyes.” - Marcel Proust

I have always found that many of life’s greatest lessons are learned through traveling. Since discord is a greater teacher than concord, it is by challenging yourself and seeing new and distant lands where most growth and knowledge occur. By traveling to many countries and learning about their real estate models, I have gained novel insights into our innovative business model. And by understanding real estate in the countries where my clients have grown up, I can better understand and implement their real estate goals. 

While my next and final installment on this series will focus on the real estate markets in the world’s most populated countries of China and India, this article focuses on Japanese and French real estate models. I have always viewed these countries, halfway around the world from each other, as very similar in many ways. Both the Japanese and French appreciate fine dining, with their capital cities enjoying more Michelin stars of any two cities in the world. Tokyo has 12 three-star restaurants and Paris has 10, much more than San Francisco with 7 and New York with 5. Both nations have great national pride and have made cultural contributions to the world. Yet, besides both real estate markets sharing very low mortgage rates, these country’s models have distinctly different characteristics that provide interesting and valuable insights into Silicon Valley real estate.

Japan

The Japanese are known for respecting tradition and limiting immigration to preserve their culture. This stability of the Japanese culture is in direct contrast to the boom and bust cycles that have dominated its real estate market for the last 40 years. In the 1980s, Japan saw stunning appreciation, with real estate prices rising six to seven times during that period’s asset bubble. Confidence was too high in “Japan Inc.” with Japanese companies' rapid rise. With these companies awash in cash at that time, they made undue speculative purchases of real estate such as The Rockefeller Center and Pebble Beach. During this period of excessive valuations, some calculated that the value of the Imperial Palace in Japan exceeded the entire value of all the homes in California. This period saw land trading in prime areas of Tokyo for $75,000 per square foot!¹

The 1990s, otherwise known as Japan’s Lost Decade, saw a steep decline in the prices of both real estate and the stock market. The stock market dropped by over half in 1990 and the government put restrictions on mortgage loans. Both the demand and prices for real estate dropped by a staggering 80% by 2002. Since then, prices have nearly doubled, but did so in sporadic bursts of appreciation and then stagnation. Demographics determine demand, and with the population of Japan declining rapidly I am not bullish on the future appreciation of Japanese real estate.

MLS

My research has found that no country in the world has a more open and utilized online system as does our Multiple Listing Service (“MLS”). The closest real estate search tool comparative to the MLS in Japan is called REINS which stands for “Real Estate Information Network System.” Access is limited to licensed real estate brokers who pay an annual fee for its use. The purpose of the database is to distribute and collect information about properties for sale. For a broker to conduct a custom search for a buyer, most will require some form of signed representation agreement and a consultation. Unlike the U.S. MLS, REINS’ feature set is limited and little information is conveyed, generally including only one interior and exterior photo. The lack of photos is likely related to the value being solely in the land, as almost all properties in Japan become teardowns, which is discussed below. Commissions in Japan are generally 6%, with 3% going to each brokerage.²

Construction

Surprisingly, Japanese homes are not built to last and have very low-quality construction. The average lifespan of a Japanese home is 20 to 30 years. Japanese homes tend to depreciate, becoming completely valueless by the 20 year mark. The process of tearing down homes started after WWII, when soldiers returned and immediately needed housing. Most of the single-family homes after the war and even now are built by prefabricated housing manufacturers. After learning that 85% of Japanese citizens opt to buy new homes, I now understand why my Japanese clients strongly prefer new homes.

While Japan’s small towns are shrinking, Tokyo is currently experiencing a construction boom due to hosting the 2020 Summer Olympics. Major redevelopment projects are underway in several parts of Tokyo. Some of this construction is driven by the inbound tourism boom led by hotels and retail, while other construction is for developing high-rise apartments. The prices for new construction in Tokyo are rising. In general, Japan is investing in tourism versus other sectors to help boost the economy and attract foreign workers. 
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Mortgages

Mortgage rates in Japan are amongst the lowest in the world. This is not too surprising given that Japanese consumers are excellent savers and need an incentive to take out loans. The most popular mortgage option is fixed for an initial period such as 5, 7 or 10 years, which later becomes a variable rate for the remaining term of 20-25 years. Rates are exceptionally attractive, with rates for a 10-year fixed mortgage being between 0.75% to 0.95%.³

Capital Gains on Primary Home

In Japan, you can exclude up to 30 million Yen (approximately $268,000) per spouse on the sale of a primary residence.4 There is no time requirement for ownership to be eligible for this exemption.

Ghost Houses

Several years ago, when many international buyers were purchasing in Silicon Valley, local residents had concerns over unoccupied “ghost homes.” In Japan, “ghost homes” also cause concern, however, they are not the result of speculators, but instead caused by a declining population. In 2013, there were 8.2 million vacant homes across Japan, representing 13.5% of the total housing stock, compared to the U.S. housing stock, which is 8% unoccupied. By 2033, it is predicted that this percentage in Japan will surpass 20%. 

Mortgages

Mortgage rates in Japan are amongst the lowest in the world. This is not too surprising given that Japanese consumers are excellent savers and need an incentive to take out loans. The most popular mortgage option is fixed for an initial period such as 5, 7 or 10 years, which later becomes a variable rate for the remaining term of 20-25 years. Rates are exceptionally attractive, with rates for a 10-year fixed mortgage being between 0.75% to 0.95%.³

Capital Gains on Primary Home

In Japan, you can exclude up to 30 million Yen (approximately $268,000) per spouse on the sale of a primary residence.⁴ There is no time requirement for ownership to be eligible for this exemption.

Ghost Houses

Several years ago, when many international buyers were purchasing in Silicon Valley, local residents had concerns over unoccupied “ghost homes.” In Japan, “ghost homes” also cause concern, however, they are not the result of speculators, but instead caused by a declining population. In 2013, there were 8.2 million vacant homes across Japan, representing 13.5% of the total housing stock, compared to the U.S. housing stock, which is 8% unoccupied. By 2033, it is predicted that this percentage in Japan will surpass 20%. 

The aging of Japan’s citizens outweighs all other nations. Japan’s population will decline from 127 million to 88 million by 2065, per the National Institute of Population and Social Security. With this declining population throughout Japan,  except for Tokyo, Japan’s countryside has become littered with deserted homes, known as “akiya.”⁵

Many countryside towns now have an “akiya bank,” which gives money to buyers who refurbish homes they received for free in these emptying areas. Japan has long been insular in their approach to immigration, but the declining population has coerced Japan to explore accepting hundreds of thousands of immigrants from China and Korea to fill labor shortages and to repopulate the countryside. 

How Expensive is it to Live in Tokyo? 

Even with the volatility and declines from the peaks of the 1980s, Tokyo is still an expensive city to live in. Prices in Tokyo on a dollar per square foot basis are around $1,525.⁶ These prices are much like those in Silicon Valley, and are very similar to Los Altos, just above Menlo Park and Mountain View, and just below Atherton and Palo Alto. Tokyo, with the upcoming 2020 Olympics, will likely see some continued appreciation. However, the low birthrate and declining population will likely result in declining prices elsewhere.

France

MLS

As you read in the previous issue of The DeLeon Insight, real estate markets like the Russian market have been functioning for only the decades after the fall of Communism. However,  the French real estate market has been operating effectively unchanged for centuries. There is no MLS, or equivalent, in France. To find a house, buyers must go to individual agencies to see their listings. Not all agencies post their listings online; some only share select properties online. Buyers need to visit numerous agencies to find a home that meets their requirements. On the listing side, because there is no MLS-like database, sellers can list their homes with multiple agencies. This increases their chances for a sale since real estate agents can only show listings from their agency. There are websites that function as mini-MLS services, where some agencies post their listings. However, none offers a complete market view. In general, these websites are not public and you need agent approval for access.
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Business Model & Commissions

In 2002, the French real estate market was split between agents selling half of the homes and the rest being sold directly by the sellers. Now, two-thirds of sellers use an agent and sellers pay 4-6% commissions, typically 5%, to their agents.⁷   

Mortgages

Mortgage rates in France are also among the lowest in the world and have been a driver in the appreciation of properties in Paris and surrounding areas. A 20-year fixed mortgage (20 years, not 30, is a typical duration for a French mortgage) is currently at 1.80% mortgage rate with borrowing 80% of the purchase price being the norm. France is more conservative than the U.S., in that banks will lend only if the total property expenses are below 30% of the buyer’s income, whereas this percentage is generally 35%-40% in other countries. In France, where ageism is still alive and well, if prospective buyers are over 65, banks will only consider their passive income or retirement benefits, with any earned income excluded. To ensure payment even in the event of death, France requires that anyone who gets a mortgage must purchase a life insurance policy for 120% of the mortgage amount. Mortgage interest is deductible for both the buyer’s primary and investment properties with no limits.^8,9

Capital Gains on Primary Home

By far the most important exemption from capital gains tax in France, which is 19%, is the family home. Those who own a home for 22 years or more do not pay any capital gains whatsoever. Those who sell before 22 years receive a prorated exemption on their gain.¹⁰

Life Estates

In France, selling a life estate, or Viager, is a very common arrangement. A Viager allows a buyer to purchase a property from a seller, usually over 70-years-old, who receives a sum of money up front and then an annual annuity payment and the seller lives in the house until he or she passes away. This is an efficient way for sellers to get money without paying a lot of taxes, since payments are received in smaller increments spread out over time. 

For DeLeon Realty’s listings, CEO and listing agent Michael Repka will sometimes create seller financing arrangements or installment sales to effectively lessen capital gains. If there were a more common system to sell homes with life estates for sellers, then elderly owners would have another option short of selling their home to provide for their health and well-being for the future.

How Expensive is it to Live in or Near Paris?

The epicenter of French society and culture will always be Paris, and this is reflected in its home prices. Prices in The City of Lights are, on average, three times more expensive than they are in the rest of France. Paris is among the most expensive cities on the continent. It has a price per square foot of $1,108, very comparable to San Francisco. Paris is generally the most expensive city in Europe after London.¹¹

Market Snapshot

Property prices in France fared relatively well during the global meltdown and France avoided the large drops that occurred elsewhere such as Spain and the Netherlands where property prices dropped more than 20% and 40% respectively. France has enjoyed stable year over year appreciation as it attracts international attention. In 2018, prices in Paris climbed 5.3%, placing it in the upper quartile of appreciation in a ranking of global cities.¹²

France’s appreciation over the last two years has been fueled by its ultra-low mortgage rates and speculation that businesses will flee London after Brexit and set up their headquarters in Paris as the best alternative. With the Euro declining relative to some other currencies, international investors have expressed strong interest in purchasing in Paris, which has the upside of London without the risks that Brexit brings.

Coming Up

The final article in this series exploring international real estate will focus upon the twin titans of China and India– the countries whose residents have had the greatest impact on Silicon Valley.

First you master the game, then you change it!  For the first 10 years of my career, I practiced real estate under the traditional model and became the #1 ranked agent in the nation by REAL Trends Inc. as published in the Wall Street Journal.  After that, I founded DeLeon Realty and with great insight and contributions from our CEO Michael Repka, we created an entirely new business model focused on the client rather than the agents. 

While our model is totally unique in America, some of our insights were inspired by international travel, and integrating some of the best components of other countries’ business models into our own. This three-part article explores the real estate industry as practiced in Russia and England.  In subsequent articles I will delve into China, India, France, and Japan and then conclude each with what lessons Michael and I learned and incorporated into our own model to bring about what we feel is the best client experience provided by any real estate business model in the world. This Global Real Estate series will explore what the business model is in each country and if they have an MLS (most countries do not), what the commission rates typically are, what typical mortgage rates are in that country, whether a primary residence is exempt from capital gains, and finally, a market snapshot of that country’s real estate pricing.

Russia

Overview of Russia

Russia is a country in transition from a chaotic housing market with little organization to a country that is moving towards a multiple listing service (“MLS”). Michael and I were very impressed on our visit to St. Petersburg and Moscow, and we met with many of the nation’s top agents and consultants. We spent an entire day with an expatriate who is trying to bring a regional MLS to Moscow to replace the current system, which is presently fragmented and segmented by the top agents who dominate the market.  While we envision a regional MLS coming to fruition soon as trends are heading that way, the lack of a buyer’s agent for most transactions and listing agents solely showing their personal inventory of listings will continue for the near future

Business Model & Commissions

In 2002, the Russian real estate market was bifurcated into some sellers doing For Sale by Owner (FSBO) transactions and some working with agents who were charging 7.5% (all commission rates cited in this article are per WSJ). Now, the majority of sellers will use an agent and the sellers pay 3-5% commissions (generally 4%) to their listing agent. There usually is no buyer’s agent (except for expats who do not speak Russian) and, if there is one, the buyer pays directly for this service.

Mortgages

The mortgage market is a relatively new invention in Russia, with mortgages becoming common only in the last 15 years.  While the rate is much higher than in America, the principles of the Russian mortgage market are very similar to the U.S. in that most loans are for 80% of the sales price and new mortgage payments cannot exceed 35% of the borrower’s net income.  Unlike the United States, no portion of the mortgage interest is deductible. This is particularly painful since the mortgage rate in Russia can be up to 10% higher than in prime European markets and generally ranges from 12% to 12.5%.¹ Vladimir Putin is trying to lower this rate to spur the housing market, but market forces are currently preventing this.² Due to high mortgage rates in Russia, most buyers purchase homes with all cash.

Capital Gains on Primary Homes:  Even though we think of housing as a piece of Americana and reflective of the American Dream, home ownership is indirectly subsidized by many nations with an exemption for capital gains being the most common tax benefit. Russia exempts ALL (note no limit of $500k per married couple as we have in the U.S.) capital gains taxes if you own your primary residence for five years or more.  

How Expensive:  Moscow is arguably a world-class city with over 12 million residents, natural beauty (except during the frigid winter, Michael and I visited in summer), and stunning new skyscrapers. That being said, the drop in the exchange rate of the Ruble coupled with the drop in home values and rent has greatly lessened the expense of Moscow relative to other international cities. In 2008, Moscow made headlines for being the most expensive city to live in the world.³ In 2018, Moscow had dropped to #17.⁴ Given this relative drop, you may be wondering if now is a good time to buy. As discussed in the market snapshot below, this decline does present an opportunity but also a risk as Moscow’s real estate prices are tied to the price of oil and other commodities, plus whether the Western embargo ever gets lifted. So there are a lot of non-real estate factors impacting real estate values in Russia. 
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Market Snapshot: As you would anticipate, the last few years have been very volatile in the Moscow property market. Economic trade embargoes, Russia’s taking over Crimea, the Ruble losing 50% of its value relative to the dollar in the last five years, and high mortgage rates, have all negatively impacted real estate prices. Even excluding any currency fluctuations, the Russian market is down from 2015 in inflation-adjusted returns. Coming from this depressed vantage point, some analysts are bullish on Russian real estate as they anticipate that these relatively low prices will be buoyed in 2019 due to anticipated higher oil prices and a continuing economic recovery.

The United Kingdom

MLS

Although the U.S. used the U.K. as a model for several things including our legal system (except for the Francophiles in Louisiana), there is very little similarity between the U.S. and U.K. real estate business models. For example, there is no exact equivalent of the MLS in the U.K. In 2016, a multi-listing platform called Agent Hub was launched that also incorporates a CRM (Customer Relationship Management) tool. There are numerous public websites where buyers can search for inventory.  Among the popular ones is, Zoopla.com. However, these databases have not been embraced universally and no market is as transparent and open as those in the U.S. Overall, Zoopla.com is a bit more similar to the LoopNet structure used by commercial brokers in the US, rather than the MLS used by residential brokers, in that only a fraction of available listings are on the website.

Business Model & Commissions 

Fees charged by traditional real estate agents in the U.K. are amongst the lowest in the world. Commission rates range from 1% to 1.5%, with 1.5% being the most prevalent rate.⁵ In the U.K. there are no buyers’ agents, and the listing brokerage coordinates and works with the buyers who purchase those company’s listings. Unlike the U.S. independent contractor model, real estate agents in the U.K. are paid a salary with small bonuses for sales and rental contracts (rentals are called lettings). The salaries are generally low and so are bonuses, so this is not as lucrative of a field as it is in the U.S. When you visit real estate agency websites, it’s all about the company. Rarely are individual agents marketed or branded. The business model is company-centric instead of agent-centric. By having the focus on the company and not on the individual agent providing services, more services can be provided by a well-funded company to the benefit of the client. Some agencies offer their services for a fixed fee, and this practice is common with online real estate agents.

Mortgage Rates

Looking at HSBC’s public mortgage rates⁶ you can see that mortgages start with a low fixed rate for the first 2-5 years, after which they go up. The low rate starts at 1.5% - 2.5% (higher if your Loan-to-Value, (“LTV”), is higher), and after the initial fixed-rate period, increases to a variable rate of 4.2% - 5.25%.⁷ These are their published rates and, I am sure that like the U.S., lower rates can be found or negotiated. For owner-occupied properties, mortgage interest is tax-deductible on U.K. income taxes for both residents and non-residents. U.K. mortgages tend to be a bit more conservative than U.S. mortgages, with loans generally around 60%-70% of the purchase price (versus easily up to 80% in the U.S.) and you can only borrow up to 3-3.5x your annual gross salary.  In the U.S., most banks allow you to borrow up to 4.5-5x your annual gross salary.

Capital Gains on Primary Home

Residents are exempt from paying any capital gains on their primary residence, which is defined as having lived there your entire time of ownership.⁸ For investment properties, the capital gains rate is generally 28%.

Market Snapshot

London is a world-class and very affluent city that is home to the highest number of millionaires (over 350,000) in the world.⁹ London, which once had the second most expensive real estate in the world after Hong Kong, has recently dropped in price. Prices peaked in July 2017 and average prices have been coming down since, caused mainly by the uncertainty attributable to Brexit and also due to inflation. Also, the pound dropped by 10-15% versus the dollar and Euro since Brexit, making London property much more reasonable to foreign investors. Overall, effective prices are down 25% when both the pricing and currency declines are factored in.¹⁰ That being said, London is still a very desirable location and is a haven for foreign investors looking to park their cash in a city that is still considered the financial center of the world and maintaining hegemony over New York and Singapore. There is an opportunity to get property in a renowned city full of culture, wealth and prestige, but those seeking certainty in London will wait for a new equilibrium to emerge post Brexit.
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Lessons Learned

From these countries we integrated the following three concepts, (1) having buyers agents on salary, (2) having agents specifically focus solely upon buying or selling homes and not both, and (3) creating a “buy direct model” to allow clients to gain the expertise of a buyers’ agent, but not necessarily bear this expense.  In the United Kingdom, having agents on salary seemed the best model for clients. I personally have always disliked aggressive sales people who are focused on the sale and not on the clients’ best interest. Much of the negative perception of real estate agents stems from their desire to quickly sell a home to clients instead of advising them. Instead, I have always strived to be a true fiduciary, similar to how I felt when advising clients at my old law firm of Wilson Sonsini. By putting all 45+ of our employees on salary, this allowed for better service for both buyers and sellers. By having our buyers’ agents on salary and their raises based upon our buyers’ feedback instead of just sales, our buyers’ agents act more as trusted fiduciaries providing consultative advice versus a proverbial used car salesman looking for any deal with no regard for the clients’ satisfaction. Also, by having agents on salary, I can assign them to focus on certain geographic areas and, by specializing, our agents have greater insight than other agents who sell in any area as they chase deals and dilute any expertise they may have.  

