Tuesday, March 19, 2013

March Silicon Valley Real Estate Market Update

Here are my observations of the most recent February 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 or send me an email.

General Market Observations and Comments -- Even though the amount of homes (single family and condos and townhouses) available for sale have increased, they are still historically low. In Santa Clara County, there were just 857 single family residences on the market versus 727 last month. In San Mateo County, there were 433 compared to 394. Half of those on the market sell in 11 days in Santa Clara County and 13 days in San Mateo County. This is termed median days on market. I think the inventory will continue to drift upwards as we enter Spring which will give some more choices to buyers who have been placed at a disadvantage. Still, 621 homes closed escrow last month in Santa Clara County and 247 did so in San Mateo County. Both counties have the characteristics of a seller's market in most market areas but not all. During February, more than half of the closings had a sales price greater than a list price (63% in Santa Clara County and 60% in San Mateo County). Both of these percentages have continued their trend upwards. For owners thinking of selling, it is important to understand the market dynamics in their particular market area. For many, this remains a very good time to sell.

What Does $85 Billion a Month Buy You? --  No this isn't some ultra-high rental or even a super high mortgage payment. This is what the Federal Reserve (FED) is paying for by buying mortgage-back securities each month!  Well, the sellers get cash and the cash has to go somewhere. If the banks are paying close to zero interest as are the money market funds, these funds are flowing into assets -- namely, stocks, commodities and real estate. If an investor can't get any yield in his or her CD at the bank, they buy an asset they hope could go up in price.

Hot, Hotter, Hottest Market Areas -- In Santa Clara County, the hottest market area is Cupertino, Sunnyvale (zip codes 95014, 94086, 94087). It sports a median sale price of $1,232,000 and has a median days on market of just 9 days! A hotter market is Los Altos and Palo Alto with a median sale price of $2,019,000 has a median days on market of 10. Only a hot market is Los Gatos, Monte Sereno and Saratoga with a median sale price of $1,521,000 and has a median days on market of 37, historically hot for this area.  

For San Mateo County, the hottest market area is Foster City and Redwood Shores with a median sale price of $1,270,000 and a median days on market of 11, followed by a hotter market of North County cities of Brisbane, Colma, Daly City, Pacifica, San Bruno, South San Francisco. The hot market is the expensive areas of Menlo Park, Atherton, Portola Valley, Hillsborough, Woodside. The median sale price in this area is $2,588,000 and has a median days on market of 20, 

Median Prices are Jumping -- The trends of median prices of single family, condo and townhouse homes march upwards. For single family residences, February saw Santa Clara County's median price, half above and half below or the middle transaction, at $713,000 and the median sales price for San Mateo County increased to $820,000. The upwards trend has been evident since the Spring of 2009. By the way, market bottoms were also established during this time in both stock indices and commodities.

Recent Overbidding Levels Remain High -- The percentage where sale price is greater than list price gives us an indication of the incidence of multiple offers. Already mentioned is the frequency of overbidding (sale price greater than list price 63% of the time in Santa Clara County and 60% in San Mateo County) but a more telling aspect is the magnitude or sales price to list price ratio (SP/LP). In Santa Clara County, the average SP/LP ratio is 103.9% or in the average transaction the seller gets 3.9% above the list price. Hottest area is Cupertino and Sunnyvale with 110.0. In San Mateo County the numbers look similar. Overall, the average is 104.6 and the highest is Bay Cities market area of Belmont, Burlingame, Milbrae, San Carlos, San Mateo with 107.5.

Murphy Avenue called Murphy Street in Sunnyvale, CA
Distress Property in Decline -- In Santa Clara County, there were just 4% of the available listings that were short sales and 4% bank-owned which means regular listings accounted for more than 90%! This is a far cry from even last year when these combined for a quarter of the listings. 

What Will Mortgage Rates Do? -- Those with an adjustable rate mortgage might want to think about a refinance in the not too distant future. Yes, the FED has been trying to maintain a low-rate environment by the purchase of mortgage-backed securities with the expressed purpose of keeping rates low to spur the economy. Problem is that those funds have and are moving into assets -- stocks, commodities and real estate. The economy can't "absorb" these funds as companies wait to get more understanding of the moving target of tax increases and a higher level of regulation (Obamacare, Dodd-Frank, to name a couple) overhanging the economy, not to mention the huge budget deficits which imply higher taxes ahead. 

So, in answer to the question, yes, they will go up. It could occur relatively quickly when the FED senses there is more inflation than they are willing to tolerate or when investors demand higher yields on government securities to compensate for a perceived higher level of risk and/or the real or potential for increased inflation. The FED has had a history of either too much/too long of money creation or ratcheting up rates too far/too long to squeeze the economy.

Thanks for reading! I'm Tom McEvoy, Realtor with RE/MAX Santa Clara Valley -- On Google+ at +Tom McEvoy. Let me know if you have any comments, questions, observations or any future topics you'd like me to address.

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