Wednesday, January 12, 2011

January Silicon Valley Real Estate Market Highlights

Here are the highlights of December 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 904 but was 3.6% lower than the same month a year ago. For San Mateo County, closings were 370, up 3.9% from 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. We did see a significant drop this month as many listings have expirations dated in December, especially December 31st! Having a listing expire so late in the year is a poor strategy that will likely set sellers up to lose (more?) money. Against this backdrop, the market remains more positive in Santa Clara County than in San Mateo County. However, inventory levels were about 41%higher in Santa Clara County and 36% 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 31%. 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), after a recent upswing has resumed a 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 December, Santa Clara County had a DUI of 77 for SFR's, 88 for condos/townhouses and 128 for multi-unit properties. San Mateo County had a DUI reading of 106 for SFR's, 140 for condos/townhouses and an even higher number of 358 for multi-unit properties. Once again, all readings continue to point to a more positive market for Santa Clara County.

> Seller Markets? -- For Santa Clara County the hottest (seller) market areas are East Valley, Central San Jose and South San Jose, and the South County area comprising the cities of Morgan Hill and Gilroy. For San Mateo County, there were NO hot markets! 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, Los Gatos/Monte Sereno, Almaden Valley (SJ) and Sunnyvale. 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, Foster City/Redwood Shores 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 prices have moved lower in Santa Clara and San Mateo counties -- The median price for SFR's in Santa Clara County which has mainly remained flat to slightly nudging upwards for several months has decreased again. It now stands at $559,000, versus $590,000, or an 5.3% decrease from last month and a decrease of 0.9% from the same month a year ago. The median price for condos/townhouses climbed to $335,000, up 6.0%from last month but decreased 6.2% from the same month last year. San Mateo County's median price for SFR's was $719,500, down 0.5% from last month and down 4.1% from the same month a year ago. The median price for San Mateo County condo/townhouses was $370,000, down 10.8% from last month and down 18.9% from the same month 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 as market areas within each county differ. Ask me to provide you with how your area compares.

> Buyers now paying 10% higher prices! -- Since the rate of which buyers will receive from mortgage lenders has risen of late to 5%, that's the equivalent of at least a 10% increase in the price of the home! To put another way, if a buyer was preapproved for a purchase of $500,000 a few months ago and decided to wait, they would now be looking at something closer to a $450,000 home because of the increase in the monthly payment.

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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