On the listing side, Michael’s team of specialists allows our clients to have the most passionate and skilled people solely doing what they are best at. While most agents try to do everything and become a jack-of-all-trades, and master-of-none, the DeLeon salary model allows for greater ethics and expertise for our clients.

In all of these countries, where there is generally no buyers’ agent, the listing agent ends up working directly with both the buyer and the seller. We feel there is a definite benefit to each side having their own advocate and when speaking with agents overseas, they often seemed conflicted about whose side they were on. This conflict seemed to lessen the services for both their buyer and seller. This confirmed our belief that at DeLeon Realty, we never want one agent to be on both sides of any transaction and, instead, focus upon and be an expert at helping just buyers or just sellers, as they have different needs and questions that need to be catered to.
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Finally, we saw that this conflict of representing both buyers and sellers is one of the fundamental flaws of real estate and a big source of contention in these countries. The only way to solve this conflict was not only to make sure each side was individually represented, but to take away all financial incentive for double-dealing that often occurs. Our “buy direct” model, where DeLeon Realty waives 100% of the commission if we represent the buyer on our own listings, is a unique solution to provide buyers with the insight and advocacy of a buyers’ agent without the greed and resulting malfeasance that can so often occur. I proudly focus solely on buyers and I strongly believe that a good buyers’ agent gives buyers expertise and resulting confidence to proceed with their purchase. With most of the world’s real estate markets not having a buyers’ agent, our “buy direct” solution provides the best of both worlds to our clients - fiduciary protection and intellectual guidance - but often at no direct cost to them. While this has come at a price to the firm, with over $5,700,000 in recent commission savings to our clients, this innovation and the knowledge that DeLeon Realty provides our clients with the best ethics and economics is one of the reasons our sales volume keeps rising exponentially.  

The articles in our upcoming newsletters will discuss the real estate business model in China, India, France, and Japan and what innovations we have brought over that make us feel that the client centric model that we have created is truly the best one for clients throughout the world (at least from the many countries Michael and I have traveled to and researched).

2017 was one of the most interesting years in real estate that Silicon Valley has experienced in quite some time. 

It started off with the area—and the nation as a whole—adjusting to the notion of a Trump presidency. During the latter half of 2016, the market was quite lethargic as voters remained cautious due to the uncertainty of the election. Generally, many buyers sat on the sidelines because of a common concern that a Trump victory could result in chaos. However, once Trump won the presidency, the real estate and stock markets took off, to the surprise of many commentators. Towards the end of 2016 and in the first few months of 2017, we saw an increase in buyer demand in Silicon Valley real estate, and as a result, sales prices soared, with many cities experiencing strong appreciation.

Although not anticipated, many commentators believed that the buoyancy of the stock market and the real estate market after the Trump victory was a direct result of people’s optimism regarding the new administration’s perceived pro-business policies. Specifically, the hope was that a reduction in taxes and an easing of regulations would result in a more vibrant economy. This area in particular benefitted from the belief that a stronger overall economy would be disproportionately beneficial to the companies and financiers of Silicon Valley. As a result of this optimism, many potential buyers got off the fence and started buying homes.

As we moved into late spring and through most of the summer, a bit more pessimism set in. Late July saw President Trump and the Republican Congress receive their first major political blow when their promised repeal of the Affordable Care Act, also known colloquially as “Obamacare,” was defeated. This, coupled with other political issues that arose, made many wonder if the promised tax cuts and easing of business regulations would ever come into fruition. Simply put, irrespective of any promises made or plans announced, many worried that none of these benefits would be achieved if the administration was unable to garner support from the Republicans and Democrats in Congress. As time went on, the perceived tensions between the White House and key members of both parties exacerbated the situation.

Fortunately, throughout this time, we have seen continued investment from buyers coming from overseas—most notably from China and India. Although the types of homes desired have changed significantly, the actual demand has remained steady. In particular, we have seen Chinese demand shift away from inexpensive investment properties, and towards upscale homes and trophy properties. In informal discussions with many of the agents representing these buyers, we have heard that a desire for political and economic stability, coupled with the appeal of other factors such as the fine weather and preferable air quality, has driven this shift. Fortunately, this strong demand has resulted in some very favorable sales prices for several high-end DeLeon Platinum properties. 
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While the swings of the market may have made for an interesting ride, the overall results paint a relatively positive picture. The only exception seems to be the slower market for ultra-elite properties, which generally include homes in the $12 million-and-up range.  

The overall number of homes sold was down slightly year over year, but there was a significant amount of variation between the cities (see charts; all data per MLS).  

Partially as a result of the continued demand, we have seen the average price per square foot increase in all of our cities, with the exception of Woodside.  

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California has it all – a vibrant and dynamic economy, stunning beaches, picturesque hiking trails, and world-class natural wonders such as Yosemite and Big Sur. The primary recurring drawbacks often associated with the state are its high taxes and housing prices. Yet, few have fully analyzed the strong correlation between these two significant challenges in our state. This article explores the direct relationship between higher taxes and lower housing supply, and discusses creative solutions that would stimulate more housing development in California.
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A single-family home in Silicon Valley is becoming an increasingly scarce commodity with each passing year. In 2005, the earliest year for which statistics are available, there were 23,087 single-family homes sold in Santa Clara County. By 2023, this number has dwindled to just 8,496, marking a staggering 63% drop in sales volume. Notably, this decline occurred amidst a population growth of over 12% in the county. Despite the alarming nature of these figures, the trend of declining home supply for sale is expected to persist unless California or the federal government lowers the taxes due when selling your home.  

What has led to such a momentous decline in the supply of single-family homes in California, and especially in Silicon Valley? The primary reason is the staggering amount of capital gains tax sellers will recognize upon selling. While there are other impediments contributing to the reluctance to sell, capital gains tax is generally the major deterrent for many sellers considering selling their homes at this time.

Although federal capital gains tax applies nationwide, Californians pay the most state tax by far. This is due to having the highest state capital gains rate in the nation at 13.3%, coupled with the most substantial appreciation of any region. Consequently, several of my long-term clients have faced taxes on millions of dollars’ worth of capital gains at a combined rate of 37.1% (13.3% for California, plus 23.8% for Federal). I have also witnessed many clients opt not to sell their homes after learning about the significant capital gains taxes they would incur upon sale.  

DeLeon Realty CEO Michael Repka, an attorney with a strong background in taxation, including a graduate law degree from NYU School of Law, often discusses the benefit of elderly clients not selling until one of them passes away - a delicate but important discussion. This strategy allows their heirs to benefit from the stepped-up basis, thereby avoiding capital gains liability at both the federal and state tax levels.

The current shortage of supply is concerning, but the ongoing trend of declining supply could lead to illiquidity in the housing market and a freezing of supply unless changes are implemented to the tax code. The decreasing supply can be attributed to the increasingly small percentage of profits that are exempt from taxation. In 1997, President Clinton proposed abolishing the previous tax exemption for homeowners and replacing it with a new, larger exemption. Under the previous rule, sellers were not taxed if they sold their primary residence and purchased a new one that was of equal or greater value. Additionally, homeowners aged 55 or older were granted a onetime exemption of $125,000, even if they did not purchase a new home. This previous rule incentivized selling, as individuals could avoid capital gains so long as they reinvested in another property.  
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Many homeowners were initially excited when the previous system was replaced with a capital gains exemption on their primary home of $250,000 per person, or $500,000 for a married couple filing jointly. This change was viewed as a major concession and generally addressed the appreciation in home values, resulting in Silicon Valley sellers rarely paying taxes on capital gains in the late 1990s. However, as home prices have outpaced inflation, particularly in Silicon Valley, and the $500,000 exemption has not been indexed to inflation, sellers now face considerable tax burdens on their gains. The explosive growth of median home prices in Silicon Valley underscores the limited protection provided by the $500,000 exemption. For instance, in 2001 the median price of a single-family home in San Mateo County was $590,000. Today it stands at $2,455,421, representing a more than 316% increase, while the exemption amount has remained static. Clearly, capital gains can be substantial in affluent Silicon Valley towns, with places like Atherton experiencing million-dollar jumps in median sales prices during robust individual years.

Another example of California’s higher taxes leading to lower transaction volume can be seen in Los Angeles’ recently enacted “Mansion Tax,” which imposes a 4% tax on properties valued over $5M and escalates to 5.5% for properties over $10M. This tax has greatly reduced sales of luxury properties, as indicated by the most recent available sales data from April 2023-January 2024, which shows a 68% decline compared to homes sold during the same period last year.¹

This ineffective tax not only falls short of projected revenue due to the chilling impact taxes have had on transaction volume, but also results in the state losing the revenue generated from property sales, particularly from the reassessed property tax values that occur each time a California property is sold.

To bolster housing inventory and avoid excessive penalties for homeowners selling their primary residence, one solution is for the federal government (or at least California) to increase the capital gains exemption for married couples when selling your home from $500,000 to $1 million, or ideally $1.5 million. Given that the initial $500,000 exemption was set 26 years ago, it is time to adjust it to account for the significant increase in home values.

Progressives may argue that this change will primarily benefit the wealthy and result in less tax revenue. However, I beg to differ. I believe that increasing the tax exempt amount would stimulate more transactions. As a result, the state could actually see an increase in tax revenue due to the rise in transaction numbers and property tax reassessments, which would help compensate for any loss in capital gains revenue. Additionally, this change would boost liquidity and supply in the housing market, leading to more sales that exceed the new exemption amount and generating additional tax revenue.

Change may be on the horizon. California Representative Jimmy Panetta recently introduced the More Homes on the Market Act aiming to double the exemption from $500,000 per couple to $1 million. This bill is gaining some bipartisan support and might become law in the near future.  

Considering the growing illiquidity of the housing market, exacerbated by limited inventory due to burdensome tax policies, it's imperative to raise the capital gains exemption amount. Failing to act will perpetuate a cycle where fewer sellers are willing to sell due to high taxes, leading to further reduced housing supply, increasing prices, higher taxes, and a disincentive for long-term homeowners to sell. We must break this cycle of diminishing housing inventory by increasing tax exemption thresholds.

Even in hindsight, it seems surreal that the most innovative bank in America, Silicon Valley Bank (“SVB”), was brought down in a matter of just two days by an old-fashioned bank run that conjures memories of Jimmy Stewart in It’s a Wonderful Life. Unfortunately, the collateral damage of SVB rapidly imploding and needing to be taken over by the Federal Reserve precipitated self-fulfilling fears that First Republic Bank (“FRB”) would be the next domino to fall.

Within a matter of two months, the two most iconic and foundational local banks with storied histories of over 40 years were now distant memories. The loss of these two banks will reverberate throughout Silicon Valley’s startup scene for some time, and will negatively impact liquidity in the high-end housing market. For the typical buyer, the loss of these banks will not negatively impact them, as several alternative options exist; however, with few lenders comfortable lending over $10M, losing the two banks most frequently willing to find ways to make the deal work creates concern.

As the top buyer’s agent in Silicon Valley for over a decade, and the most well-educated, with graduate degrees from both Berkeley Law School and Stanford’s Graduate School of Business, I have helped dozens of clients purchase high-end homes in Atherton, Woodside, Los Altos Hills, and Palo Alto. A large number of my clients will initially obtain loans on these properties, and historically the lender for homes over $20M was almost uniformly SVB or FRB. Similarly, the majority of my clients who purchased with all cash would then opt for a cash-out refinance, almost always with SVB or FRB.

Over the last few months, my buyers who have purchased their high-end homes with all cash are now evaluating which bank is the best fit to fill this vacuum in high-end lending. The following banks are the top choices I have found thus far:

Citi Private Bank – Currently, this is the bank that is most aggressively trying to take advantage of this unique opportunity to capture market share. A client who recently purchased in Atherton, and was planning on using SVB, was instead able to find a similar rate by forming an investment management relationship to subsidize a lower mortgage rate. SVB’s use of mortgages as a loss leader to form long-term relationships is being replicated at Citi Private Bank.

JP Morgan Private – While I was hoping that FRB would survive, when they did go under I was optimistic that they would be acquired by JP Morgan Chase. Despite having some of the best minds in the business, JP Morgan has been surprisingly weak in their wealth management division, yet they wisely realized FRB’s affluent client base as an ideal segue to expand their business. While JP Morgan has stated that they will close FRB, they are retaining the focus upon upper-end clientele and the existing branches will be centers for relationship formation. Michael Repka and I attended a seminar by JP Morgan Private Bank where they explicitly stated their goal of doing more loans and wealth management in Silicon Valley.  

Private Lenders – I have a network of private lenders who provide liquidity to clients to help facilitate trade-up buyers in need of capital for a purchase and then quickly pay back the loan once they close upon their former residence.

FinTech Startups – While less likely, FinTech startups such as Brex, who have greatly benefited from SVB and FRB’s demise, may shift their focus from providing liquidity to start-up employees to concentrating on serving their C-suite executives when purchasing a home.

While there is still uncertainty regarding what bank or entity will replace the dominant role FRB and SVB provided, I am encouraged that so many banks see the potential and seek to fill the void. With my focus solely upon buyers, I stay on top of every major bank and lending option to provide my clients with the optimal match based on their personal financial goals and constraints. 

In November 2022, 57% of Los Angeles voters approved a new measure known as the “mansion tax", which went into effect April 1st. The goal of this measure is to raise hundreds of millions of dollars of funding for projects promoting housing construction and alleviating the homeless problem across the city. In this article, we will explore whether this tax is efficient, and the likelihood that it will make its way to Silicon Valley.

Before the mansion tax was enacted, the city and county of Los Angeles would only charge very low transaction costs that averaged below a quarter of a percentage. These fees are exponentially increasing, with the city now imposing a 4% transfer tax on sales of property over $5M, and a transfer tax of 5.5% for sales of property over $10M.  

The LA mansion tax is projected to greatly lessen the demand for upper-end housing and lower the supply of new upper-end homes that are being constructed. This is due in large part to the very high additional costs that will now be going to taxes, lessening builder’s profit and their financial incentive to build homes. This tax applies to both residential and commercial properties and is projected to impact commercial and multi-family properties even more, since they generally sell for over $5M. Bob Weiss, an LA attorney who specializes in assisting commercial transactions, states that this tax will be “a disaster for the commercial real estate business. The tax itself will create a tremendous decline in values.”¹  

While it is still too early to ascertain the future impact of this tax, forecasts indicate that sellers will be less-inclined to sell and developers less-inclined to build homes, exacerbating California’s home shortage. Additionally, this tax is projected to lower demand, with many analysts stating that this tax “is going to be the hardest hit to the real estate market that we’ve seen since 2007.”² Panicked sellers dropped prices or incentivized buyers to close before April 1st to avoid the tax, with some sellers even throwing in a Bentley if they could close on their home before the tax took effect.  

Other spillover effects include towns that have not enacted increases in transaction costs seeing more interest as developers seek to avoid this tax. Jason Oppenheim, one of LA’s top agents, feels that this tax will end up pushing developers out of the city. “A 4% or 5.5% tax equates to 20% to 30% of developer profits,” Oppenheim said. “So those developers will choose to develop in other luxury communities where they won’t have to pay the tax, such as Beverly Hills, West Hollywood or Newport Beach.” Oppenheim also believes the law creates market inefficiencies such as developers getting more money for selling a home for $4.99M without the tax, versus $5.2M with the tax.³

This tax, if ever enacted locally, would be a large impediment to selling, further exacerbating Silicon Valley’s chronic shortage of homes and further encouraging migration of affluent individuals to other states. With our supply of homes declining for the last twenty years due to sellers not wanting to lose their low Prop 13 property tax basis or pay capital gains, any additional transaction fees would further reduce the number of homes available for sale. Furthermore, given the high prices of Silicon Valley real estate with many cities having median home prices well over $5M, if this tax were enacted locally it would simply be a “home tax,” as most local homes are certainly not mansions. 

Given that Silicon Valley residents already pay amazingly high taxes, including the highest state income tax and one of the highest sales tax rates in the entire nation,
I am hopeful that Silicon Valley avoids the high transaction costs other cities are enacting. These additional costs will only further reduce the supply of homes available, and lead to greater home scarcity and as a result, higher prices.

One of my greatest pleasures is connecting clients with the best service provider for their needs.  For example, I will often pair clients with a high-end custom contractor to build their dream home in Atherton, whereas I recommend a very reasonable contractor for remodeling investment properties. I match clients with the best providers in many venues such as insurance brokers, audio-video installers, arborists, and pool cleaners.

The most nuanced and most valuable connection is to perfectly pair my buyers’ goals and economic circumstances with the best lender for their situation. Buyers are often surprised at the variability in underwriting standards and criteria. For example, some lenders fully consider stock options as part of a buyer’s salary while others do not. Of the lenders that do, some lenders give full credit to options and treat them like salary whereas others count only a fraction of their value; again, it is surprisingly lender-dependent.

Given that each lender has unique underwriting standards, the loan amount a buyer can be pre-approved for can change dramatically depending upon which lender they speak to. As loan approval amounts can often vary by well over a million dollars, finding the right lender can provide the buyer with a tremendous amount of optionality in their home search. Below are some common examples of buyers who would benefit from working with the right lender.
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Trade Up Buyers

When qualifying a buyer for a loan, most of the larger banks such as Wells Fargo and Bank of America will consider the carrying costs not only of your new home, but also your existing home.  Carrying two homes in Silicon Valley makes it much harder to qualify for as large of a loan as desired, inhibiting the ability to trade up. However, some lenders do not count the debt ratios of your existing or departing residence, allowing you to qualify for a much higher loan amount. This allows buyers to efficiently trade up now and postpone selling their original home, giving them the ability to effectively time the market. 

