Wednesday, November 10, 2010

November Silicon Valley Real Estate Market Highlights

Here are the highlights of October transactions and market comments for Santa Clara County real estate and San Mateo County real estate. Your comments and questions are always welcome. If you see something in your neighborhood that you are curious about or have a question, please don't hesitate to share with us. If you have questions or a comment, please leave them here, or feel free to contact me through my website.

> Market Overview -- The last several months has seen a continual decrease in the amount of sales in both counties, an indicator of slowing markets. Closings of single family residences (SFR) in Santa Clara County decreased and were at 780, 24.0%lower than the same month a year ago. Even though the amount of sales in San Mateo County rose a bit from September, the same general decline exists. My analysis of the transactional information reveals:

* The supply of homes available for sale (inventory), which was increasing later in the year (far longer than in most years), has now reversed course and is following historical trends in both counties. As usual for this time of year, inventory tends to drift lower. We'll see, I'm sure, a major drop-off at the end of the year as many listing agreements seem to expire on 12/31 of each year. Still, the market overall remains more positive in Santa Clara County.

* 44% of sellers in Santa Clara County get at least list price for their homes! In San Mateo County, the corresponding percentage is a bit over 39%. This is another indicator that the overall market remains stronger in Santa Clara County. Also, these indicators have drifted lower and underscore a slowing market in both counties -- usual for this time of year.

* Days of Unsold Inventory (DUI) has turned the corner and is now heading down. this could portend a market that is gaining strength and could point, if it continues, to a more positive market condition in 2011. We shall keep an eye on this important indicator. As we have discussed, DUI is conceptually the inverse of inventory turns ratio and represents a calculation using both supply and demand. A higher figure for DUI, then, means the market is becoming weaker. For October, Santa Clara County had a DUI of 70 for SFR, 87 for condos/townhouses and 193 for multi-unit properties. San Mateo County had a DUI reading of 99 for SFR's, 136 for condos/townhouses and a whopping 395 for multi-unit properties. Once again, notice that all readings were lower, hence more positive, for Santa Clara County.

> Seller Markets? -- For Santa Clara County the hottest (seller) market areas are South San Jose, East Valley (SJ), Milpitas, North Valley (SJ) and the area comprising the cities of Mountain View, Los Altos and Palo Alto. A seller's market has shorter time on the market, fewer number of homes available for sale, higher demand by buyers with a tendency to have multiple offers and sale prices generally exceeding list prices with a potential of price appreciation.

> Buyer's Markets? -- For Santa Clara County, we see buyer's markets in Almaden Valley (SJ) and Willow Glen (SJ). Almaden Valley is my current "Best Buy" area in the county. What makes a "buyers" market is the relationship of supply to demand -- simply put as higher supply and lower demand. The characteristics of a buyer's market is a longer time on the market, higher number of homes available for sale, lower demand by buyers which translates into a lower probability of multiple offers and a tendency for price stabilization or even price depreciation.

Where do I get "Seller's" and "Buyer's" market information? This is not an opinion or based on price levels 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).

> Median price situation -- Santa Clara County median price for SFR's has mainly remained flat to slightly nudging upwards. It now stands at $641,500, an increase of 8.1% from the same month a year ago. The median price for condos/townhouses was $330,000, a 8.6% drop from last year. San Mateo County's median price for SFR's was $675,000 and represented a 3.8% decrease from the same month a year ago. The median price for San Mateo County condo/townhouses was $380,000, a drop of 5.0% from last year. I continue to advise my clients NOT to use an entire county's median price level to decide whether to buy or sell or time the market. To formulate an effective strategy, I recommend the use of the supply-demand characteristics for the neighborhood under consideration.

> Short Shift? -- REO's (bank-owned homes) and short sale listings are termed "lender-controlled" transactions. Bottom line is that short sale homes sell but are a lot less apt to close. Here's a chart of the latest breakdown to illustrate my point:

You can see that short sales, comprise 25% of the available inventory and 35% of the pendings, only comprise 16% of the closings.

> Buyers get ready -- Last month I mentioned that buyers need to think about a time of year when there is historically less activity and a good time of the year to do that is when we approach and are in the holiday period of the year. We're seeing the inventory of available homes decrease and those homes remaining on the market, in all likelihood, have sellers that have a higher motivation to sell.

Need help with understanding the market in your area? Give me a call or email me for a no-obligation consultation and research to arm you with market intelligence to help you make a better, more-informed decision.

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

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