Valley of Heart's Delight Blog

Silicon Valley Real Estate Market UpdateJanuary 2008

What's the real estate market in Santa Clara County, San Jose, or Silicon Valley doing? How's the market in early 2008?

Realtors are trained to say something vague in response to that question, like, "incredible!" Yeah, it's incredible all right - incredibly few homes are selling, but prices are still going up. Make sense of that at a cocktail party!

But seriously, what IS happening?  It's true that it is a strong buyer's market in most areas and in most price ranges (some exceptions DO apply). Most homes are not selling. But the ones that do are selling at a great price.

It's all or nothing!

I have statistics and trends for the hearty among you who'd like to see all the data. You can see what's what in Los Gatos, Saratoga, Almaden Valley, Cambrian Park, Willow Glen... you can see San Jose as a whole or by districts. You can view the county by its towns and cities or as a whole. All of this is available to you on my Real Estate Report, which is updated each month at about the 10th or so, and now also includes an annual report which reviews 2007.

Hunger for more? A lot of folks want tons of info to analyse on the housing market in Santa Clara County. For you, there's also the 18 page pdf version, which you can obtain here: http://rereport.com/scc/print/MaryPopeHandySCCannual.pdf

Right now, it's neighborhood by neighborhood, and one price point can be quite different from the next. Call me and we can go over it together. I do offer a free one hour consultation to prospective clients.

Best regards, and happy New Year,

Mary

Mary Pope-Handy, Realtor,  CRS, ABR, e-PRO, SRES, ASP, RECS, CNHS, ACRE
Helping Nice Folks to Buy & Sell Homes Since 1993
Co-Author: "Get The Best Deal When Selling Your Home In Silicon Valley"
Keller Williams, Cupertino, CA  (Silicon Valley)
877 397-5391 (Direct/Toll-Free/Fax);   408 204-7673 (Cell)
www.PopeHandy.com    www.ValleyOfHeartsDelight.com   
emailto: Mary@PopeHandy.com
Blog: www.LiveInLosGatos.com

Report: How To Buy The MOST Home for the Money
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Slow Summer Days, Slow Summer Market

I have seriously neglected this poor blog on The Valley of Heart's Delight (aka Silicon Valley) in recent months. While this one was languishing, I was busily writing volumes on my Live in Los Gatos blog as I was working it over for a blogging contest, Project Blogger, that ran from April 9 to July 15. That's a long, long blog competition. (We'll learn who won it on August 1st at Blogger's Connect, a conference, in San Francisco.)

Alright, so what about the Silicon Valley real estate market?

We are experiencing two things at once. First, it's the "bifurcated market" - the east side is in a slump and most of the west side is in a healthy market (with some areas actually being a seller's market). Second, we are in the midst of a totally typical seasonal slowdown. In virtually every year, inventory rises from January until perhaps July. Buyers express the most demand (most years) in spring and by summer their interest level tends to trail off. So by summer, normally prices cease to rise and go flat. Some years, prices actually go down in August.  It's late July. Most buyers are winding up their home searching for now.

If you want or need to buy, in most parts of the valley the market is favorable!  On the east side and in starter homes, it is very, very much a buyer's market.

If you want or need to sell, it is keenly important to understand your local market and to listen to good advice and pay heed to what is working on pricing. Many homes are listed, but few are selling, on the east side. It does NO good to "test the market" now. If you must sell, price your home lower than your competition and make your condition better. That is the only way at this time.

I invite you to look at (and bookmark) my online report for San Jose (as a whole and by area) and Santa Clara County's cities and towns, which is updated early each month.

Please call me for personalized information on your own area!

May Statistics and Trends for Silicon Valley Residential Real Estate

The numbers are in!

In the previous month, it looked like a sudden jump in pricing had occurred because the average and median sales price both shot up. Now they are down slightly (.2% and .7% respectively), but the average price is up 7.8% over a year ago.

What is going on?

These numbers do not indicate that a particular Silicon Valley home is gaining or losing value. Last month's jump was deceptive because what was happening was simply this: the lowest priced homes (and in the poorer areas like east San Jose or south San Jose) were suffering the reprecussions of the subprime loan fallout. Higher priced homes, such as those in Palo Alto, Sunnyvale, Cupertino, Saratoga, Los Gatos and Almaden Valley continued to sell. So the numbers were skewed.

And now? A change as slight as this may simply mean that lenders are taking a deep breath and starting to fund more "B" paper (and entry level) homes again. Or it could be the beginning of a trend reflective of growing inventory and days on the market. Sales are off about 9.5% (not home values, but number of sales/sales volume) from a year ago.

To get the full scoop, please see my online report for Santa Clara County:
http://www.rereport.com/sj/winmph/index_scc.html

Under Santa Clara County, click on Monthly Trends. Page 2 of that report will break it down for you city by city.

Bifurcated Market

Broderick Perkins of Deadline News lays out what is going on with our split Silicon Valley Market in his article Silicon Valley Haves-Have-Nots Rift Widens.

The article matches my experience that the wealthier areas of the valley (mostly in the west side communities of Los Gatos, Saratoga, Cupertino, Sunnyvale etc.) have low inventory and multiple offers and prices are rising, wheras lower priced housing on the eastside is much more of a buyer's market.

Prices Are Still Rising

In the next day or two, we will get the stats from April sales in Silicon Valley. Meanwhile, the early reports are that prices are continuing to rise in the greater San Jose area.