Landlords

Just as some buyers trade up and then sell their home, some choose to hold on to and rent their previous homes. Whether a lender considers the projected rental income in their loan-qualifying analysis varies by lender. Several lenders give full consideration to treating this rent collected as income, while some give 75% credit to rental income to account for vacancies and others provide no credit at all if the buyer has never been a landlord before.  This difference in how various lenders view rental income can greatly affect the loan amount for which buyers qualify.

Special Loan Programs for Lawyers, Entrepreneurs, Doctors & Professors

Several lenders offer special loan programs tailored to particular professions. Citibank has an excellent program for lawyers at elite firms, such as my old firm of Wilson Sonsini, that entitles them to lower rates and down payments than other borrowers. For example, below-market rates are available even with putting down as little as 10% for a loan up to $5 million, whereas most banks want 30% or more down at this price point. Silicon Valley Bank also has special programs for founders that grant both lower down payment requirements and lower rates to incentivize founders to keep all of their business with the bank. Bank of America has similar options for doctors, while Stanford Federal Credit Union and First Republic Bank both offer great programs for Stanford professors. I know the nuances of each of these specialty loan options, as well as the most experienced lenders at the various banks, and can recommend to my clients appropriately.  
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Where are Mortgage Rates Today and Where Will They Be at End of the Year

More than any other factor, the decline in housing prices that occurred in 2022 was precipitated by mortgage rates more than doubling in 2022. Freddie Mac surveys the nation’s average rate for the 30-year mortgage, and this rate started 2022 at barely over 3% before peaking at just over 7% in early November. The average 30-year mortgage rate has now dropped below 6% as inflationary pressures ease. The Mortgage Bankers Association is predicting 30-year mortgage rates declining to 5% by the end of 2023 and 4.4% in 2024. Decreasing mortgage rates are catalyzing a recovery in local and national housing prices.

I am recommending to clients that they purchase a home in today’s market, discounted due to the high mortgage rates borrowers are facing. Purchasing today locks in the good deal as well as the low property tax rate in perpetuity, and buyers can later refinance in 18-24 months when rates are projected to be much lower. While the average mortgage rate for a 30-year mortgage is barely below 6%, I get my clients lower rates by directing them to the banks providing the most attractive rates, such as those found below:

Examples of Mortgage Rates as of Mid-February:

5-year ARM - 4.40%

7-year ARM - 4.65%

10-year ARM - 4.9%

15-year fixed - 4.95%

30-year fixed - 5.4%

*Ken DeLeon and DeLeon Realty are not licensed mortgage lenders.  The material contained in this article is for informational purposes only, and should not be considered lending or financial advice. Interested parties are advised to consult with a licensed mortgage professional regarding available rates and programs. 

The housing market, both in Silicon Valley and around the nation, was hitting an all-time high in pricing and demand at the end of 2021. Yet this frenzied housing market, both locally and nationally, experienced a rapid reversal and conditions have quickly pivoted to becoming a buyers’ market.

This change was precipitated in large part due to rapidly rising mortgage rates. Many articles have discussed how the average 30-year conforming mortgage jumped up from 3.11% at the end of 2021 to 5.22% now. Neither mortgage rates nor the federal funds rate have risen this quickly since the 1980s.

This rapid rise has done more to cool buyers’ interest than the declines in the stock market. Home buyers generally care more about the amount of their monthly mortgage payment than they do the exact price of their home. The reality is, how much house you can afford is directly related to your monthly mortgage payment. While home prices generally fluctuate by several percent between a sellers’ or buyers’ market, there can be a much greater variance in mortgage rates. 

In recent weeks, mortgage rates have somewhat declined from their new peaks and these declining rates have helped the housing market regain some momentum. The question is whether mortgages will likely increase or decrease going forward, as their trajectory impacts the housing market.

I, along with several economists, actually feel that mortgage rates will decline in 2023. This statement may sound surprising given that the Federal Reserve will continue raising the Federal Funds rate throughout the rest of the year. The Federal Funds rate, currently at 2.5%, is the rate that banks charge themselves when borrowing money from each other. The Federal Funds rate also determines the prime rate, and if the Federal Funds rate goes up, so too does the interest rate for credit cards and car loans.  

Conversely, mortgage rates are market-driven and are determined by the bond market. Expectations of a rising Federal Funds rate have been incorporated in bond markets for several months now and when the Federal Reserve does a planned increase, that generally has no impact on pricing for the 10-year bond.

Additionally, in times of economic uncertainty such as we are experiencing now, many investors take funds out of the speculative and volatile stock market and transfer these funds into the bond market, bringing bond yields down. I feel that the mortgage rates spiked up more than were warranted at the start of the year, and the recent decline in mortgage rates is due to the 10-year bond’s return dropping from over 3.49% in June to 2.89% as of the writing of this article. This drop resulted in a commensurate drop in mortgage rates over the last two months. 

Most economists expect inflation to ease and the Fed’s rate increases to end as it pivots to easing monetary policy in 2023 as the need to sustain economic growth becomes paramount. While I project the Federal Funds rate to fall from a peak of 3.5% at the start of 2023 to 1.5%, I feel that market-driven mortgage rates will continue to decline, or stay stable, for the next year, at which time they may go up as the economic recovery may be in full swing by then.

Given that this dip presents a rare opportunity to purchase a Silicon Valley home for hundreds of thousands below what a similar home would sell for in the spring, I recommend that clients purchase a home now at a discounted price, use an adjustable-rate mortgage for 7 years, and then refinance to a 30-year mortgage when rates decline in the future.  

Additionally, through my sole focus on buyers, I always know what bank offers the best mortgage rates each week. These rates are much lower than general market rates, as I focus on the most aggressive lenders with the best rates, and I share these referrals with my clients.  To get these referrals, please reach out to me at Ken@DeLeonRealty.com or 650.543.8501. Some of the exceptional rates I can steer you towards include:

7-year - 3.20% 

10-year - 3.60% 

15-year - 3.65% 

30-year - 3.95% 

According to the Diamond Price Index, in December 2021 the average price for a diamond was $11,212.56 per carat. I found this interesting given that the average price per carat of diamonds has gone up significantly since the time I proposed to my lovely wife, Alex, in 2020. However, it would be a financial mistake for her to value her ring based on this simple calculation. There are many other nuances that go into the true value of a diamond, such as the cut, the quality, clarity, and the groom! I like to think that Alex views her ring as priceless.     

Zestimates are a useful tool for general market trends, and may even be helpful in subdivisions where the individual homes are somewhat fungible. However, a reliance upon Zestimates in Silicon Valley’s very specialized market is not much better than valuing a diamond based solely on weight. Unfortunately, it is looking like Zillow is learning this lesson the hard way and their sliding market capitalization may be a direct result.  

Perhaps Zillow’s recent market value drop from $46B to $13B could have been avoided if Zillow’s executive team had read my article nearly 5 years ago, entitled, “Zestimate or Zestimiss?”¹

In my article, I discussed that experienced agents realize that Zillow’s Zestimate, an attempt to use an algorithm to value each home in vast metropolitan areas, is highly flawed in its reliance on incomplete analysis that ignores the nuances of each property. For example, a Zestimate will miss many intrinsic attributes, such as being on a quiet street with no heritage trees limiting redevelopment versus overvaluing homes on high-traffic, cut-through streets, or properties with lower redevelopment potential arising from flood zone, or single-story overlay impacts. Overall, I found that Zestimates tended to overvalue properties, ironically illustrated when the CEO of Zillow sold his home for merely 60% of the Zestimate’s value.²

In fact, class action lawsuits have been filed against the inaccuracy and resulting implications of Zillow’s Zestimate.³ Yet, even with the flaws in Zestimate’s valuation methodology pointed out in my article and others, Zillow was so confident in its pricing algorithm that it said early last year, “its Zestimates would serve as the initial offer price on eligible homes.” That did not last.⁴ In a related, albeit abrupt and embarrassing, about face, late last year Zillow’s entrance into the practicing of iBuying was dramatically halted.⁵

The “i” in iBuying stands for “instant,” wherein Zillow sends owners instant, all-cash offers at their Zestimate value. These Zestimates were so inflated that even with savings in transaction costs and the nationwide housing market strongly appreciating, Zillow was reselling the majority of their homes at a steep loss.

With thousands of their property resales being below their purchase price, Zillow’s iBuyer division had a staggering loss of $422 million in the 3rd quarter. While a monumental number, this paled in comparison to the company shedding 25% of its workforce, or 2,000 employees, along with the majority of its market cap in 2021 as it ignominiously shuttered its plans to purchase tens of thousands of homes with its iBuyer methodology.⁶

This implosion does not only underscore the value of a local expert for valuation analysis… it also calls into question any reliance upon Zillow’s Zestimate in particular, and in general the sustainability of online valuation models going forward.

Zillow’s loss of two-thirds of its market cap was due not only to the failure of the iBuyer model, but the public relations fiasco that ensued, underscoring how inaccurate the Zestimate often is.  

In light of these great setbacks, many articles and experts further question the accuracy of the Zestimate tool. “It’s really a toy,”⁶ said Mike DelPrete, a real estate analyst who tracks the iBuying sector. “It’s meant to drive people’s interest in property.” However, this clearly does not reflect market value as evidenced by Zillow themselves losing so much money due to their reliance upon this flawed metric. 

While the iBuyer concept has been humbled, it could still succeed if better executed, and when applied to homogenous housing markets with a lot of tract housing. Silicon Valley, with its heterogenous housing, high variability in lot size and configuration, building codes varying per city, and with its high prices, poses significant and potentially insurmountable feasibility barriers for iBuying to become pervasive, unlike Phoenix where iBuyers own 13% of all homes on the market.  

While iBuyer companies like Opendoor have lost about 40% of their market cap in 2021, they generally employ better metrics in making their valuations than Zillow, and accordingly will likely survive. However, unless these models are constructed or adjusted at the local level, they will always struggle to achieve the accuracy of a very good local real estate agent, ideally with a qualified local appraiser on staff. It should also be noted that while Compass has lost over 65% of its value from its peak last year, this is not due to any significant iBuyer exposure. Rather, it’s due more to the market’s general disappointment with the company’s performance, which resulted in its general operating losses of over $100M in the last quarter. Commentators believe that this weak performance will likely continue into the immediate future.

The loss of faith in Zillow’s Zestimate is a cautionary tale illustrating that local expertise is required to analyze value in a market as sophisticated and distinct as Silicon Valley. To that end, for those considering the sale of their home, the listing team at DeLeon Realty is happy to provide a complimentary and accurate analysis rooted in localized, sound market data of the valuation of their property, a valuation enhanced by our on-staff licensed appraiser. And for those considering the purchase of a new home, the buyer team at DeLeon Realty is dedicated to employing an equally proven, data-driven approach to property valuation critical in today’s highly competitive Silicon Valley market.

Home buyers generally care more about the amount of their monthly mortgage payment than they do about the exact price of their home. The reality is, how much house you can afford is directly related to your monthly mortgage payment. While home prices generally fluctuate merely by a few percentages between a good deal and overpaying, there can be a much greater variance in mortgage rates. 

This is because bank guidelines can greatly vary, and while one bank may be the perfect fit for one type of borrower, this same bank may be a poor choice for another borrower. At DeLeon Realty, we direct our clients to the right lenders by knowing all about the unique attributes of each lender and what bank is the best referral for our clients’ individual circumstances. 

For example, the rates on a purchase of your primary home from the right Wells Fargo (“Wells”) representative can be ½ to a full point lower than another bank. While Wells always has competitive rates, these amazing rates  are available because Wells considers your down payment to be part of their relationship pricing. 

Many other banks also have relationship pricing, where in exchange for forming a relationship by giving the bank money or stocks to manage, the borrower will get a lower mortgage rate. Wells is unique in that they consider your down payment as part of that relationship and you do not need to keep any funds in the bank after closing. For example, if you buy a $4M home and put down the requisite 25%, or $1M, so long as this down payment is in your account sometime during escrow before it gets wired to the title company, you get a relationship discount of ½ point lower. On a $3M mortgage, that savings is $15,000 per year. Additionally, the lender I work with at Wells gives my clients a lower rate than others, as he makes it up in volume since I am one of his main referral sources. While the market rate for a 30-year mortgage at other banks is hovering around 3.5%, my clients are getting a 2.75% 30-year rate by putting in a million for their down payment to get a ½  point off and get another ¼ point off from my Wells representative to achieve such an amazingly low mortgage rate. 

While Wells is presently my preferred bank for purchasing your primary residence, they are less advantages for an investment property. This is because they both lose their relationship pricing on investment properties and surcharge a much higher rate on investments, so you can pay up to 4.5% on a 30-year at Wells, nearly double the rate for primary homes. For investment properties, I often direct clients to my representative at Bank of America ("BoFA"). While BoFA is often not competitive for purchasing a primary home, they do not increase their rates for investment property like most banks do, so they are by far the best choice for investors. 

For entrepreneurs who have variable incomes, First Republic and Silicon Valley Bank are well suited banks to understand an entrepreneur’s volatile income and unique circumstances. These banks will lend to those who have great futures, but are "out of the box" loan applicants. 

Other real estate brokerages also offer advice on mortgages; however, the fundamental distinction is that for many other brokers it is a profit center, where clients get funneled to very few choices with high mortgage rates to provide additional income to the brokerage via referral fees. Conversely, at DeLeon Realty we employ a specialist who previously worked in both private banking and a large bank and who can expertly and unbiasedly advise clients. This is complimentary benefit to our clients, along with a myriad of other free services we provide. 

Given that all buyers’ agents are compensated at the same rate by the seller and free to the buyer, shouldn't you work with America’s top real estate team that provides expertise and insight on every facet of your purchase including which lender will provide you with the best rate given your individual circumstances? Contact me at Ken@DeLeonRealty.com if you would like to hear about how we help our clients select the best loan for them.

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Few buyers fully optimize and research their mortgage rate before they purchase their home. As an illustration of this, a study published in the Washington Post showed that almost half of the buyers fail to shop around before applying for a loan, and three out of four buyers only apply with one lender or broker. But the most important flaw that the study noted, is that “most consumers get their information from lenders or brokers who have a stake in the outcome.” 

Realizing that a proper and unbiased advocate for DeLeon Realty buyers could save them hundreds of thousands of dollars over the life of their mortgage, DeLeon Realty has hired a financial consultant to help advise our clients on the ideal mortgage for them, given their goals and economic situation. While other brokerages have mortgage advisors, the biggest difference is that at DeLeon Realty, our financial consultant is provided as a loss leader solely for the benefit of our clients, and at no explicit or implicit costs to our clients. Other brokerages have a mortgage division, but their lending departments are utilized as a separate profit center, versus DeLeon having a consultant that provides clients greater insight without charging a penny for our service.

Our DeLeon Realty financial consultant, with nearly two decades of experience at both large retail banks and elite private banks, helps our buyers find their ideal lender. Our consultant utilizes over ten direct lenders and mortgage brokers to source the best loans. With this insiders’ perspective, we can direct our clients to the banks that provide them with the best rates and service. With $350,000,000 just in home purchases and not counting our listing sales, our team has the volume that incentivizes lenders to do all that they can to provide lower rates and premium service for our clients. 

Many banks with off-the-shelf pricing and no volume discounts have mortgage rates that are at least a ½ point higher. On a $4M purchase, this ½ point differential is an extra $20,000 of interest payments in the first year alone, and this pricing differential can quickly reach hundreds of thousands of dollars over the life of a 30-year mortgage.

While we explore a multitude of banks that we get rates from on a weekly basis, other brokerages often direct their clients solely to their in-house lender. While their rates may be much higher, the buyers do not know this, since often they will work with just the one lender their agent referred them to, and they have no sense of comparison.

How we advise our clients on mortgages is reflective of how DeLeon Realty operates. We negotiate for our clients at every step in the transaction. This often includes getting several competitive homeowners insurance quotes or remodeling bids from contractors and then negotiating on our clients’ behalf. While we seek savings for our clients at all times, these savings are passed on 100% to our clients, as DeLeon Realty never wants to profit from our clients beyond buying and selling homes.

Whether it is our complimentary time with our financial consultant or our in-house contractors, interior designers, or attorneys, DeLeon Realty is proud to provide our clients with insight and expert advice on every facet of their purchase. Only DeLeon Realty, with its client-centric business model, can provide this extensive suite of services that lets us be a one-stop shop and save our clients’ money and time.

Below are mortgage rates that my clients have recently obtained that illustrate why now is a great time to buy and lock in historically low rates. 

7/1 ARM - 2.125%
10/1 ARM - 2.250%
15 Year Fixed - 2.500%
30 Year Fixed - 2.875%

Contact us if you would like to be connected to our best lenders for each of the major loan programs.

Welcome to the brave new world of buyer’s agency, where, as a buyer, you may now have to pay your agent directly. While many buyers, and most buyer’s agents, are concerned about this change, I’m excited! And buyers should be too, because there has never been a greater opportunity to use strategy, insight, and experience to gain a competitive advantage in the Silicon Valley real estate model.  

When buyers must pay directly for something, they tend to scrutinize it more carefully than if it were simply included in the price. In the past, many buyers gave little thought to choosing an agent, assuming there was no direct cost to them and opting for a family friend or someone who was simply convenient. But if you’re the one paying, shouldn’t you invest in the best? 

This reminds me of my time as an attorney at Wilson, Sonsini, Goodrich & Rosati. As Silicon Valley’s largest and arguably most prestigious firm, we frequently faced opposing attorneys from other major law firms. Occasionally, however, opposing counsel would be either a solo practitioner or part of a small firm. This always excited our team, as we knew no individual attorney could compete with the full resources and array of talent that a large firm could provide its clients. This business model—providing a team of integrated salaried specialists to deliver exceptional service—is highly effective, and we’ve applied it to real estate. By adopting this approach, we offer services that no individual agent can match. Here’s what sets me and my team apart:

• Guidance When You Need It Most: Some buyers prefer to navigate the process on their own, thinking they can manage without a dedicated agent. In Silicon Valley, many are indeed capable of handling complex tasks, but when buying a home—a process that most people experience only a few times in their life—does it really make sense to invest the time and energy into becoming an expert? And do you truly believe the listing agent, who is loyal to the seller, has your best interests at heart? While many buyers often spend months or even years searching and repeatedly losing out, we provide expertise to help you secure your dream home on your timeline. In one of the nation’s most competitive markets, buying a home involves much more than just finding it on Zillow; you need a trusted ally to help you cross the finish line.
   
