Wednesday, January 13, 2010

January Silicon Valley Real Estate Market Highlights

Here are the highlights of December's transactions and market actions for Santa Clara, San Mateo, Santa Cruz, and Monterey counties. Your comments and questions are welcome. If you have an update as to what you are witnessing in your neighborhood, please don't hesitate to share with us. You may leave comments here, or contact me through my website.

> Market continues to show improvement -- March 2009 saw the trend change in Santa Clara County -- a trend that continues to date. Closings in Santa Clara County were 938 versus an anemic 676 in December 2008, an increase of 38.8%. Even though median prices decreased from November, seasonal factors outweigh the direction as smaller homes sell this time of year -- fully 5% smaller since last month! My analysis of the transactional information reveals:

* The supply of homes available for sale (inventory) continues to trend lower in each of the four counties without exception. This trend has been virtually uninterrupted since February 2009 and it is still more pronounced in Santa Clara and Monterey counties. Santa Clara County available homes inventory has fallen 59.7% from December 2008.

* The sale price to list price ratio continues above 100% in Santa Clara County and stands at 101.0%, continuing an upward trend; whereas, San Mateo County stands at 99.1%.

* The Days of Unsold Inventory (DUI) continues to improve generally in each county for single family residences and condos/townhouses, respectively. For December, however, we saw an uptick as the rate of sales decreased faster than the decrease in inventory. This is a normal seasonal factor that should reverse in the near future.

> Super-heated Seller's Markets? -- You bet! South San Jose, North Valley, Milpitas, Santa Teresa, East Valley, Evergreen (lower priced homes only!) are all hot markets. The characteristics of a seller's market are shorter time on the market, fewer number of homes available for sale, higher probability of multiple offers with many sale prices exceeding list prices and a tendency towards price appreciation.

> Buyer's Markets? -- For Santa Clara County, we see buyer's markets in Saratoga, Los Gatos and Los Gatos Mountains. Saratoga exhibits the highest Days of Unsold Inventory in the county at 238 due mostly to low demand and is my current "Best Buy" area in the county. To refresh you, characteristics of a buyer's market are longer time on the market, higher number of homes available for sale, lower probability of multiple offers or even an offer with most sale prices below list price. The tendency is to have price depreciation or stable prices at best case under this market condition.

Where do I get "Seller's" and "Buyer's" market information? This is not an opinion thing but a calculation I make using the number of homes for sale (supply) and the number of sales (demand) in the prior month which results in days of unsold inventory (DUI). Additionally, this is not based on price levels but a supply-demand relationship. Generally, we see that the hottest markets are those in the more affordable price areas.

> Median prices -- Santa Clara County median price for single family homes now stands at $564,000 versus $512,450 or 10.0% increase from December 2008. The median price for condos/townhouses was $357,000 or 14.2% higher than December 2008. San Mateo County's median reached $682,500, 13.1% higher than the same month a year ago. I coach my clients to not use an entire county's median price level to decide on whether to buy or sell but use the trend information in a general manner. To formulate an effective strategy, I use analysis of the supply-demand characteristics of the neighborhood under consideration.

> Sellers Be Sooner Still -- I continue to maintain my recommendation for sellers of higher-priced homes, especially those above $1 million that they should consider selling sooner and having an initially more-aggressive list price as the market usually softens when we go move into the winter/holiday season. Sellers need to be positioned properly otherwise they risk languishing on the market.

For those considering a purchase of a home in an expensive area like Los Altos Hills, Los Gatos/Monte Sereno, Saratoga, an opportune time for negotiating is upon us! Some motivated sellers are reducing their list prices but as you may know, not all sellers have to sell. Some of the prices we term "sticky" on the way down as some sellers can't believe their home has fallen in value from what they thought it was worth. As many of my consistent readers and subscribers know, markets are not made between agents.

Thanks for reading my blog. I'm Tom McEvoy, Realtor -- Let me know your comments, questions, observations you may have or any future topics you'd like me to address.

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