With all the national doom-and-gloom, it would be easy to believe that the sky is falling. Or at least that prices are falling. In many places, they are - but not here. 

Why not?   Simple:  supply and demand.

Despite what you may hear, more people are coming into Silicon Valley than are leaving it.  Santa Clara County has about 1.8 million people, and the largest city is San Jose, with just under 1 million of them. Last year, San Jose grew by 1.6%. 

In my office, we are hearing of a lot of multiple offers in entry level to mid-level homes in the west valley communities of Los Gatos, Cambrian Park, Almaden, Saratoga, Cupertino, Los Altos, Sunnyvale, and all the areas along the highway 85 corridor near the coastal foothills.

Today I was asked to complete a survey and one of the questions was "when do you expect the market to hit bottom?"  My response: we did already, last December.

So What is the Market Doing?

Our market is split.

I know, you are hearing that it's a buyer's market. And you are also hearing about homes in Palo Alto getting 47 offers and getting bid up by several hundreds of thousands of dollars.

And how, exactly, does that impact a normal home in Silicon Valley?

Well, what I'm seeing is hot & cold. Some homes are just sitting...and sitting. The sellers seem to think it's 2000 and they can ask whatever they want, and put a home on the market that needs work, and have it sell.

That's not working.

And there are other properties where it's just land value. Fixer smixer, these homes are "dozers" as my daughter used to call them. But they are priced like dozers, not like homes that need a little lipstick and rouge. And they are selling.

And then there are the homes that are "like new". And they are full of the "wow factor". These places have granite. They have Bosch or Thermador. We're not talking Sears brand appliances, we're not talking formica countertops - we're talking high end and granite. Lots of granite. 

Those homes are selling too.

Most of the homes aren't selling. But the ones that ARE selling are selling fast and furiously.

So don't be fooled!

I have clients who want to think it's a seller's market because they are hearing stories of multiple offers. Listen: those places, with all those offers, are either land value and priced "rock bottom" or they are completely redone and priced attractively. It's a buyer's market and the homes that are selling are BETTER than the average home in condition and price. Yes, they make the news because their stories are exciting.

But talk to the guy who's average home has been on the market for 90 or 120 days with no offers - and a home that didn't seem overpriced (well, not by much) and you'll find the real pulse of the market.

In my own Belwood neighborhood, there are 3 properties for sale and none are moving. All are overpriced, in my opinion.  Buyers are rejecting the yawners. They are waiting for the good deals - and then voting with their enthusiastic bids.

What do do?

Be realistic. Realize that if you want or need to sell, you need to be in the bottom 1/3 of the market to make it work now.  Clean. Repair (EVERYTHING). Get rid of the "buyer can fix it" or "I'll let the buyer choose his or her carpet color" thinking. That will not work.

You need to fix it. You need to update it. And then you need to price it like it's on sale.

And whatever you do, don't list your home with someone who tells you what you want to hear instead of what you need to hear. That would be a very expensive mistake.

Yes, you can sell your home now. You can. But not at the price from a year or two ago.

Absorption Rates & Market Conditions

How's the Silicon Valley market doing?

A really good way of knowing is to take a look at the supply and how long it is lasting (as opposed to the days on market, which is a little skewed since some homes never sell, some sell fast, and it can't factor in the rate at which inventory is rising.)

The absorption rate tells us how long it would take for all the current inventory to sell off if nothing new came on the market. (Think of a bathtub. If no new water poured into the tub, how long would it take for the water currently there to drain out of the tub?) It is, I believe, the best indicator of the market that we have. So below please find the absorption rate of single family homes in Santa Clara County over the last few months:

     (1) Single family homes months of inventory

January 2007 4.33

December 2.85

November 3.56

October 4.16

September 4.43

August 3.6

July 4.13

June 3.18

May 3.22

April 3.03

March 2.5


     (2) Condos and townhomes months of inventory

      

January 2007 3.74

December 2.76

November 3.16

October 3.84

September 3.94

August 3.14

July 3.39

June 2.695

May 2.5

April 2.24

March 1.89

     I looked at the absorption rate of January over the last 10 years and found that with single family homes, the average "months of inventory" was 2.97. Only one was higher than our current 4.33 and that was in 2003 when it hit 4.6 months. Of course, within 2 years that had completely reversed itself and in January of 2005 we had a very low rate of 1.84 months of inventory. In other words, this is a buying opportunity! If buyers wait too long, it will likely shift back into a Seller's Market.
      The National Association of Realtors views a timeframe of under 6 months as still being a Seller's Market. Here, our market tends to move faster than the nation no matter what - but this is one indicator that if it IS a Buyer's Market, it's not a really strong one.
     Another indicator is the percentage of list price received. Using this criteria, when it's at or over 100%, it's a Seller's Market, but under 100% it's a Buyer's Market.
     % of List Price Received:
     Jan 2007 98.34% Dec 2006 98.3% November 98.87% October 98.83% September 99% August 99.39% July 99.61% June 100.17% May 100.21% April 100.09% March 100.26% February 99.98% January 99.08%
     So again, it is currently in the buyer's favor, but not by a lot!

Oh, and the photo above - that is a mural on a wall in downtown San Jose. Pic taken with my Treo. This lovely valley was once known as The Valley of Heart's Delight. I'm not sure this constitutes a delightful image of our valley, but it's funky and it made me laugh so I thought I would share it here.