• Data-Driven Strategy to Find Below-Market Deals: We leverage data science to identify homes that sell below market value, targeting those opportunities. For example, our analysis shows that homes listed by out-of-area agents tend to sell for significantly less than those listed by experienced local agents. Similarly, sellers who foolishly let agents convince them to keep the home off the MLS, even if only for a short time, will likely settle for a lower price due to lower exposure.
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• Strategizing for Maximum Appreciation: While most people know me as a Berkeley-trained attorney, my background in economics, including a master’s degree from Stanford’s Graduate School of Business, equips me to analyze key drivers of appreciation in specific towns and neighborhoods. Our internal data reveals that buyers who have resold their homes with DeLeon Realty experienced an average annual rate of appreciation that is more than double that of San Mateo or Santa Clara County overall. This is a direct result of our expertise in recommending the best values and guiding clients through optimal home improvements to increase home value.  
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• Trusted Service Provider Recommendations: Most agents sell only a few homes per year and lack the volume to develop strong relationships with service providers or negotiate discounts. Our team’s volume enables us to forge valuable partnerships with reliable vendors in fields such as contracting, lending, insurance, moving, cleaning, and more. These vendors prioritize our clients and provide them with the best service and lowest possible prices. 
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• Aligned Interests with Our Buyers: We are so confident in our market analysis and appreciation predictions that we’ve created an incentive plan that aligns our interests with our buyers. If our client loses money when reselling their home, we believe we’ve fallen short, and we cover some of the losses—up to the commission we earned on the purchase *Terms and conditions apply*. 
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• Complimentary Legal and Tax Guidance: While most real estate agents are not attorneys, DeLeon Realty has five in-house lawyers who assist with the complex legal and tax questions buyers face when entering a real estate transaction. Our team helps with issues from negotiating lower property tax rates to structuring deals with seller financing or option payments. We also answer questions relating to probate and bankruptcy sales, targeting sophisticated transactions that intimidate most agents but often present excellent value.^{*
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• Construction Expertise: Our VP of Development, Matt Griffis, holds a master’s degree in construction management from Stanford’s School of Engineering.  Matt’s extensive experience includes managing projects ranging from large buildings on Stanford’s campus to luxury homes selling for $30M in Atherton. Many buyers shy away from remodels due to a lack of renovation knowledge, but with our guidance, they can confidently invest in properties with substantial potential. Matt offers free evaluations of development opportunities, identifying building impediments like easements, overlays, and flood zones, and helps determine whether a remodel or rebuild is the best option. He then assists in selecting the right team, reviewing budgets, negotiating on the client’s behalf, and ensuring that projects are completed on time and within budget. Thanks to our high referral volume, contractors prioritize our clients and provide competitive pricing.
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• In-Depth Disclosure Analysis: Unlike many other major brokerages where agents avoid giving detailed advice to minimize liability, at DeLeon Realty, we take the opposite approach. We provide clients with thorough summaries and analyses of disclosures, highlighting key red flags so they can make informed decisions on one of life’s largest purchases. 
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• Maximizing Home Values: As I’ve previously shared in The DeLeon Insight, I turned a $350,000 down payment on my primary home into a $7 million profit in under 10 years by implementing strategic home purchasing and improvement tactics. I pass on these strategies to our clients to help them maximize their returns.  
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• Exclusive Off Market Listings: Because I work exclusively with buyers, listing agents frequently share their listings with me before they’re widely advertised, giving our clients access to exclusive properties with less competition. Homes that sell “off-market” almost always represent a buying opportunity due to the reduced competition.   
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• Winning the Bidding War: In competitive bidding situations, having a buyer’s agent with a strong reputation can make all the difference. Listing agents respect our team’s reputation, knowing that our buyers are well-informed and thoroughly advised about potential issues before submitting an offer. This reduces the chances of surprises during the escrow process, enhancing the likelihood that the transaction will close. Additionally, our reputation often gives our clients the edge when multiple offers are on the table, ensuring they are given priority in the selection process.
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• Waiving Buyer’s Side Commission on DeLeon Listings: One of the greatest benefits of working with the DeLeon Buyers Team is that we waive 100% of the buyer’s side commission on our own listings. With nearly half a billion dollars in annual listings, this can translate into significant savings for our clients. 

This is just a glimpse of the many services the DeLeon Buyers Team provides. With our exclusive focus on buyers and extensive resources, we deliver a level of services that no other agent can match. If you have to pay, invest in the best. Contact Ken at 650.543.8501 or ken@deleonrealty.com to discover how we can help you purchase your dream home. 

*Legal services are provided by the Integra Law Group, LLP.

Why is there no performance component to real estate commissions? If a buyer loses money when they resell a property, why should the same brokerage that represented that buyer in their purchase of that property be the only one to make money when that property is resold?

At DeLeon Realty, we believe home buyers deserve a business model that aligns incentives between themselves and their buyer’s agent. Moreover, DeLeon Realty stands behind its analyses and acquisition recommendations to its buyers when they purchase their home with us and has created a tangible mechanism to make this possible. 

If DeLeon Realty doesn’t sell your home for more than what you paid after you’ve lived there for at least two years, we will reimburse you the difference between the purchase and sale price, up to the amount of any buyer-side commissions we earned when you originally bought the home. For this aligned incentive program to apply, simply ensure that (1) DeLeon Realty represented you when you purchased your single-family home, (2) you’ve owned the home for at least two years, and (3) you choose DeLeon Realty to handle the sale.

Here’s how this program works: Suppose you purchase a home for $5 million, and DeLeon Realty earns a 2.5% commission as your buyer’s agent. If, after owning the home for over two years, you resell it with DeLeon Realty for $4.9 million (a 2% decrease from your purchase price), DeLeon Realty will reimburse you the 2% difference of $100,000 upon closing. If the price difference is 2.5% ($125,000) or more, DeLeon Realty will refund the full commission of $125,000 that we previously earned.

The key benefit of this program is that it provides financial relief when you need it most—when your home sells for less than you paid. Additionally, this incentive aligns our goals, fostering mutual trust. DeLeon Realty is motivated to secure the best possible deal for you, as we share in the financial outcome. Our goal is to maximize your profit, especially in a rapidly appreciating neighborhood.

DeLeon Realty offers this program because of our extensive market knowledge, proven track record of accurately predicting market trends, and our ability to deliver nuanced appreciation analyses, honed over decades of experience. Our analytical expertise and deep understanding of the market give us the confidence that our recommendations will lead to significant appreciation, a confidence backed by the billions in profits our clients have earned by following our advice. This program is a testament to that confidence.

This aligned commission incentive program is the latest innovation from DeLeon Realty, building on our established client-centric business model. This model already includes our unique policy of waiving all buy-side commissions on DeLeon Realty listings, putting our clients’ interests first. Our ability to offer these groundbreaking programs comes from our highly efficient approach, where salaried specialists collaborate to perform their expert tasks. This structure minimizes pressure on clients and ensures that every decision is made with the singular goal of providing the best possible service and outcomes for our valued clients.

To learn more about the terms and conditions applicable to this program, and how you can align with the expertise of the DeLeon Team on your next purchase, give me a call at (650) 543-8501 or email me at ken@deleonrealty.com. 

Despite the impact of COVID, the unusual market conditions, and the looming tax proposals (which Michael Repka will address in his July 15th seminar), the current real estate market remains remarkably robust. This phenomenon is fueled by historically low mortgage rates, a surge in the stock prices of most local tech stocks, and people rethinking their lifestyle choices as a result of COVID-19 and job requirements. Just in the last two months, five of the DeLeon Team’s listings jumped more than a million above the list price, and well beyond what I would have viewed as reasonable. Yet, even in this heated market, I have been able to consistently get my clients attractive properties below market value and the list price. 

To get a below market value in a competitive market requires judgment, patience and selectivity – skills I have learned through years as Silicon Valley’s most successful agent. The following strategies have recently helped my clients secure great values:

As COVID unwinds, so too will its effect upon real estate 

As California reopens and the threat of COVID starts receding, so too will housing trends unleashed by the virulent pandemic start fading from memory. Sectors of the real estate market that have been battered due to the trends created by COVID are good purchases as the pandemic ends. The uniqueness of the pandemic created some rare housing outcomes, such as some historically slow housing sectors becoming very hot markets. For example, Saratoga and Woodside were not favored by young buyers before the pandemic, but became favorites for urban buyers escaping San Francisco’s space constraints and wanting expansive properties that are relatively reasonable.  

Conversely, before the pandemic, downtown condos in Palo Alto, Menlo Park, and Mountain View were very much in demand. However, during the pandemic and still now, downtown condos have declined in value more than almost any residential asset class, down about 10% from their peaks. This is because condos are out of favor since the pandemic made housing with shared features, such as a common elevator and shared hallways, a “germ factory” to best be avoided. Although COVID infection rates are rapidly declining, the terrible recent sales of condos will anchor prices lower this year even as the reasons that caused the price declines are eliminated.

Additionally, the premium paid for a downtown location and its great walkability is discounted now, with vibrant restaurants closed and people wanting to avoid crowds during the pandemic. As downtowns continue to reopen, so too should interest in downtown condos revive. There will be a window throughout 2021 where condos, and to a lesser degree, townhomes will be discounted due to the pandemic. By 2022, the condo market will likely recover and those who purchase now will likely have 10% equity or more built in when housing preferences return to pre-pandemic norms.

Land is an excellent investment in this market

For anyone considering purchasing land for a tear down and rebuild, this is a great time to be purchasing a property. The pandemic has created an urgency for finished housing, and turn-key homes that are nicely presented are in high demand. The dearth in supply of luxury homes is most pronounced in Atherton, where every home that is within a year of completion has been pre-sold. This pandemic demand for larger luxury homes has pushed demand up so high that I was recently involved in a bidding war for a $22M home in Atherton that received 5 offers and sold for more than a million above list price. Similarly, Michael Repka, the head of the DeLeon Listing Team, has sold two eight-figure homes with multiple offers over the past 6 months and he has informed me that he has three more coming.  
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While all families want and will pay top dollar for a finished home, construction has fallen out of favor and consequently land values have underperformed. This is due to two pandemic trends, the first being that buyers want their home immediately and will not wait the two to three years to build their dream home. Additionally, COVID really hindered construction, and time delays and cost increases that came about made this one of the worst construction cycles ever. Furthermore, prices for items like lumber are up 3 to 5 times what they were two years ago, so the cost of construction has also gone up. Most of my experienced builder clients feel that the supply chain disruptions and spike in commodity prices will subside (but not return to previous levels) from their current peaks, so building in the future will likely be a bit less expensive than now while the finished home will enjoy strong demand for years to come. We are already seeing loggers dramatically increasing production of lumber, and this trend is likely to continue.

‍Seller mistakes can be capitalized upon

The 2021 market is a strong one, but not a forgiving one. That is, if a mistake is made by the seller or listing agent in poorly presenting the home, overpricing it, not marketing it well, or giving an opportunity for select agents to show it to our buyers before permitting full competition (i.e., “off market sales”) etc. – then a buyer can definitely get a good value. I am directing my clients away from the homes that are well presented and well-priced, for these homes create an auction dynamic and are jumping to above-market values. Ironically, it is those homes that are priced above market value that in the end sell for below market value. I have gotten some great outcomes for clients – more than a million dollars below list price – by choosing the most motivated seller to negotiate against. It is much better to come in alone and negotiate down than to fight amongst a dozen other offers.  

Additionally, it is only in the last three months that the housing market jumped in appreciation. If you can get a home that came on the market before April, that home did not get the jump that new homes received from the appreciating market. Focusing on homes that are lingering effectively brings you back to 2020 market conditions, where prices were 7-10% lower and where I am directing the majority of my value-oriented buyers. 

Reach out to me at ken@deleonrealty.com or 650-543-8501 so I can let you know about the latest best values or winning strategies to help you get a home below market value regardless of strong market conditions. 

I know that Michael Repka, the head of our listing team, is generally opposed to selling his listings off market. However, as the head of our Buyers' team, I believe that off-market sales represent a wonderful opportunity for buyers to get a home at a price below fair market value, and a way for sellers to experience a very easy transaction without the inconvenience of showing their home to a lot of buyers.

Some sellers are willing to sell their home for considerably less than they could get on the open market for a variety of reasons. For example;

• Couples going through a divorce, or financial troubles, may not want their neighbors to know that they’re selling;
  
• People who may need to sell but want a very long rent back or, alternatively, they need a really quick sale;
  
• Others may not realize the potential price differential between an off-market sale and sale with maximum marketing effort;
  
• Someone may have led them to believe that they can get the same high price with no marketing and only a few buyers knowing about the property. 
  

Whatever the reason, these sales are often good opportunities for buyers. 

How to Find Off-Market Properties

When an agent gets an off-market listing, they often try to sell it to their own buyers first so that they can get double commission. However, if that doesn’t work, they will reach out to other top agents in the area. Thus, it is highly beneficial to work with a top-producing buyer’s agent if you’re looking for off-market buying opportunities. 

Fortunately for buyers, some listing agents will encourage sellers to accept a quick sale, even if it is for less money, because the listing agent will save the marketing effort and expense associated with a full marketing program. Plus, the listing agent will avoid risk and get their commission sooner. As the top buyer’s agent in Silicon Valley, and probably the United States, I am one of the first calls that these agents make. 

Similarly, some sellers reach out to me directly. They may not be interested in listing their property, but they are open to selling it if I have a buyer, assuming we only charge them part of the commission they would normally pay, which I am happy to do.
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In other words, sellers that are thinking about selling their home at some point down the road should let us know about it well in advance. Unlike other real estate brokerages, we never take commission from both sides of any transaction. Therefore, the economic incentives are exactly the same for us whether someone sells their home to one of my buyers off-market with no listing-side commission or if they list it with Michael and the DeLeon Listing Team. 

Opportunity for Buyers

If you are a buyer, you should reach out to me and let me know what type of property you desire. I will then share all of the appropriate off-market properties of which I am aware. Additionally, I will keep an eye out for opportunities that may suit your needs and desires.

Opportunity for Sellers

On the other hand, if you are a seller who would be open to selling your home off-market, please let me know about it. This is true whether or not you have the property listed with another listing agent. My role would be only to bring an interested buyer - under our unique structure, I do not handle listings at all.

Unfortunately, there are some listing agents who only let agents who give them a kick-back (or “referral fee”) know about their off-market properties. Therefore, you should let me know about your home directly to make sure your agent isn’t being “selective.”

If you are not working with an agent, I would be happy to represent a buyer, and you could be represented by a real estate attorney for much less than the typical listing commission. In fact, we will reimburse you for up to $3,000 in outside legal fees out of our commission.

Conclusion 

Purchasing a home off-market is only one of many ways to get a very good deal on a property. Please reach out to me so that we can discuss all of the different possibilities.

DeLeon Realty is constantly improving and revolutionizing the residential real estate business model. One of the fundamental flaws of the current model is that it is built around the agent’s goals and needs as brokerages fight to recruit top real estate models. Brokerages go out of their way to stress their agent-centric focus and qualities.

DeLeon Realty has created a brand new model that is instead client centric and built around what we feel clients both want and deserve.  One clear example of us highly prioritizing clients’ needs, goals and finances is where we waive 100% of the buyer’s side commission when we represent a buyer on one of our own listings.  We do this to avoid the conflicts of interest and bad judgement that can occur when one agent or even agency is seeking to double their commission by representing both sides. DeLeon Realty never allows the same agent to be on the same side of a transaction, and when we do have a different agent advocating for their respective client on each side, we further reduce the incentive to put our interests first by eliminating all financial temptation. Thereby both of our clients win as sellers pay less commission and our buyers get a valuable advantage.

This innovation greatly benefited our clients, particularly our sellers (although our buyers gain as well). The next evolutionary and revolutionary benefit we are providing our VIP buyer clients is that we are willing to align interests and create a performance-based model for buyers agents.

A current major problem for buyers is that their interests are not aligned with their buyers’ agent.  Sellers and their listing agents do have their interests aligned, for the more the sell the home for, the more both the agent and seller receive.  Buyers and their agents actually have their goals inversely aligned, for the more the buyer pays the more commission their buyers agent will receive since a higher sales price results in a higher commission.  Additionally, a higher price bid by the buyer will also result in a quicker sale, so the dollar per hour the buyers agent receives is much higher.

DeLeon Realty has created a new policy for our committed buyers that for the first time aligns both buyer and their agents’ interest by creating a performance-based commission structure for when you sell your home.

DeLeon Realty strongly believes in our ability to find and negotiate excellent values for our clients as well as direct our clients to the neighborhoods with the most appreciation.  With this confidence, DeLeon Realty is the first residential brokerage to ever state that we will not make a profit for our listing services unless our buyers make more than $500,000 in gain in their first three years of home ownership!!!

We feel that presently buyers’ agents have no skin in the game and are not financially motivated to direct their clients to the homes that are the best value and in cities with the most appreciation potential.  In the (rare) event we do not achieve this $500,000 in gain for our clients, then DeLeon Realty shall sell their home at our costs instead of at a profitable commission rate.  Our new performance-based model lets buyers know that we have “skin in the game,” and by aligning our interests and goals with our buyers we have created a better model where clients can then fully trust the advice of their buyers agent.

This performance-based model is available for clients who purchase a single-family home in the neighborhoods that we feel have strong appreciation potential, provided they listen to our advice as to the maximum price they should pay. It does not apply to purchases before July 1, 2018 and we reserve the right to cancel this program any time prior to a client entering a binding contract.  All that we ask is that our clients hold on to this home for at least three years in the neighborhoods we are particularly optimistic on prices continuing to rise.  The list of neighborhoods that we feel have the greatest appreciation potential are proprietary and based on my empirical data plus my analysis, and this information is shared with our buyers.
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There are many benefits that buyers receive from this arrangement including: 

1. Complete Trust in Your Buyers’ Agent. 

I actually feel that the greatest benefit of this new model is that buyers can now fully trust their agent since both interests are now aligned. When I was an attorney at Wilson Sonsini, my clients fully trusted me, conveyed everything to me and allowed me to most effectively represent them. Many buyers withhold information from their buyers agent, such as how much they would pay for a property or other crucial information, that if known would allow their agent to provide the best representation. By aligning interests and truly being a fiduciary to our buyers, this allows for trust and a better outcome for everyone.

2. Saving Money in a Down Market.  

While the greatest benefit of our performance based model may be that buyers can now fully trust their agent, there is obviously a lot of value to the protection provided by the offer. If the market does not appreciate as much as we project and we do not make you over $500k in gain, then you can take comfort in knowing that our future commissions will be greatly reduced.

3. Confidence in Knowing that Your Agent Believes in the Market.

Given how much appreciation has occurred in the local market, many buyers are now worried that they are buying at a peak time and that a drop in prices may occur. With my background in Mathematics and professorship of Economics, I have been able to accurately project which cities and neighborhoods have the most appreciation. This model tangibly illustrates my confidence to direct our buyers to the right cities and opportunities where I feel they will make over $500,000 in gain. Only DeLeon Realty has the confidence in our abilities and this market to create this model. I recommend that all other brokerages follow our model for the clients benefit.

