Valley of Heart's Delight Blog

Affordability Improves Very Slightly In Silicon Valley

The Silicon Valley/San Jose Business Journal just published an article relating to housing affordability in Santa Clara County (the San Jose or Silicon Valley area) that reveals a slight improvement for weary home buyers here "with a 14.1 percent share of homes affordable for the median income of $94,500". Last quarter the percentage was 12.8%. Statewide, the ratio is 12.6%. For more info around the Bay Area and around the state, please see the Business Journal's article, entitled "Valley Ranks #25 in Home Affordability". 

September's Silicon ValleyReal Estate Stats & Trends

The numbers are in and it's what we were seeing "in the trenches": the slowdown has spread. Normally September is far busier than August in terms of sales, but not this month!  In Saratoga, for instance, the sales were cut in half in September from August. There is downward pressure on pricing in many areas, including Los Gatos, where some price reductions are so severe as to appear ridiculous. Will they work? Cause an overbid? Time will tell.

Click here to view Mary Pope-Handy's Santa Clara County Real Estate Report online.

How long will this deepening buyer's market last? Rick Campbell, who crunches the numbers for this report, predicts that it will begin to be alleviated by the end of the quarter.

What does that mean to you?

If you want to sell your home in San Jose, Los Gatos, Saratoga, or anywhere in Silicon Valley now, you must price your home aggressively - you must undercut the current trend of price declines.  You may want to wait until the new year to put your home on the market. But you're gambling, if you do, that it will be better - and it might not be. Sometimes a buyer's market lasts a couple of years.

And if you are a buyer, you should recognize that this is a great opportunity to purchase homes with softer prices than we've seen for years. Yes, it's true that now interest rates are rising. But get in at a low price now, and when the mortgage market softens, refinance. Then you'll have the best of both worlds.

The Market is Slowing Down

August was a little slow, but along the west valley the expectation was that September would be robust.

What has happened, though, is a significant slowdown. Few homes seem to be selling since the middle of September.

At this point, we are waiting for the September statistics to roll in. What I'm seeing, though, is that a lot of homes are just plain "sitting" at this time.

Silicon Valley Update

The housing market in Silicon Valley has truly heated up in recent weeks - at least in the "west valley" communities. The San Jose Mercury News reported on March 31 that in south county and in the east valley, homes are languishing on the market. (The Merc does not keep old articles searchable past a week, so the link above will take you to another blog of mine that goes into more detail on this subject).  Not so for moderately priced homes in Los Gatos, Saratoga, Cupertino, and the areas creeping close to Palo Alto.

What's going on?

In a nutshell, schools drive the market.  In better school districts, homes are more insulated from down markets because of the schools. In hot markets, the best schools seem to enjoy an extra margin of popularity.  Right now, it's as if there were two classes of homes, and they are the haves and the have nots: the better schools (where the market is hot) and the worst schools (where the market is not hot).

Schools always drive the market here in Silicon Valley. We have an extremely well educated population, second only to a few places like Boston (which is crammed with universities, colleges, and tech instititutes).