Wednesday, December 8, 2010

December Silicon Valley Real Estate Market Highlights

Here are the highlights of November 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 and something we see each year as we enter the fall and holiday season. Closings of single family residences (SFR) in Santa Clara County jumped a bit from last month to 820 but was 8.8% lower than the same month a year ago. For San Mateo County, closings were 330, virtually the same level as November 2009. 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. I'm sure we'll again see a major drop-off at the end of the year as many listing agreements expire on 12/31 of each year. Ask me why this is an extremely poor strategy that will set sellers up to lose money. Still, the market overall remains more positive in Santa Clara County. However, inventory levels were 37% higher in Santa Clara County and 33% higher in San Mateo County than the same month a year ago.

* 40% of sellers in Santa Clara County get at least list price for their single family homes! In San Mateo County, the corresponding percentage is a bit over 34%. 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 though for this time of year.

* Days of Unsold Inventory (DUI) continues to move lower. If this trend continues, it could portend a market that is gaining strength and could point to more positive market conditions next year. We watch this important indicator closely. 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 November, Santa Clara County had a DUI of 70 for SFR's, 84 for condos/townhouses and 140 for multi-unit properties. San Mateo County had a DUI reading of 94 for SFR's, 122 for condos/townhouses and an even higher number of 487 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 Milpitas, the area comprising the cities of Mountain View, Los Altos and Palo Alto, East Valley (SJ), Evergreen Valley (SJ), South San Jose. For San Mateo County, we see hot markets in Foster City and Redwood Shores. 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 Saratoga, Willow Glen (SJ), Los Gatos/Monte Sereno, Almaden Valley (SJ). Saratoga is my current "Best Buy" area in the county. For San Mateo County, we see buyer's markets in Menlo Park, Atherton, Belmont, Burlingame, Redwood City and especially the San Mateo Coast cities. 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 has changed in Santa Clara County -- The median price for SFR's in Santa Clara County which has mainly remained flat to slightly nudging upwards for several months has turned down. It now stands at $590,000, versus $641,500, or an 8.0% decrease from last month and a decrease of 2.5% from the same month a year ago. The median price for condos/townhouses was $315,975, down 4.25% from $330,000, last month a 10.4% drop from last year. San Mateo County's median price for SFR's was $723,000, up from $675,000 last month but a decrease of 0.3% from the same month a year ago. The median price for San Mateo County condo/townhouses was $415,000 or 9.2% higher than the $380,000, last month and decreased 6.5% 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.

> Buyers get going -- I've 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 -- like NOW. 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. In Santa Clara County currently there is a tendency for buyers to search for single family residences but there are better deals in condos/townhouses due to greater supply compared to demand in the $450,000 to $750,000 price range. Same goes for San Mateo County -- good deals are probable in all price ranges but the lowest price range ($450,000 and below).

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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