4. This Model is Very Tax Efficient. 

It is not a coincidence that I picked $500,000 as the amount that we are projecting you will make even more, for $500k is also the amount that is exempt from capital gains for your primary residence for a married couple filing jointly. So if my clients make less than $500,000 in gain on their home, every dollar in commission that I charge them is a full dollar out of their pocket. Yet if my clients make over $500,000, then they will pay a combined 37.1% in federal and state capital gains taxes. So when my clients make over $500,000 in gain, the government is indirectly paying for 37.1% of the commission since my clients would otherwise be paying capital gains on their profit. Thus, under this model we only charge clients our normal commission rate when they made a large gain on their home plus the commission helps reduce their capital gains.

To our knowledge, no other brokerage anywhere in the world has offered a similar model to this that we know of. Inspired by our innovative clients, DeLeon Realty continues to revolutionize how residential real estate is bought and sold by creating the first truly client centric and efficient model. As you can imagine, there are a lot of details to how this program works. Please contact me or any DeLeon Realty buyers agent to learn more about this latest revolution designed to help our clients confidently buy their dream home.

When evaluating the purchase of a newer home, the two most important factors that impact the home’s quality and long-term durability are the builder and their goals. The majority of homes are built by speculative developers, who are building for profit. A minority of homes are built by "end users," those who are building their dream home for their families. Although these homes tend to sell for approximately the same price, I strongly recommend that clients purchase custom-built homes vs "spec homes" whenever possible.

Spec homes, or homes built for speculative profit by developers, tend to have a lower level of quality than custom homes. With most spec builders only doing a few projects at a time and in different cities, they tend to focus on profit instead of building up their long-term reputation. There are certainly excellent spec builders out there, with Pacific Peninsula Group and Benchmark Builders being a couple of my favorites. Yet most builders will focus on cosmetic items while skimping on expenses for the infrastructure that lies behind the walls, thus neglecting the long-term integrity of the build.

Custom homes tend to be built by the most discerning buyers who feel that the options available on the market do not work for their goals, and are willing to spend three to five years of their lives building their dream home. The mindset of these end-user builders is very distinct from spec builders, with a focus on building the best home possible for their family. These builders are willing to spend the extra million to enhance what is visible as well as the home’s infrastructure and systems. Custom homes look better than spec homes on day one, but the differential between the two magnifies as they age. Custom homes that are ten years old often feel like they are six or seven years old, whereas a ten-year-old spec home can often feel like it is thirteen years old.

Are custom builders rewarded for sacrificing years of their life and spending more money for greater quality? Unfortunately for the sellers (and fortunately for the buyers), custom homes tend to sell for slightly higher or the same as spec homes on a per square foot basis. With many buyers and agents focused on the simplistic metric of dollars per square foot, the extra expense inherent in the construction of a custom-built home often gets diluted, and most sellers get less than a shocking 10 cents on the dollar for the extra money spent for the higher-end build quality and material. Meanwhile, the spec project will receive a premium relative to its lower-end material and construction, given the finished product is the prevailing contemporary aesthetic and design.

The lack of a real premium for high-quality homes is due to the simple fact that many buyers and unsophisticated agents cannot differentiate between high and mediocre construction quality. I admittedly only began learning to make these subtle distinctions in quality as I started building and remodeling homes myself. You ought to ask yourself if there is a large spread in a cost that will likely go unnoticed, “which one would I buy?” The answer is to purchase great quality at a substantial discount.

The best way to extrapolate a home’s quality is to evaluate its windows and doors. These are good indicators, as there can be huge differentials in the cost of these materials but usually little benefit when reselling a home. Consequently, developers generally install very cheap windows and doors, while finer ones are a clear marker of quality.

On windows, buyers may be surprised to know that custom wood windows from Europe can cost ten times as much as unbranded vinyl windows from China. For doors, solid core doors with strong hinges can be five times as much as hollow-core doors with cheap hinges. If you see owners who invested heavily in windows and doors, you can count on quality in other areas we cannot see behind the walls.
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The only area where spec homes are often better is in their floorplans, since they are designed to appeal to the widest net of buyers. Conversely, some custom sellers tailor the home to their individual needs above resale foresight and occasionally design an incurable floorplan flaw. An example is providing only two suites upstairs since the owners built the home for their needs and they had only one child. If you can cure the flaw through a minor redesign, the greater quality is worth the effort.

While I have built homes for resale, I never have, nor will I, spend the small fortune and give up years of my life to build a custom home. The phrase "build a house, lose a spouse" humorously conveys the stress that comes with building your own home. Instead, save yourself this frustration and purchase a custom-built home secondhand and enjoy the quality and the home aging well.

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As market dynamics change and economic tailwinds turn to headwinds, so too are real estate consumer preferences changing. During periods of market volatility and transition, good deals and opportunities abound as the best time to purchase a home is when there is less competition. Locking in an excellent value also perpetuates a low property tax for the entirety of your time owning the home, so the good deal carries forward.

Buyers have gotten pickier and their tastes and expectations have changed as market conditions and overall economic conditions have deteriorated. These changing tastes create market opportunities where savvy buyers will seek to get a good value on what is presently out of favor.  

While the market has cooled and demand dropped, it has not done so uniformly. With the balance of power now with buyers, they have become less forgiving of any work that a home requires. Consequently, as the market has continued to weaken over the second half of the year, buyers have become unforgiving of homes that require remodeling.  

New Homes vs. Tear-Downs

Even in this market, new homes or turnkey remodeled homes are often generating multiple offers. A Los Altos property located at 845 Mora was tastefully updated and a buyer could move in without having to do a thing. This turnkey home received multiple, all-cash offers and it recently jumped more than $800,000 above list price and went from $6.99M to over $7.82M.

Conversely, homes that need remodeling are viewed as too much work and buyers are only proceeding when the value is clearly reflected in the price. The greatest discount and drop in past sale prices from earlier this year to now is for tear-down lots. Covid had a negative impact upon construction, increasing costs of both materials and labor while also greatly increasing time for completion as many cities’ planning departments inefficiently worked remotely. A tangible illustration of the discount for tear-downs is that earlier this year, a tear-down in Atherton’s Lindenwood neighborhood sold for $7.15M, whereas a larger lot just closed for $6.3M, a drop of nearly 12%.

Savvy buyers should use this down market to purchase a lot upon which to build their dream home. Tear-downs are ideal to purchase in a weaker market as housing recessions generally last only 1-2 years. Once the home is complete, the market should have recovered. Building costs should also be lower when building during a recession.

Privacy and Space vs. Density and Walkability

Before the pandemic, the strongest markets were neighborhoods that allowed for walkability to a downtown or park. The former premium buyers would pay for walkability was particularly high for the many restaurants and shops in vibrant downtowns such as Palo Alto or Mountain View. However, the pandemic redefined much of society and our view towards housing.

During the pandemic, buyers no longer sought centrality and walkability, but instead started seeking a large space that provides privacy and a compound feel so that children could be watched and protected. Public playgrounds went out of favor over expansive backyards.  

These revised valuations fundamentally flipped Silicon Valley’s demand, and downtown neighborhoods have suffered the greatest declines whereas formerly slower moving markets like the hillside communities of Los Altos Hills, Portola Valley, and Woodside are more sought after than ever before.

As the pandemic ends and we return to our former values, I project that the premium formerly ascribed to walkability will return and now is a good time to get these types of properties at a discount. Sophisticated buyers are using this short-term dip to make some very good long-term investments.
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“We shape our buildings, and afterwards our buildings shape us,” Winston Churchill

The pandemic has forced us to involuntarily spend the majority of our time in our homes. A recent article in the Washington Post discussed how the share of US residents in their home at any given hour rose from 28% in 2019 to 61% in 2020. While the pandemic will end, its impact, including spending more time at home versus a corporate office will be an enduring legacy. Given this likely permanent shift to more time at home, more research is occurring in the field of environmental psychology, which studies how buildings affect our health, mental processes, and social interactions.

A 2020 article entitled “How to Make a Happier Home” in Psychology Today showed that the empirical research indicates that homes and buildings are most conducive to human happiness when they mimic the scale and tone of the natural world through their design and layout. This replicates a famous experiment where hospital patients healed faster with a view of nature; additionally, natural light was correlated with an alleviation of pain symptoms. Consistent findings show that incorporating nature into interior design has a positive impact on health, such as the study which showed that spending time in rooms constructed with a moderate balance of wooden surfaces has been linked to decreasing diastolic blood pressure and to a general sensation of comfort. In a recent study, participants were less stressed and fatigued in wooden indoor spaces than non-wooden ones. Overall, visual access to a natural setting has been correlated to positively influencing overall happiness, mood, and attitude.

Unsurprisingly, natural light throughout a home has been found to be one of the most restorative features found in a home. Recent studies have confirmed that human performance, both indoors and out, is improved by natural light. We think more clearly, have more energy and endurance, and simply feel more sanguine about ourselves in well-lit spaces.
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In 2015, a University of Toronto study found that high-ceilinged spaces were considered more aesthetically beautiful. Through the use of MRI scanners to gauge reactions to photos of different types of interior spaces, the team discovered that high-ceilinged spaces stimulated the part of the brain structures aiding visual navigation and behavior.

Interestingly, men in particular seem to crave larger personal space bubbles when they find themselves in low-ceilinged environments and are more likely to act antagonistically when they feel cramped. This is likely due to a sense of being enclosed, stimulating our fight-or-flight response.

Other design attributes that have been correlated with happiness include curved design elements. A 2017 study found that rooms with curvature were rated more stimulating and pleasurable to reside in versus rooms defined by rectilinear lines. Curvature may delight us because it recalls pleasant forms found in nature such as bodies of water, eggs, and fruit whereas sharp shapes may invoke thorns, fangs, and jagged rocks, things we associate with riskier situations.
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The pandemic has impacted so many facets of our lives. Now that we will be spending more time in our homes as we embrace remote working, our focus on homes should turn towards designing homes that maximize our happiness and to do so generally involves incorporating natural beauty and materials into home design. Since it has been scientifically proven that spending time in natural environments improves overall happiness, a logical conclusion is that the fields of architecture and interior design should increasingly bring the outdoors in, both literally through more windows and doors and metaphorically through incorporating natural design elements throughout the home. While home is where the heart is, so too should this be where happiness resides as well.

Silicon Valley builders tend to be composed of one of two groups. One group of builders are construction foreman who rose through the ranks and build homes as they have done in the past. The other set of builders is more reflective of Silicon Valley, and these builders will be very analytical, discerning, and often have graduate degrees from an elite university like Stanford. With my analytical background, I tend to attract the more calculating developers, and they seek my advice on which town is the most profitable for them to build in. While this article focuses on the advice I give my clients who build homes for profit or speculation (“spec” builders), the analysis also applies to advice I provide custom builders who are building their dream home. 

While some agents may intuitively try to evaluate what city is the most lucrative to build in, I wanted to empirically evaluate the data to draw this conclusion. I compared the builders’ final sales price, and then subtracted out the price of the land and imputed construction costs; as a result, I was then able to determine which cities provided the most profit to speculation builders.

Having worked with clients to build dozens of homes, and personally building a home now in Palo Alto with a client, I have gotten to know accurate estimates for the cost of construction and how that will vary by each city as determined by their topography and building codes. As a study in contrasts, in Mountain View, which is a town very open to property redevelopment and has a flat topography that is easy to build upon, a “spec” builder can still build a home for $350 per sq. foot or less. In Woodside, which has very restrictive building regulations, hilly topography, and the San Andreas Fault running through its center, necessitating very stringent seismic requirements, it is hard to build anything of quality for less than $800 per sq. foot. In my analysis, I normalized the construction costs to be reflective of the cities that I was examining. In higher end cities such as Atherton, Los Altos, Los Altos Hills (“LAH”), Menlo Park, Palo Alto, Portola Valley and Woodside, I also imputed a higher level of finishes to the homes to determine my estimated cost of construction in each town.

While I share the detailed findings with my clients to best help them, I have some general conclusions that will be insightful for anyone interested in building in Silicon Valley:

1. Palo Alto has been a good city to build in: Intuitively, I always told my clients that Palo Alto is amongst the best cities in which to build. There is always high demand due to the exceptional schools and a vibrant downtown. This was empirically proven with Palo Alto having the highest return on investment amongst all local cities with an average profit of 39% for speculation homes built by developers. This is why I chose Palo Alto to partner with a client to build my first home, so that way I can gain greater construction expertise that I can pass along to my clients. While a 39% return per project sounds amazing, planning, permitting, and completing a home now takes over two years in most cases, so this return is fair given the risk involved of market fluctuations coupled with the large amount of time and money required. Palo Alto’s growing timeframe for reviewing and approving permits may deter future redevelopment if this trend continues. To illustrate, it is likely that the home I am building from the ground up will have a longer time for plans and permits (13 months) than the time to complete it (approximately 11 months).
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2. Los Altos, Mountain View, and Menlo Park all had roughly the same return on projects: As both Los Altos and Menlo Park are viewed as sister cities to Palo Alto, and are both prestigious and in high demand, I anticipated strong and roughly equal returns for developers in these two cities. I was correct, as projects in these towns had just a slightly lower return of 33% and 35%, respectively. I anticipated Mountain View would have a lower rate of return due to lower sales prices of new homes, but with an average return of 38%, this city fared well. Lower land acquisition costs and lower costs of construction (due to lower buyer expectations plus ease of building there) netted out to have a higher profit margin than other cities.
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3. Towns with large lots do best with expensive homes: I anticipated lower rates of returns for building in the hillside towns because of the high cost of construction (due to sloping topography and earthquake risks engendering more stringent seismic requirements) and overall lower demand. While I was correct overall, with the rate of return a bit over half as high as other towns, I spotted an interesting trend: large homes that sell for over $10M had exceptional returns that, overall, were in the top range of all the cities. As I reflected upon this, I noticed that my upper-end clients are the most willing to spend money to save time. Whenever I have clients that want to buy a $20M speculation home, I try to be the hero and save them $6M by telling them that we can buy a nice tear down for $8M (either an acre in prime Atherton or 3 acres in Woodside) and spend $6M building the home that when complete will be worth $20M. Most of my affluent clients appreciate my trying to save them money, but say they will happily pay the $20M to enjoy the home immediately. The builders who regularly build these beautiful spec homes, such as Pacific Peninsula Group, have been very successful in catering to busy tech clients who value time over money. Interestingly, homes and lots that were smaller than average for these elite towns tended to provide very little return.
   
   For those who are considering building their own home in Silicon Valley, whether for their family or for profit, DeLeon Realty can provide more analysis and assistance (such as our interior designers assisting with selecting finishes during construction) than any other agency would ever offer. We look forward to sharing our continually growing expertise and experience with building to our clients. 
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Patience is a virtue. While this has always been the case in the construction industry, patience has now gone from a virtue to a necessity. With the Silicon Valley economy thriving for many years, construction projects are now experiencing the longest wait times for city approval than at any other time during my nearly twenty years in real estate.

To better serve and advise my clients, I have decided to go through a full construction project myself in an effort to understand and become an expert on all current aspects of construction in Silicon Valley. To further this goal, I have partnered with a client to build a home in North Palo Alto. In the past, I used to tell clients to budget eight to nine months to draw up their architectural plans and obtain city approval to allow construction to begin. That is often no longer the case.

In this environment where there is a surge of remodeling and rebuilding going on throughout all of Silicon Valley, this timeline for approval now needs to be stretched out to more than a year. Unfortunately, even with full focus on the process, there is not much that can be done to get approval in less than one year. For example, the moment that my client and I went under contract on our property, we started working on blueprints with our architect. By utilizing our thirty-day escrow period we were able to submit our architectural plans just one month after closing. However, even though the project was fully compliant with all of the setbacks and city guidelines, three out of four adjacent neighbors opposed our design. After some modifications, the neighbors were satisfied and the project was able to proceed along through the rest of the city’s onerous requirements. 

As of now, the home has not been fully approved and we will be fortunate if the planning and permit phase takes less than fifteen months, with over a year dedicated to working with the city for approval. Note that this is the timeline with an experienced architect and builder that have recently built many homes. If, alternatively, I had less experienced clients building their custom dream home for the first time, this process would assuredly take even longer. 

On a positive note, we have found a builder who is very good at project management and has a track record of building two-story homes in under nine months. So, we have made up for the planning and permit delays by finding this builder and, as a result, the entire project will be completed in just over two years. You know there is too much bureaucracy when the approval process takes nearly fifty percent more time than what is needed for construction. 

Along with rising planning times, there has also been a large spike in construction costs. Whereas I used to tell clients to build a home they should budget $300 per sq. ft., I now tell clients that they should anticipate total construction costs of approximately $500 per sq. ft. This increase is due to both higher labor and material costs. As an example, the price of lumber is up nearly 30% as there is high demand caused by the fires in California and hurricanes in Texas and North Carolina, which are driving up demand with all of the redevelopment that these natural disasters have necessitated.

While there are still a lot of reasons why one would want to build a new home, whether for anticipated profit for a developer or to create your customized dream home, both the time and costs required for this endeavor have gone up and likely will continue to do so. At DeLeon Realty, we utilize our expertise in construction and knowledge of great architects and builders to help our clients optimize what is generally a long and arduous, yet, ultimately, a rewarding process.

How can one’s darkest moments lead to the light of knowledge? How can a seemingly horrific experience result in greater insight and later happiness? Through having to face and overcome four “tragedies” with the right mindset, I have become an emotional alchemist. I can now transform adversity into life lessons, resulting in growth. I wrote this article in hopes that you take bold chances and live the most fulfilled life possible, for I have found that we create our own lives and outcomes. 

While we cannot control what happens to us, I believe that we can control our responses and thereby we indirectly determine our outcome, and our lives. These tragedies catalyzed new thoughts and personal growth that has essentially resulted in me being able to live the life of my dreams and have the courage to start my own real estate brokerage utilizing a new, client-centric business model. 

‍My First Tragedy – Losing My Sister

The hardest and most painful of my hardships is the childhood loss of Jane, my older sister and my only sibling. Jane was a brilliant and kind person, better than me in almost every way. The one attribute that I had and she did not was self-confidence. Doubting herself and struggling with depression, when her long-term boyfriend broke up with Jane, it was too much for her and she took her life at the tender age of 17.
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Losing Jane was a hand grenade to my heart. At first, I was overwhelmed with guilt. I kept wondering what I could have said or done differently to give her enough hope and resilience to carry on. Within a few weeks, guilt transformed into anger. I endlessly thought of this question: how could she do this to me and our parents? No matter how hard I tried, I could not wrap my mind around Jane’s decision to end her own life, leaving everything behind over a mere boyfriend.

