Thursday, July 14, 2011

July Silicon Valley Real Estate Market Comments

Here are my observations of the most recent June transactions 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.

> General Market Observations and Comments -- Closings continue to increase in both counties but the level remains below the average of the past ten Junes. The "market" seems like it is bipolar. There is one portion of well-priced, good condition homes that sell quickly and those others which are over-priced or have other issues like poor condition that linger on the market for a long time. Inventory, or the number of homes available for sale (supply) has increased but it, too, continues to grow at a slower rate than the ten-year average.

Buyer demand continues to point to single family residences (SFR) and away from condos/townhouses. This is especially evident for First Time Buyers as well as Investors. About a third of all transactions are for all cash. I continue to advise buyers that if there is a preference for the life-style of a condo or townhouse, there are better buys possible and buyers can have more advantages than sellers. Yes, condos and townhouses have homeowner association dues, of course, that often cover additional ownership features and benefits (e.g., utilities, pool/spa, exercise rooms, and the like) but the owner doesn't have to worry about mowing the lawn!

Of the 1,128 Santa Clara County single family homes that closed escrow in June, 50% sold in 22 days! One of my closings last month was a Sunnyvale home on the market just six days. It sold comfortably above list price. Another of my closings, a Santa Clara home in a nice neighborhood sold in about a month for 6% under list price.

The northwest quadrant of Santa Clara County continued to be the hottest market area, as was the case last month. The area comprises the cities of Mountain View, Los Altos and Palo Alto. This area had the lowest DUI reading in Santa Clara County of just 37 days, clearly a seller's market. Next door, Sunnyvale and Cupertino had a DUI of 50, balanced to seller's market. Some of us are calling this the "Facebook" effect. By contrast, the DUI for the expensive Los Altos Hills is 153, clearly indicating a buyer's market.

Days of unsold inventory (DUI) for Santa Clara County by price range is interesting. Overall, the DUI reading was 60, up slightly from last month of 58. The DUI for homes priced under $450,000 was just 35 days; those priced from $450,000-600,000 was 59 days; those priced from $600,000-750,000 was 74 days; from $750,000 to $1 million was 66 days; from $1.0 million to $2.5 million was 74 days; from $2.5 million to $5.0 million jumped to 225 days and finally, those priced above $5.0 million was 1,330 days! Clearly, the higher priced homes in both counties may have to undergo more aggressive price concessions to move in this bipolar market environment. One of my clients leased a new, never-been-lived-in Hillsborough home a bit more than two years old that the owner tried to sell ever since he completed the construction. List price was $4.8 million and the home never had a price adjustment during the entire time on the market!

Days of Unsold Inventory is an indicator I use to gauge whether the market is a Buyer's market, Seller's market or what we call a Balanced market. In Santa Clara County, the Buyer's market are for those areas above 90 DUI a Seller's market would have a DUI reading under 45. Balanced markets are those in between.

Mortgage rates remain very favorable in the range in the high 4% to about 5% range. Since most buyers need a loan to purchase a home, mortgage rates are a major consideration in the decision and ability of the buyers to purchase.

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.