Monday, February 11, 2008

February Silicon Valley Real Estate Market Update

This information summary and analysis uses MLS Listings Inc. (MLS) transactional data for January 2008. For single family homes in Santa Clara County, January saw the fewest closings (338 closed escrow) of not only any January but of any month going back to at least 1988, when the MLS records began! There were 338 closings in the month with 563 initiated sales (accepted offers) that indicates that closings in February will be higher. This lower closings record occurred across the board in each of the counties I track closely: Santa Clara, San Mateo, Santa Cruz and Monterey. Inventory of available homes was 4,432 up from 4,031 in December compared to a high of 4,925 in October. Since we've had a significant number of homes come off the market in late 2007, I forecasted that we'd see a rebound in inventory either in January or February as some of those homes come back on the market for another try. We did indeed see that occur and we may see even higher inventory in the months ahead.

Days of Unsold Inventory (DUI) or the intersection of the inventory (supply) with the recent sales level (demand), shows Santa Clara County at 214, down from 303 in December, San Mateo County at 161, down from 190, Santa Cruz County at 274, down from 351 and Monterey County at 404, down from 579. Clearly, even with the drops in this indicator, these still are indicating a buyer's market condition as a reading of DUI above 90 depicts. For comparison, a seller's market will have a DUI of less than 45 and a balanced market will have a DUI between the two. Keep in mind that these are county-wide averages so there is an incredible variation between those areas experiencing terrible market conditions compared to those at virtually the other extreme.

As I've mentioned, real estate is local (down to the neighborhood level) and market conditions can vary within each county and even within cities by a large amount. For instance, within Santa Clara County, Mountain View, Los Altos, Palo Alto and Cupertino have the best market climates in the county with a DUI reading of 61, down from 83, while San Jose's East Valley has the worst reading of 542, down from 698 followed by South County (Morgan Hill, San Martin and Gilroy with 440, down from 542. In San Mateo County, the best market climate is in Foster City/Redwood Shores area and contrasts with the San Mateo coast that includes Half Moon Bay and Pacifica.

The following is a ranking of selected Santa Clara County cities or areas with their current DUI readings and last month's calculation in parentheses. Even though there are a lot of "improving" notations made, these areas are still in what we call a "buyer's market". Just some markets are much better off than others.

  • Los Altos, Mountain View, Palo Alto - 61 (last month -83) - improving
  • Cupertino - 61 (94) - improving
  • Almaden Valley - 129 (120) - worsening
  • Los Gatos, Saratoga - 134 (126) - worsening
  • Campbell - 79 (128) - improving
  • Cambrian - 111 (148) - improving
  • Sunnyvale - 106 (152) - improving
  • Willow Glen - 140 (163) - improving
  • Milpitas - 141 (210) - improving
  • North Valley - 248 (263) - improving
  • Downtown SJ - 242 (275) - improving
  • Evergreen - 213 (303) - improving
  • South San Jose - 372 (446) - improving
  • East Valley - 542 (662) - improving
  • Morgan Hill, Gilroy, San Martin - 440 (698) - improving
The median price for single family homes in Santa Clara County was $743,500, down from $799,000 in December and down from the record high reached in April 2007 of $868,400. This is a decrease of 14.4% from the peak. There is still an emphasis (overweighted percentage) of higher-priced homes sold as opposed to the more affordable homes but not as pronounced as last year when the sub-prime loan problems started in February 2007.

Median prices for single family homes by county in January 2007 were:

  • Santa Clara County - $743,500
  • San Mateo County - $877,500
  • Santa Cruz County - $610,000
  • Monterey County - $500,000
These median prices are back to the levels reached in early 2006. The price range with the lowest DUI is called the "sweet-spot" of the market. For January as is was in December, the $1,000,000 to $2,500,000 range is the most brisk. Next comes the $750,000 to $1,000,000 range and then the under $450,000 range. For condo/townhouses the picture is similar but slightly better with a DUI reading of 216, down from 264. Potential real estate investment buyers take heart as the DUI picture has continued to deteriorate to a reading of 563, down from 529. This means under the current rate of sales of multi-unit properties, there are about 1.5 years of supply! The "sweet-spot" of the multi-unit or investor class is the range $1,000,000 to $2,500,000. If not for this range's activity levels, this segment would even be worse! Lenders have substantially increased the borrower's minimum requirements to obtain a loan for investor property purchases.

Why is following all these statistics worth it? I believe that informed clients make the best decisions. The research and staying on top of the changes to market conditions allows me to properly advise my clients on the appropriate strategy to employ so that they make the best decision possible. This is one area I part company from other real estate agents who don't invest the time and would rather spend time working on self-promotion ads for newspapers, magazines and fill your mailbox with either "brag" cards or "spray and pray" cards.

The various real estate markets are too complex for media sound-bites or headlines as they generalize too much (i.e., the national real estate market, the Bay Area real estate market, etc.) and you lose the fineness of being able to use information strategically to make better decisions. These publications are often weeks and sometimes up to a couple of months later than my data which comes directly from the multiple listing service of actual transactions.

If you have any comments or questions, please feel free to post them here or send me an email at

Thanks for reading!

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