The passage of time changed my attitude and emotions. I began to feel more and more empathy for Jane and started to wonder how she felt and what she saw before making that mortal decision. Then there was the feeling of acceptance and less anger. I came to realize that my sister was so depressed and distraught that she truly did not know what she was doing and could not think fully of the consequences. I moved from guilt, to anger, and finally settled upon a peaceful acceptance of her love.

I can attribute the following lessons from losing my sister:

Become self-reliant. My sister’s fatal flaw was letting another person determine her self-worth. While initially a people pleaser, seeing my sister’s downfall due to her need for approval, I learned to no longer seek validation from others. My self-worth is determined by my actions and thoughts. I have learned how to generate my own happiness, motivation, energy, and satisfaction. For example, not needing the approval of business competitors empowered me to support Michael Repka’s drive to create a new, more ethical, and client-centric real estate listing model that has revolutionized the way people sell houses and changed the home-selling process for the better. 

Focus on strengths and positives. Before Jane’s suicide, she was burdened with absurdly high expectations as the first born. Her 99% test scores in both math and English were excellent, but the sad irony is that many geniuses use their intellect to overanalyze their flaws and Jane focused on what she lacked versus what she had. To help myself recover, I vowed to carry the best attributes of Jane in my heart. I became more empathetic and aware. I also became a better communicator and ended every conversation with family members by telling them I love them, since those being my last words to Jane gave me solace. With Jane gone, I wanted to achieve more in life and honor her memory by using her loss to fuel me to greater heights. My grades went from B+/A- to all A’s and I sat in the front row and became fully engaged in school. Until age 40, I lived for Jane almost more than myself, as I thought of her daily. I have now released this through finally coming to terms with her loss and now my focus is on my family and clients. 

Become an inspiration to others. While it is wise to learn from your own life mistakes, it is even more ideal to learn from the errors of others. I used the emotional loss of Jane and my other tragedies to speak on a volunteer basis at many local high schools, to at-risk youth, and suicide prevention groups, to give strength and perspective to these young people. It is my hope that by sharing my experiences and my unique perspective on life, that I can help someone else get through a hard night and realize that the sun will rise just as beautifully tomorrow. Losing Jane gave me a resilience that prepared me for quickly overcoming three subsequent hardships.

My Second Tragedy – A Nearly Fatal Car Accident

On the morning of August 17th, 1998, my prospects never seemed brighter. I had recently graduated from Berkeley Law School, passed the California Bar Exam, and was slated to start as a patent and trademark attorney at Wilson Sonsini Goodrich & Rosati in a few weeks. I was visiting my parents in Florida and went on a walk that would nearly end and forever change my life.

My father and I were conversing about how excited I was for my move to Palo Alto while walking along the sidewalk; then, without warning, my life changed. Behind me and my father, a car traveling over forty miles per hour veered off the road and, without braking, slammed into my right leg.  The force of the impact catapulted my body upward and ripped me out of my shoes. I was launched above the hood of the car. My right shoulder and upper arm crashed through the windshield, breaking several bones in the process. My body landed, contorted and mangled, half in and half out of the speeding vehicle which showed no sign of slowing down. My head and upper body were wedged against the passenger seat while my legs were painfully sprawled out over the hood of the car.

I screamed in agony, as extreme, searing pain tore through my body and inner core. Through my teary eyes and horrified screams, I looked at my throbbing leg and saw it twisted in an unnatural and hideous manner, pierced and punctured by broken glass fragments from the windshield. Then I noticed the clouds darting along overhead and realized that somehow, I was moving. I suddenly stopped screaming when, through the haze of pain, I felt a new source of force being applied to my body.  

Confused as to where the blows were coming from, I looked up and will never forget the dilated, bloodshot eyes of my attacker. He was clearly under the influence of mind-altering drugs. His manic eyes glared at me with an animalistic hatred and darted back and forth between me and ahead at the cars he was dashing past. His face was drenched in sweat. While beating me, he screamed, “Get Out! Get Out!” in a guttural, ravenous snarl. Doing my best to block his punches, I did my best to resist him pushing me out of the speeding car.

After my attacker ran several red lights with my twisted body still stuck through the windshield, he finally was forced to stop when there were cars filling up all of the lanes. Once that happened, I immediately tried to get out, but could not open the door with my right arm, which was badly broken. Using my left arm, I pulled the door latch and was able to barely open the door and began frantically trying to escape from his car. But because both my right arm and leg were badly broken, I could not disentangle myself. Finally, my attacker violently shoved my body out of the car and my broken arm slammed against the door and ground. I slowly writhed away from the car while feeling an unbelievable and unbearable pain coursing through the right side of my body. I looked at my right arm and saw that it was pulled backwards and dangling limply. My first thought was that I would never be able to write again. Then, I heard approaching sirens in the background. 

My attacker was soon identified and arrested. They found out that just two days earlier he had been arrested on felony charges for attempting to sell drugs to minors. Tests found that he was on horse tranquilizers (ketamine), methamphetamines, ecstasy, and marijuana when the accident happened. Apparently, he blacked out due to all of the drug use and that is why he swerved off of the road into me. In his delusional mindset, he said I was a “demon from the sky attacking him,” which is why he had to punch me and was screaming “Get out!” at me. My attacker was sentenced to seven years in prison and was released early due to good behavior.  

Just a decade after losing my sister, my parents almost lost their only son. With this huge fork in my life, would this accident shatter my future as it shattered many of my bones?  While I could not control the event, lying there in pain in the hospital bed made me realize that getting back up again and living life to the fullest was solely up to me and my mindset.

I am thankful to say that my life is truthfully better and more fulfilled because this accident occurred. While this accident could have forever kept me down and depressed, the power of the mind to overcome all obstacles is our greatest gift. With this mindset and a determination to not let my attacker lessen my life, I had many epiphanies during this physically painful, but mentally fulfilling time of my life.

Life Lessons from My Accident

I think that life events are neither inherently good nor bad. Instead, life events are open to our interpretation and we can shape the outcome simply by our mindset. This accident, where the most likely outcome was losing my life, positively shaped my life instead and led me to:
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Find a new life purpose. Before the accident, I felt that my life purpose was happiness. I wanted to first focus on making myself happy and then share this with others. However, the several months I spent convalescing really gave me a newfound perspective and appreciation for life. I realized that with the right mindset, seeking growth and being forgiving of myself, I could use this setback as a launching pad for self-improvement and doing great things in this world. I now have made growth my life purpose. I want to grow as much as I can, and help others evolve to their full potential. The beautiful part about focusing on growth as my life’s purpose, is that I can embrace the full spectrum of emotions, rather than just valuing happiness as before. Mindset is excellent for transforming seemingly tragic circumstances into greater life growth and fulfillment. 

Live life to the fullest. I have viewed studies which showed that pedestrians hit by speeding vehicles going 40 mph or more have an 85% chance of dying. Having come so close to death, I have gained a greater appreciation of life. I do not fear failure, I fear living a mediocre life. I do not want a life filled with regrets. The greatest crime against life is boredom. We have only one life and it could end at any moment. I now seek to live a life so great that it eliminates any fear of death.

Pursue passion – leaving law for real estate.
I was a very good lawyer and was proud to be working at Wilson Sonsini, one of the preeminent law firms in the nation. However, my accident showed me how fleeting life can be and this gave me the courage to pursue my passion for real estate. I always loved real estate and felt that there was a lot of inefficiency and room to improve this industry versus the efficiency of elite international law firms. Michael Repka and I drew from our backgrounds in law to create a new, team-based, salaried specialist model that is very similar to how a large law firm operates.

Forgive. I have given hundreds of inspirational speeches on a volunteer basis and at real estate conferences as a keynote speaker. I am always asked what I think of my attacker. I honestly reply, “I don’t,” for I have forgiven and nearly forgotten my attacker. I highly recommend the book Forgive for Good by Dr. Luskin, the Director of Stanford’s Forgiveness Project, which talks about the medical and psychological benefits of forgiveness.   

Love yourself. Realizing that life may end at any moment, I will not waste my limited time being beholden to the approval of others. The goal in life is to be your truly unique self and to find likeminded people to grow together. Wasting time and energy caring about what others think of you will lead to endless comparisons and will limit growth. 
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Although these two “tragedies” caused me great hardship, in many ways, my life is much more fulfilled and I appreciate every moment, as I know how fleeting life may be. While I do not wish adversity upon anyone, with the right mindset, you can gain resilience and wisdom when overcoming life’s hardships. It is important to leave a legacy, as I know life is ephemeral. The life lessons I learned instilled me with the courage to follow my passion for real estate. 

There are two things I love most about real estate: How much I get to help my clients, and how my practice utilizes my IQ skills, as well as my EQ skills (more commonly referred to as emotional intelligence) that I’ve derived through my educational experiences. Both Berkeley Law School (f.k.a. Boalt Hall) and the Stanford Graduate School of Business provided me with distinct tools that allow me to best represent my clients.

Berkeley Law School taught me to think critically and consider all alternatives. As a result, I have been able to offer a world-class buying experience to my clients through the innovative incorporation of the following:

1. DeLeon Realty's brokerage model mirrors that of elite law firms. Drawing on my background from the major international law firm Wilson Sonsini, I have seamlessly incorporated “white-shoe” law firm efficiency into our own innovative, client-centric approach, which has revolutionized the real estate industry.
   
   Other traditional brokerages are composed of commission-based independent contractors acting as agents. These agents do not have formal training in the professional trades important to clients, and consequently they become jacks-of-all-trades and masters of none. 
   
   Conversely, DeLeon’s team of salaried specialists provides much greater expertise and economies of scale, allowing us to pass along these benefits to our clients. For example, the Buyers I represent on our listings each have their own agent advocating for them, get access to our designers and construction consultant, and can use our moving truck, all for a total cost of 3%.
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2. My expertise in negotiations comes from both professional training at Berkeley, Stanford and Harvard, as well as extensive practical experience from representing many hundreds of buyers in their home purchases. Through this experience, I have mastered the art of the deal and overcome zero sum issues. As an experienced negotiator, I have learned to leave a little for the other side and to highlight what we offer them in the negotiation, so that even while my clients come out on top, both parties walk away satisfied.  
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3. California has the nation’s highest capital gains tax rate, which provides great incentives for tax-efficient deal structuring. Michael and I use our legal expertise in tax law and estate planning to structure agreements that can lower capital gains taxes and related tax costs, while enhancing the other deal benefits. Although these techniques are commonly used by attorneys to help their clients, many Realtors® are unaware of these tools and opportunities—often leaving considerable money on the table. By way of example, we recently put together a win-win structure that utilized seller financing, which lowered the seller’s tax burden while helping the Buyer get a slightly lower mortgage rate.  
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4. Being a lawyer with training from world-class institutions, and having experience at one of the nation’s most elite law firms, I developed an intense work ethic inside me that I carry forward to this day. At Wilson Sonsini, I regularly worked 75 hours per week, always being available to our clients at all hours. Whereas many in real estate fail due to a lack of self-discipline, the work ethic I honed in the intense environment of Wilson Sonsini allows me to be fully available day or night to my buyers.
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5. My legal background is arguably the best background for real estate. With my expertise, I can help clients with many legal issues such as deciphering planning ordinances, helping explore SB 9 lot subdivisions, or Prop 19 transfers of their property tax basis. Unlike any other brokerage of which I am aware, all of our in-house legal services are complimentary for our clients. 
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6. While I enjoyed law school, I loved business school! My classmates at Stanford’s Graduate School of Business were as brilliant as my Berkeley Law classmates, but in addition to IQ, they also had exceptional EQ skills. The following insights were honed during my time at Stanford:
   • The ability to deeply analyze the market and individual homes. With a greater understanding of all factors impacting valuation, I can really calculate my thoughts on the ideal time to purchase a property and where the greatest deals can be found. Through data science, I am able to find out what variables most correlate with a great deal, and use that information to obtain homes below market value for my clients.
   • Additionally, I have learned powerful, quantitative programs that help me forecast trends to accurately predict which areas will see the most appreciation.
   • In business school, the focus was on solving pain points to provide value to clients. At DeLeon Realty, our VP of Development Matt Griffis helps our clients on a complimentary basis to orchestrate their remodel. We also have interior designers on staff to help our clients further improve their homes. DeLeon’s integrated team has varied strengths, providing solutions to nearly any issue a client may encounter. 

One final and considerably large benefit is the trusted relationships that I tend to instantly form with Stanford and Berkeley alumni. While my formal education is likely over, I will forever be a life-long learner, and the knowledge that I have gained from law and business school allows me to continually grow and assist my clients with every facet of purchasing a home. 

A better education, stronger work ethic, more experience, and a highly client-centric business model focused exclusively on Buyers has positioned me to be the best option for any Silicon Valley Buyer.  Meet with me in person, or chat with my teammate Alex, a trained California real estate attorney and elite Buyer’s Agent, to understand why I am the only Silicon Valley Agent ever ranked as the Number One (#1) real estate agent in the United States, as published in the Wall Steet Journal by Real Trends. 

I left the practice of law for real estate because I felt that no real estate broker was truly showcasing the ability for a primary residence to create wealth. Through delaying my ideal home and being very strategic in every home purchase and improvement, I was able to make a large enough profit to purchase my true dream home in the end. This article showcases the mindset and strategies that I personally used to make over $7 million in profit in 10 years. I teach my clients to follow similar strategies to unlock the keys to financial freedom through using their first home as a launching pad to financial freedom, and I am inviting you to mix and match strategies from this blueprint that best fit your goals and current circumstances.

Your primary home is often not only your best investment, but the investment with the lowest cost of capital and the greatest tax advantages. Every two years you can sell your primary home and the first $500,000 in profit is exempt from capital gains for married couples, and $250,000 if single. The negative of California having the nation’s highest tax rate has the converse benefit of tax-exempt savings being worth more in California than any other state (worth 13.3% more than income tax-free states). The fundamental premise of my housing investing philosophy is that any purchase of a home ideally meets the following criteria, which requires that the home:

1. Is purchased below market value − you make your money when you purchase, not sell;
2. Is in a neighborhood with above-average appreciation;
3. Has identifiable, yet correctable, flaws presenting a good deal;  
4. Is good enough to live in for over two years to get Internal Revenue Service § 121 $500,000 tax exemption and long-term capital gains rate;
5. Ideally your purchase is a fee-simple, single-family home, since properties where you own the land historically appreciate the most rapidly.

Since most of the profit is made through buying a home and remodeling it to increase the resale value, moving frequently is recommended to maximize profit. I typically moved after every two years, which resulted in a total of four moves between 2011-2021. In this article, I will discuss each of these four purchases and what strategies I utilized to get both a good value when buying, and how to optimize and thereby maximize value when selling. 

The purpose of this article is not to brag about my results, but rather illustrate that my model of “flipping” my primary home is proven. My profit from flipping my primary homes was over $7 million. By using the $500,000 exemption in capital gains all 4 times I sold my homes, that equates to $2 million of tax-free profits. The remaining $5 million is then taxed at the lower rate of long-term capital gains of 37.1% (23.8% federal, 13.3% state). This results in a tax of “only” around $1,920,000. Of the total $7,173,000 gross profit I achieved, the $1,920,000 of taxes makes my net profit $5,243,000.

This profit is more than one would take home earning a million-dollar salary for the same ten-year period. In California, the top tax bracket is slightly over 50% (37% federal, 13.3% state). Thus, a million-dollar gross income nets less than $500,000 after taxes. 

The net result of profit from “passively” flipping my primary home over a 10-year period, including the tax incentives, resulted in a higher profit than ten years of actively working with a million-dollar salary. The power of the tax benefits the government wisely bestows upon primary homes is often never fully leveraged. Use this business model when purchasing your primary home, and before you know it, you may be in your dream home.  

Now that you have the overall strategy, let me illustrate the tactics I used to build this wealth.
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In 2011, I was about to be named top agent in the country per the WSJ/Realtrends nationwide sales volume rankings from a pool of over one million agents. That ranking was my catalyst to finally open my own brokerage later that year. Preserving money for my business, I utilized the benefits of leverage and financed a mortgage for 75% of the purchase price, requiring only a 25% ($300,000) down payment. This purchase was a good value due to the following factors:

• I optimized timing through purchasing during the summer. I try to buy properties for myself and my clients during the slow summer months or winter holidays, and sell in the spring or fall markets when markets are stronger to optimize the housing market’s seasonal fluctuations.
• I bought the home at a discount since it needed remodeling, as most buyers do not like the uncertainty of tackling a major construction project.
• I had solutions to the problems that compelled this home to be a discounted value. I opened up the floor plan by easily taking down a non-load bearing wall (always check with your contractor before presuming you can take walls down).
• The property was poorly presented and had a price drop. With only one opportunity for a first impression, homes that are poorly priced often end up as good values. The home was initially priced at $1.398M, dropped to $1.348M, and I purchased it for $1.243M.

Optimizing the sales process almost always involves the flip side of the coin: fixing all the mistakes that were made by the past seller. The following strategies helped me earn this exceptional return:

• I sold during the fall, when buyers are back from summer vacations and motivated to purchase a home. Ideally, optimizing seasonality (buy in winter or summer, and sell in spring or fall) can make a 5% difference in appreciation due to a seasonal shift in buyers’ sentiment alone.
• I remodeled the home focusing on where the greatest return on investment (ROI) multipliers could be found. This included remodeling the kitchen and bathrooms, painting, refinishing the flooring, and opening up a wall to create a more open and modern floor plan. As a result, the home felt more updated and larger without the time and expense of adding more square footage. The key is to execute updates that have the highest rate of return relative to expense.
• Underpricing the home when listing it for sale to bring in multiple offers and move buyers’ reasoning past the low price I paid just two years prior. If
  I listed the home for $2.5M, more than double what I paid, it would appear I was a greedy seller. Instead, I underpriced it at $1.888M, and the contention of several offers increased the sales price to $2.648M.

In barely two years, I took a down payment of $300,000 and nearly quadrupled my investment. This first flip showcases the power of leverage and its ability to amplify good investments. 
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The next few homes I purchased were good values that I presented to my clients, but they needed so much work I could not convince any of my clients to purchase them. Employing my own analysis, I ended up purchasing these homes myself and took on the large construction projects that intimidated others. The projects that offer the highest return are often the most difficult to make. Here is how I got a good value on my 110-year-old Victorian masterpiece:

• There were several price drops, as the home originally was listed for $4.95M and was reduced by nearly 50% over the course of 6 months on the market.
• Purchased in July, traditionally the slowest of all summer months.
• The home had many issues and every room needed to be updated.
• The older home showed very poorly, with many of my clients calling it a “haunted house,” as it had not been cleaned in months and not updated in years.
• There were no kitchen cabinets and the floor plan was segmented due to the prevailing architecture in 1893.
• Maximizing the sales price by selling in March, when there is high demand and low supply.
• Opened all entries to make the formerly segmented home brighter and feel more updated and spacious.
• I got into the home at a better price because of all the work required. People are often overwhelmed at the prospect of a large project because most do not know who to call, how much it will cost, and how long it will take.

To optimize my profit when selling, I took the following steps:

• Optimizing market timing by selling in March, when there is high demand and low supply.
• Temporarily moved into a tiny investment property I owned, as vacating the home would expedite the remodel. Living in a second home for a period is another strategic move to optimize timing and garner the greatest return.
• I got into the home at a better price because of all the work required. People are often overwhelmed at the prospect of a large project because most do not know who to call, how much it will cost, and how long it will take. DeLeon Realty provides vetted contractors and architects while also helping our clients pick the best remodeling team, giving them the confidence to take on large projects.
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• Several price drops over a year and a half from the original list price of $8.2M down to $5.6M.
• A kind but inexperienced listing agent for this higher price point, chosen through friendship and not merit. They had only a week left on the listing agreement before the listing would expire, so the agent was motivated to get the property sold to receive their commission.
• Poor presentation of the home, which included pink walls and a darker interior. This custom-built home was of very high quality, but just needed cosmetic updates.
• Good timing of purchase, close to Thanksgiving, and I structured a 4-month escrow period to have time to prepare my previous home for resale.
• A whole house remodel was necessary to truly transform this home and maximize my return.

When I started the remodel, I again moved out for a short period of time to give the contractor the entire house and plenty of time. The numerous floor plan flaws of the home, such as the smaller kitchen, segmented and separated rooms, were all addressed in the remodel and were solved. In total I invested $1,100,000 on this large-scale remodel, primarily due to higher-end finishes being more expensive. The higher the price point of the property, the more buyers will pay to have a move-in ready home.

All journeys must have an ending. After “flipping” these past three homes, I was able to purchase my dream home with acreage. I received a good value through doing the following:

• Purchased from an agent who is a friend of the seller, and while an expert in selling mid-level homes, he has less experience with higher-end properties.
• Researched the seller and understood how attached he was to the property. I won over an all-cash offer at the same price, because I spoke of my love of the property and wanting to preserve and honor the seller’s vision over others who would likely make major changes to the home he built.
• Got into contract in July, my favorite month to purchase, as you can tell!

Current Valuation: One of the most known and accurate online valuation tools has the value of my current property, at the ten-year mark from the purchase of my first home, at more than $2,300,000 above what I paid for it. I have only put in $60,000 for new painting. So, this home has appreciated by $2,215,000 since purchasing it, per online estimators and my own analysis of the market.

All told, over the past ten-year period I made $7,138,000 through flipping my primary homes. While obviously 2011-2021 was a good decade in the real estate market, I feel that following this mindset and my strategies discussed above will allow buyers to optimize their return on investment of their primary home to maximize their wealth using tax-free incentives. I continue to be excited about sharing these tips and tricks to help my clients have similar success by viewing their primary residence as a vehicle to gain financial freedom. 

Having experienced a close encounter with death, I have developed a profound appreciation for life. Every moment now holds special significance, knowing how fragile and fleeting life can be. 

The lessons I gleaned during my recovery from a nearly fatal car accident gave me the courage to transition from the practice of law to my passion of real estate in 2000. Fast forward several years, and my life was going amazingly well in 2007 – my real estate career was thriving, my family was growing, and the anticipation of my first son joining my two daughters in a few months filled me with joy. Amidst these highs, I strived not to let the onset of a sharp pain in my back dampen my spirits.  

Despite diligently following a physical therapy regimen, the pain progressed and worsened to the point of being unbearable. Reluctantly, I finally went to see a doctor. The initial examination seemed routine, and I was scheduled to get a cortisone shot to numb the pain after an MRI the doctor recommended. 

To my astonishment, the doctor phoned me the day after my MRI and urged me to come in immediately. Filled with apprehension, I awaited the diagnosis. 

With a concerned face, the doctor delivered the news. “Ken,” he said, “we have both good news and bad news. The good news is that your back and spine are fine. The bad news is that the MRI showed that you have a mass, likely a tumor, the size of a softball. This mass is expanding and pushing on your spine and spleen, causing your back pain.” At just 35 years old and in seemingly good health, shock washed over me as thoughts of my daughters and unborn son raced through my mind. I could only ask, “Doctor, how can this be and what could it be?”
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Glancing at the prominent scar running down my right leg, the doctor asked about the nature of my accident. Recalling the event, I recounted how a speeding car struck me at 45 mph and dragged me for several miles. As a result, I had severe inflammatory swelling that necessitated my leg be surgically opened and left exposed for a week until the muscle swelling subsided. Hearing this, the doctor suggested a diagnosis of lymphoma, a cancer affecting the lymph nodes, speculating that the trauma from the accident may have caused a lymph node in my upper right leg to metastasize. Lymphoma is known to affect younger individuals and is often associated with heavy trauma, such as my horrific car accident. 

At the Stanford Cancer Center shortly after receiving the news, I sought solace in the restroom while grappling with overwhelming emotions. Alone with my thoughts, I cried for a good thirty minutes as my mind drifted to my loved ones. My children needed me. So did my parents, as I was their only remaining source of support after my sister’s tragic passing. This filled me with newfound strength, and I made a firm decision to confront this cancer with courage and dignity. Even if I had only six months to live, I was determined not to waste any precious time. 

My childhood friends rallied around me, providing unwavering support during this challenging time. Their presence, filled with laughter and camaraderie, helped me conquer my fears. Following my first round of chemotherapy, my hair started falling out. Rather than bemoan this, we turned it into a moment of bonding and empowerment. My friends playfully shaved my remaining hair, styling it into a bold Mohawk for a day. In that moment, I felt incredibly resilient, strong, and even a bit sexy! 

After my head was completely shaved, my 2- and 4-year-old daughters would wake me up in the morning by playfully banging on my bald head, giggling while proclaiming, “Daddy drum, daddy drum!” I chose not to share the seriousness of my condition with them, preferring to shield them from sadness and uncertainty as long as my prognosis remained positive.

After completing six rounds of chemotherapy, I underwent 40 days of daily radiation targeting my tumor. The intensity of the radiation caused the skin near the tumor to turn dark red and brown, resembling a severe sunburn, despite the protective copper shield. 

I stayed positive throughout my treatments, as I firmly believe in the mind-body connection and how optimism can improve one’s chances of recovery (which is now empirically proven). With the dedicated care of my exceptional doctors at Blake Wilbur Stanford Cancer Center, the tumor gradually shrank, and after nine months of treatment I was declared cancer-free. I didn’t survive cancer; I BEAT cancer.

While nobody anticipates developing cancer at a young age, overcoming the disease ultimately brought more positives than negatives into my life. This second brush with death taught me that love and the legacy we leave behind are the most important aspects of life. 

While I was very thankful to have defeated lymphoma, my doctors warned me the heightened risk of developing thyroid cancer due to the radiation treatment I underwent, as these conditions are closely linked. To address this concern, my doctors performed bi-annual, full-body scans.  
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Armed with this knowledge, coupled with the resilient fortitude I had gained from overcoming my first three tragedies, I faced the diagnosis of my metastasized thyroid eight years later with a prepared mindset. I reminded myself that no matter the outcome, I had already lived the life I had wanted with my children, and I hoped that my volunteer speeches on resilience and overcoming tragedy had positively impacted others. I felt I had already left a legacy and accepted the idea of death. Regardless, I vowed to fight on for my family, and again dedicated myself to being the best patient possible. After two surgeries in 2017, the cancer was successfully removed and has not returned since.

During my battle with lymphoma and thyroid cancer, I gained valuable life lessons. I learned the importance of accepting and optimizing my medical condition by focusing on what I could control, such as maintaining a positive attitude, following a healthy diet, and seeking the best medical care possible. This mindset allowed me to direct my recovery efforts effectively. 

After losing my sister, I realized the importance of family and the eternal bonds we share. My perspective shifted and I began living for my children, understanding that they were my driving force. I also learned to prioritize what truly matters—my family, friends, and clients. I discovered that by focusing upon getting my clients great homes in appreciating neighborhoods, I could positively impact their lives, giving my career a deeper meaning beyond mere financial success. Additionally, beating cancer provided me with a profound perspective on life, leading me to a state of peace. This inner peace reflects in my work, enabling me to remain calm and solution-oriented, especially during challenging transactions for my clients.  

I am deeply grateful to the Blake Wilbur Stanford Cancer Center for saving my life not once but twice, offering Silicon Valley cutting-edge medical care, innovative research, and treatments. My gratitude towards the Blake Wilbur Cancer Center is immeasurable; it’s so profound that my upcoming child with Alexandra Wilbur DeLeon will be named Blake Wilbur DeLeon. Overcoming these cancers and other tragedies has enriched my life, making me wiser and more fulfilled. 

I encourage readers to recognize their inner strength and power. While life events like accidents or illnesses are beyond our control, our response to these events is within our power. Our reactions shape our outcomes, giving us control over our lives despite the chaos around us. By embracing and savoring life, taking calculated risks, and striving to reach our full potential, we can lead a life so fulfilling that the fear death will no longer hold sway over you.

When other agents ask how I can stay so calm and focused on my clients while the real estate industry is undergoing such changes, I can’t help but think that my brushes with death have made me a better person. Fundamentally, I care more about helping people and leaving a legacy than I do about maximizing every dollar of commission.  After all, my family, friends and clients are the most important things to me. 

“Ken, you are like the Daniel Day-Lewis of Real Estate Method Acting.”  

That’s how a client of mine reacted recently after I mentioned that I have owned multiple homes in Crescent Park and provided him with detailed information about that wonderful neighborhood gleamed over the years from personally living there. Hearing myself compared to one of the most esteemed actors in Hollywood caught my attention immediately. Upon reflection, I realized that this statement was more than just an ego boost, it summarized one of the fundamental reasons for my success in the industry.  

Method acting is when an actor aspires to fully inhabit a role in order to truly understand it and become that role. Method acting is an outstanding metaphor for my approach to real estate. I can serve my clients at a far deeper level than ordinary, independent contractor Realtors^® at traditional brokerages because I understand what my clients are going through – I have been there many times myself.  

Having personally purchased and sold over 20 local homes, I have owned or lived in almost every town in which we sell properties. For example, I have lived in five different neighborhoods in Palo Alto alone, and have also lived in Atherton, Menlo Park, and Los Altos Hills. Additionally, I have “flipped” houses in other areas where we sell. This experience allows me to provide truly detailed insight into what it is like living or owning almost anywhere in prime Silicon Valley.

My love of real estate has manifested itself in my moving every few years. I have moved a total of five times in the last nine years, each of the first four homes in distinct neighborhoods, and this has allowed me to be the “guinea pig” of sorts and personally experience these neighborhoods firsthand before my clients. Another perk of moving is taking advantage of the $500,000 capital gain exemption for married couples that is granted every two years for your primary home. I effectively “flip” my primary home because the tax advantages are much greater for your primary residence, and the available interest rates are materially more attractive, when compared to an investment property. While I will convey how to do this yourselves in future articles, the focus here is all of the insight I learn from moving so frequently. You never learn an area as well as when you, as a homeowner, walk it in your own shoes and can truly convey the unique pros and cons of a neighborhood or town.  

In fact, I find it is hard to give truly exceptional advice in life unless one has personally faced a hard decision and experienced everything that comes with it. Even then, the journey of enlightenment is only half completed as subsequently one must evaluate whether and why the decision was right or wrong, and how they might do it differently the next time. Once another asks you for your advice, you know exactly what to convey due to your own personal journey. 

My primary focus when buying and selling the properties I have owned was not to make the most money, but to take the most calculated risks; that way, if mistakes are made, I’ve made them myself and can learn from them before I help others with the same issues. While generally my investments have gone exceedingly well, some have stumbled and left me with innumerable lessons to pass on to others – along with several new grey hairs!  

Sadly, many agents are content to live in the same home for decades, and others do not even believe enough in what they sell to own a home. These agents will often make their clients the beta test gone wrong. Mistakes in California real estate are generally in the six-figure range and can often hit seven-figures, so choosing a great agent is essential. Ideally, you want somebody who does a lot of volume in the area, knows the local market, and can share the wisdom of their own personal experiences buying, selling, and living in prime Silicon Valley.
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While I have previously visited India on several business trips with Michael Repka, I had never before traveled there for pleasure. With Michael, I have attended real estate conferences in Delhi, and toured homes and talked to top agents in tech hubs such as Bangalore, Mumbai, Chennai, and Hyderabad. 

Yet my clients from India said I was missing some of the most beautiful parts of the country. When the real estate market hibernates over the winter, I take my annual trip, and this time I focused on the picturesque state of Rajasthan, meaning “the land of the kings.” 
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My first adventure was a tiger safari. Tigers, the largest and strongest of the big cats, were approaching extinction due to habitat loss and illegal poaching. Through preserving the park and other reserves, the tiger population has nearly doubled. Still, these stunning animals are hard to find, and it took days of searching until I was lucky enough to meet “Krishna,” a twelve-year-old female. With the striking juxtaposition of the most ferocious roar I have ever heard coupled with the most beautiful coat and calm demeanor of this stunning animal, this made for an unforgettable sojourn I highly recommend. 
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Next, I traveled to Udaipur, known as the “Venice of the East.” This city alone has four palaces: a city castle with a 200,000 sq. ft. main residence built for the Maharaj on a 1,100 acre lake; the Monsoon Palace on a summit to weather the intense rains and flooding; a lake palace that can only be accessed by boat; and my favorite, a party palace on the lake solely dedicated to lavish parties available for rental, where India’s richest man spent $100 million on his daughter’s wedding. This region is rich with five thousand years of history and culture. 

From there, I viewed the worlds greatest monument of love - The Taj Mahal. With eternal love for his wife who bore him 14 children, but died young, Shah Jahan built a stunning marble monument to be a mausoleum for his wife and himself. Taking 20,000 laborers 20 years to complete (and we thought building was slow in Silicon Valley!) this scintillating testimonial of love is the most impressive manmade object I have ever seen.

After the Taj Mahal, I explored the deep history and architectural beauty of New Delhi. I enjoyed visiting the house of one of the men I admire most, Gandhi. I appreciate all of his philosophies, but particularly like his quote: 

-Live as if you were to die tomorrow. Learn as if you were to live forever.

I enjoyed seeing all of the US tech companies that had large branch offices in India. I also enjoyed touring homes in Delhi and was impressed with how many new homes, particularly with contemporary architecture and its walls of glass and abundant natural light, were being built. By studying the homes my clients might be looking at in their native country such as India, China, Russia, or Japan, I can better understand their housing criteria and goals when they are looking in Silicon Valley.

While the country of India is beautiful, it is the culture and people that I love the most. Even in the face of widespread poverty, almost everyone seems content and enjoys their life as best they can. The concept of Karma, that good deeds will be rewarded in the future, and present difficulties stemming from past experiences, is pervasive, and this philosophy helps its believers accept the vicissitudes of life with positivity. 

I also love how entrepreneurial the culture is and I understand why this culture creates so many successful CEO’s. As a rare male in America who loves to dance, I appreciate how integral dancing is to Indian society irrespective of gender. 
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While an experienced world traveler, how much I enjoyed this trip surprised me, as this was one of the best trips of my life that I would recommend to all of our great readers. 

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This is the second article discussing my four life tragedies and the accompanying lessons I learned by overcoming them.

There are moments that can quickly and forever change your life. While we tend to worry about life’s uncertainties and setbacks, it is the things that we do not see coming that can impact us the most. 

On the morning of August 17th, 1998, my prospects never seemed brighter. I had recently graduated from Berkeley Law School with High Honors, had just passed the California Bar Exam, and was slated to start as a Patent and Trademark attorney at Wilson Sonsini Goodrich & Rosati in a few weeks. So when my father asked if I wanted to go on a walk with him that afternoon, I happily accepted his invitation. Little did I know that on this walk, I would be forced to face my own mortality and have my life fundamentally altered. This close brush with death became a nationwide news story (CNN, USA Today) as it was such an amazingly unique accident.

My father and I were conversing about how excited I was for my move to Palo Alto while walking along the sidewalk, which had a 20’ grass divide from the road, so it felt particularly safe. This false sense of security was soon to be shattered, along with my reality, arm, and leg. Within a second and without warning, my life changed. Behind me and my father, a car traveling over forty miles per hour veered off the road and, without braking, slammed into my right leg. The force of the impact catapulted my body upward and ripped me out of my shoes. I was launched above the hood of the car. My right shoulder and upper arm crashed through the windshield, breaking several bones in the process. My body landed, contorted and mangled, half in and half out of the speeding vehicle which showed no sign of slowing down. My head and upper body were wedged against the passenger seat while my legs were painfully sprawled out over the hood of the car.

I instantly went from walking with my father to hanging on for dear life. I screamed in agony, “Oh my God! Oh my God!” as extreme, searing pain tore through my body and inner core. Through my teary eyes and horrified screams, I looked at my throbbing leg and saw it twisted in an unnatural and hideous manner, pierced and punctured by broken glass fragments from the windshield. Then I noticed the clouds darting along overhead and realized that somehow I was moving. I suddenly stopped screaming when, through the haze of pain, I felt a new source of force being applied to my body. Unable to understand why I was being hit, I begged the driver, “Help me! What are you doing? Please help me!”

I then looked to where the blows were coming from and will never forget the dilated, bloodshot eyes of my attacker. He was clearly under the influence of mind-altering drugs. His manic eyes glared at me with an animalistic hatred and darted back and forth between me and ahead at the cars he was dashing past. His face was drenched in sweat. While beating me, he screamed, “Get Out! Get Out!” in a guttural, ravenous snarl. Doing my best to block his punches, I did my best to resist him pushing me out of the speeding car.

After my attacker ran several red lights with my twisted body still stuck through the windshield, he finally was forced to stop when there were cars filling up all of the lanes. Once that happened, I immediately tried to get out, but could not open the door with my right arm, which was badly broken. Using my left arm, I pulled the door latch and was able to barely open the door and began frantically trying to escape from his car. But because both my right arm and leg were badly broken, I could not disentangle myself. Finally, my attacker violently shoved my body out of the car and my broken arm slammed against the door and ground.

Now that I was out of immediate danger, I slowly writhed away from the car while feeling an unbelievable and unbearable pain coursing through the right side of my body. I looked at my right arm and saw that it was pulled backwards and dangling limply. My first thought was that I would never be able to write again. 

I heard approaching sirens in the background. Two policemen arrived at the scene and asked me to describe what had happened.

“I was walking with my father on the sidewalk and was then hit by a car. I think my father was hit, too. The driver of the car beat me while I was inside the car and finally pushed me out here.”

After hearing this implausible story, the questioning officer drew away from me and then quietly whispered to his partner, “He’s in shock.”

At that moment, the officers received word of a 911 call from my father reporting the accident. They then realized that I was the accident victim who had been hit, and that I had been beaten and held captive for over three miles before being shoved out here. I was relieved upon finding that my father was alive and not badly injured. I felt sorrier for my father than myself, as he had to witness his sole surviving child being run down while walking alongside him. 

We were walking side by side, and then my father felt a powerful push on his leg as the car tire brushed against him, leaving a road rash scar on his leg. Knowing I had been hit, my father looked all around for my thrown body. He used the term “body” when describing that moment, because he feared and felt that I was probably dead. Not finding my body, my father quickly looked ahead and saw the car speeding along on the sidewalk before darting back to the road. Seeing me inside the vehicle, my father ran after the car but soon realized that my attacker was not stopping and that he would never catch up.

My father then waved down an approaching city bus whose driver saw the whole accident. The bus driver and my father chased after the car and my body, not knowing whether I was alive or dead. Because my attacker was weaving in and out of traffic and ran a red light, the bus driver could not keep up the pursuit. My father then told the bus driver to drop him off on the side of the road and called 911.

Apprehension of My Attacker

When my attacker finally pushed me out of the car, he sped away from where he left me to escape capture. My attacker then pulled into a parking lot and discarded incriminating evidence in a grassy area adjoining the parking lot. This evidence was later found, and it was learned that he had discarded several weapons, including an 18-inch machete, a bloody baseball bat, and a billy club. Then, he attempted to destroy the most damning evidence of the attack: his car that now had a shattered windshield and blood all over the interior. He drove the car down a boat launch ramp and submerged it into the Intracoastal Waterway. Getting soaked in the process, he then stripped down to his underwear and sneakers, and ran away from the car.

A call concerning a suspicious-looking and wounded person was received by the paramedics and police, as my attacker ran from his submerged car clothed only in his underwear, and bleeding profusely from wounds caused by glass shards from the shattered windshield. Finding my attacker hiding in an alley, the paramedics dressed his wounds and the police decided to take him to the hospital before determining who he was. This is where I had a fortuitous outcome, as the police who were at the hospital interviewing me and my father heard about this new hospital patient who perfectly matched my description. My attacker was then identified and they found out that just two days earlier he was arrested on felony charges for attempting to sell drugs to minors. While he was driving and hit me on a Monday afternoon, the tests found that he was on horse tranquilizers (ketamine), methamphetamines, ecstasy and marijuana. Apparently he blacked out due to all of the drug use and that is why he swerved off of the road into me. In his delusional mindset, he said I was a “demon from the sky attacking him,” which is why he had to punch me and was screaming “Get out!” at me. My attacker was sentenced to seven years in prison and was released early due to good behavior. 

Just a decade after losing my sister, my parents almost lost their sole remaining child. With this huge fork in my life, would this accident shatter my future as it shattered many of my bones?  While I could not control the event, lying there in pain in the hospital bed made me realize that getting back up again and living life to the fullest was solely up to me and my mindset. 

I am thankful to say that my life is truthfully better and more fulfilled because this accident occurred. While this accident could have forever kept me down and depressed, the power of the mind to overcome all obstacles is our greatest gift. With this mindset and a determination to not let my attacker lessen my life, I had many epiphanies during this physically painful but mentally fulfilling time.

Life Lessons from My Accident

I think that life events are neither inherently good nor bad. Instead, life events are open to our interpretation, and we can shape the outcome simply by our mindset. This accident, where the most likely outcome was losing my life, positively shaped my life instead and led me to:

Find a New Life Purpose – Before the accident I felt that my life purpose was happiness. I wanted to first focus on making myself happy and then share this with others. However, the several months I spent convalescing really gave me a newfound perspective and appreciation for life. I realized that with the right mindset, seeking growth and being forgiving of myself, I could use this setback as a launching pad to become even greater than before and also uplift everyone around me.

I now have made growth my life purpose. I want to grow as much as I can and also help others evolve to their full potential as well. The beautiful part about growth as my life purpose is that I can now embrace the full spectrum of emotions rather than just valuing happiness as before. This mindset is also excellent for transforming seemingly tragic circumstances into greater life growth and fulfillment. “While we cannot entirely control circumstances, we can control our perception of and reaction to circumstances. It is through our reaction, which determines the outcome, that we are in control of our lives even in an uncontrolled world.”

Live Life to the Fullest – I have viewed studies which showed that pedestrians hit by speeding vehicles going 40 mph or more have an 85% chance of dying. Having come so close to death, I have gained a greater appreciation of life. I do not fear failure, but rather fear living a mediocre life, and I do not want a life filled with regrets. The greatest crime against life is boredom. We have only one life and it could end at any moment. I try and make every moment matter because I realize it can be my last.

Pursuing My Passion – I was a very good lawyer and proud to be working at Wilson Sonsini, one of the preeminent law firms in the nation. However, my accident showed me how fleeting life can be, and this gave me the courage to pursue my passion for real estate. I always loved real estate and felt that there was a lot of inefficiency and room to improve this industry versus the efficiency of elite international law firms. Michael and I drew from our backgrounds in law to create a new, team-based salaried specialist model that is very similar to how a large law firm or top VC firm like Andreessen Horowitz operates.
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‍Forgive my Attacker – I have given hundreds of inspirational speeches to students on a volunteer basis, or at real estate conferences as a keynote speaker. I am always asked what I think of my attacker. I honestly reply, “I don’t,” for I have forgiven and nearly forgotten my attacker. I highly recommend Dr. Fred Luskin’s Forgive for Good. Dr. Luskin, the Director of Stanford’s Forgiveness Project, talks about all of the medical and psychological benefits of forgiveness. I forgave my attacker to heal and psychologically move forward, not out of kindness. Be very selective about who you let enter your life. When someone who is unworthy of your time enters your life as my attacker entered mine, throw them out immediately, as it just takes one bad apple to poison the entire barrel. 

Live Life and do not Spectate upon it – Realizing that time is our most valuable asset, I have become increasingly aware of how I and who I spend my time with. The biggest change is that instead of watching TV shows, I lead an active life. I now see my friends instead of watching the show “Friends,” or I play basketball with my kids versus watching it on TV. I want to be a good father to my children, happily work 60+ hours a week for my amazing clients, and stay in shape by exercising. I can only do all of this by efficiently utilizing my time and by actively living and not spectating upon life. As a result, everything is so much more authentic and fulfilling.

Coming so close to death, I’ve gained a greater appreciation of life. I don’t fear death; instead, I fear living a mediocre life. I try and make every moment matter because there is no promise of a tomorrow. I founded DeLeon Realty because I wanted to create a business model that, for the first time in real estate, puts the client first, as I felt ethics has always been lacking in the industry. Let us all live our greatest lives together. Life is a dance circle and the greater a dancer you are, the more people you can inspire and positively impact.

My next article will be centered on my life after recovery from my accident and entry into real estate. Everything was going amazingly well until I felt a terrible pain in my back, which was found to be a cancerous tumor the size of a softball. Life lessons also abound as I discuss bouncing back from my lymphoma and recovering thanks to the Stanford Cancer Center.

In real estate, they speak of the three L’s – location, location, location – as the most important components of a home’s value. In my life, the three L’s are loss, love and laughter; looking back, it was my greatest loss that put me on the path to finding love and embracing laughter. This essay is about how losing my sister, the most painful experience in my life, paved the way for future triumphs. This is a story of turning darkness into light. 
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I generally do not speak about my sister, Jane. But given the prevalence of depression, anxiety, and resulting risk of suicide in our upcoming generations, I feel it is my duty to shine the spotlight on this topic to help address this borderline epidemic that is now the second leading cause of mortality amongst teenagers. 

My sister committing suicide is the single greatest fork in my life. My parents went through a bitter divorce when Jane and I were seven and five, respectively. She had the same genius as my father, who was a brilliant math professor, and would always tutor me while also standing in as a replacement for my busy mother. We were amazingly close, both going to the same elementary and middle school, sharing a bathroom, and having daily nighttime talks. Our lives were inextricably intertwined and Jane was my guardian angel, in the truest sense of the word.

Everything changed when Jane entered high school. The transition was hard on my sister, as all her friends went to the neighboring school instead. She was left to navigate the new school, with class sizes several times larger than what she was used to, all by herself. Shortly after school began, Jane fell deeply in love with a boy from the same school who was a year older. My sister fully immersed herself in the relationship and lost her sense of identity. I could only watch with concern when my sister began isolating herself from our parents and started being less open with me. Jane’s relationship was rocky from the start – she would be exuberantly happy, then despair when breaking up, only to get back with her boyfriend again shortly thereafter as if nothing had happened.

After dating on and off all through high school, Jane’s boyfriend went off to college a year before her. He and Jane still tried to date during this time. Then came the fateful day: on Labor Day of 1987, when I had barely turned 15, Jane’s boyfriend broke up with her for good. Jane took her own life later that night. I was the one who last spoke to her, and also the one who found her. 
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Losing my sister was a hand grenade to my heart. At first, I was overwhelmed with guilt. I kept replaying the last forty-eight hours in my mind and desperately tried to pinpoint what I could have done differently to save my sister. I tried my hardest to recall all our most recent conversations, and started imagining what particular words I should have said in our final moments together. Almost scientifically, I traced all the events, and looked back at every fork in the road leading up to Jane’s death in order to figure out where I committed the fatal mistake.

Guilt soon transformed into anger. I thought of this question thousands, even millions of times: How could she do this to me and our parents? No matter how hard I tried, I could not wrap my mind around Jane’s decision to end her own life, leaving everything behind, over a single boy. I recall the feeling of bewilderment – my entire face would burn red whenever I thought of my sister’s irrationality, and her resulting death. 

But the passage of time changed my attitude and emotions. Slowly but surely, I began to feel more and more empathy for Jane and started to wonder how she felt and what she saw before making that fatal decision. Then, there was just the feeling of acceptance, and no more anger. I came to realize that my sister was so depressed and distraught that she truly did not know what she was doing and did not think fully of the consequences. When I think of how much Jane must have been suffering, the feeling of pure love swells up within me and I can finally connect the dots. Jane was my saint, my guardian angel. She gave me love, warmth, and the courage to be myself. Surely, she would have wanted me to move forward, to create a better life not only for myself, but for others. And so I swore that I would live a life worth living, to leave behind a legacy that she helped start. It took me six years since Jane’s death, from when I was just fifteen, to come to this revelation. I hope by sharing this personal arc of healing, I can help others accept their loss and find the strength and motivation to move onwards and upwards. 

Since Jane’s death, I never take a life lesson for granted. Circling back to the three L’s of loss, love and laughter, the three main thoughts I would like to impart to readers to go from loss to laughter are:

1. Be 100% self-reliant. My sister’s fatal flaw was letting another person determine her self-worth. I am of a completely opposite train of thought: I do not need validation from others, as my self-worth can only be determined by myself. While I love being around others, I try to avoid the need to be liked by everyone, for that is such a limited way of living. I have the ability to generate my own happiness, motivation, energy, and satisfaction alone, and this has allowed me to create a new, more ethical and client-centric business model that has revolutionized real estate and forever changed the industry for the better. The paradox I have found is that when you do not care what everyone thinks of you, everyone cares to be around you. The great irony is that the key to setting others free is to first free yourself.
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2. Focus on strengths and positives. Before Jane’s suicide, she was burdened with absurdly high expectations as the first born. Her 99% test scores in both Math and English were excellent, but the sad irony is that many geniuses use their intellect to overanalyze their flaws. Sadly, Jane focused on what she lacked versus what she had. To help myself recover, I vowed to take the best parts of Jane inside of me. I became more empathetic and aware, and also became a
   
   better communicator. I ended every conversation with family members by telling them I love them, since those being my last words to Jane gave me solace. With Jane gone I wanted to achieve more in life and honor her memory by using her loss to fuel me to greater heights. My grades went from B+/A- to all A’s, and I sat in the front row and became fully engaged in school. Until age 40, I lived for Jane almost more than myself as I thought of her daily. I have now released this through finally coming to terms with her loss and now my focus is my children and my clients. 
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3.  Become an inspiration to others: I became a motivational speaker so others could benefit. While it is wise to learn from your own life mistakes, it is even better to learn from the errors of others. I used the emotional loss of Jane and my other tragedies to speak to many local high schools. My four tragedies have given me a unique perspective on life, and I enjoy sharing this perspective on a volunteer basis at many local schools, to at risk youth, and suicide prevention groups. It is my hope that, having spoken to thousands of people over the last two decades, maybe the loss of Jane and then my speech might have helped a teenager get through a hard night to realize that the sun will rise just as beautifully tomorrow.
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While I still think of my sister, I am actually thankful that my focus is now more on my children. This is what Jane would want, and I picture her smiling at my trying to give the joy she was meant to give the world, and knowing that her greatness still shines on through my speeches and actions of trying to help others love themselves as the loss of Jane taught me to love myself.

My next article will detail the life lesson I learned when recovering from a nearly fatal accident when I was hit by a speeding car while walking on the sidewalk with my fater.

My father was a brilliant professor and chairman of his mathematics department. He was a man of few words, yet highly articulate – when he spoke, people listened. In a discussion, it always seemed like he was calculating the best and most concise response as if he was solving a math equation. If I were to describe my approach to life with a mathematical metaphor, one that my father could appreciate, it would be:

Life is Like an Upward Sine Wave. What is Your Angle of Evolution?

As you may recall from high school trigonometry, a sine wave is a mathematical curve that is constantly oscillating up and down in a regular, consistent manner. The amplitude of a sine wave is the maximum distance traveled from the center line. 

I created the quote above and the mindset to get there only through enduring, analyzing, and then evolving from four life events that others would consider tragedies. While we all face adversity in life, each crisis is a fork from which you either evolve upward or devolve to new lows. While you cannot control life events, how you react to them will determine its outcome. Life events are neither inherently good nor evil; they are open to our interpretation and our reaction. Control your reaction and it will set you free. 

We all have a sine wave of life, with the valleys and mountains of life being our oscillating from peak to trough with a relatively regular pattern. What I noticed in my life is that my periods of sadness or loss were followed by periods of exceptional growth from the resulting epiphanies and changes that loss brings. With the right mindset, I evolved from being barely able to suffer through loss to accepting loss immediately and further optimizing my life because of these lessons. The knowledge I gained through overcoming my “tragedy” gave me the strength to win the battles I would fight. Even in the trough, I could look up and see the light of knowledge I would find at my future peak. Now I not only can accept adversity, I readily seek it as I know the greatest evolution comes after calculated risk-taking and failing fast and forward. 

Through seeking the lessons from the pain, I found that I was not just going through my sine wave, I was actually evolving to a higher level by accepting my lows. The full analogy then came to me: We are all going through a sine wave of growth and setbacks in life, but we are increasing our amplitude by angling upward with each cycle of life with new insights. By not fearing the downs and, instead, seeing them for the growth opportunities that they are, I don’t fear loss and can resiliently accept and then overcome challenging life events. The intensity of my experiences and more importantly, through the proper mindset of learning as much as I could from them, I was able to imbue these seemingly negative and random events with positive connotations and outcomes. This has amplified the sense of self-control of my own destiny and also has increased my angle of evolution.

The angle of evolution is a concept I use to convey the velocity of growth that people experience. Complacent people are born and stay their entire life at a 15-degree angle. Silicon Valley attracts a category of people who are generally well-educated and are life-long learners. This is the category most of our clients are in, including myself. This set of people are at a 30-degree angle of evolution and, with the right mindset, can and have raised this to a 45-degree angle of evolution. Please note this is not a statement about one’s inherent intelligence or overall worth, but simply a self-created metaphor to illustrate that our mindset and our choices control how rapidly we continue to grow in expertise and insight.

Note that if I illustrate a sine wave at a 45-degree angle of evolution, even when the sine wave is in decline in relative terms, it is still rising in absolute terms. The amplitude is continually increasing as the angle of the rise more than counterbalances the down times. Along this segment is where you really can take calculated risks when failures are buoyed up by your long-term growth and improvement through open-mindedness, seeking the most authentic and original path in life, and gaining strength and speed of recovery due to lessons learned from failures.

It would have been easy to have been beaten and to have lost my life purpose by bearing the four “tragedies” in my relatively young life. They include my sister’s suicide, my nearly fatal accident when a speeding car going 45 MPH hit me while I walked with my father on the sidewalk, or the two cancers that likely were caused directly or indirectly by the accident (and then beautifully beaten by the genius doctors at Stanford Cancer Center).  Instead of dwelling on the pain and loss, I used these forks in my life (that almost cost me my life) as springboards to greater wisdom and happiness. I was able to turn negative life events into positive growth. While I still miss my sister beyond belief, I can honestly say that the three other “tragedies” that I overcame made me a better person overall and were worth the pain.

One of my greatest life purposes is to take all of the hardships I have been through and first, learn from the “tragedy,” and then integrate those lessons into myself. Once I test them in my own life, I then pass on the most effective lessons to others. My goal of being an alchemist, who can turn hardship into personal and then community life lessons, helps me endure the suffering I feel when in the abyss of loss.

I convey these lessons in many ways including being a volunteer public speaker. I have spoken in front of 2,500 people at real estate conferences, sharing center stage with world famous public figures and motivational speakers. Yet my favorite presentations are speeches before local students and at-risk youth in Silicon Valley. I have given dozens of volunteer speeches in Silicon Valley schools and local organizations. (Please feel free to contact me about speaking on these subjects for your group.)

I realize that my clients and others in the Silicon Valley community would like to know more about my personal story and how I was resiliently able to overcome so much loss but, ultimately, get through the pain and evolve as quickly as possible to avoid wasting time - our most precious commodity. Therefore, I will write an essay for each hardship addressing the initial loss and then the later gain of insight that resulted.

My first installment will be my most powerful and poignant, as it deals with how losing my sister forever changed me. I seek to honor her by letting her inspire me to make a difference with my life and leave the most significant positive legacy that I can, both personally and professionally. Our lives have meaning beyond ourselves through the gifts we give and the legacy we leave behind.