August Silicon Valley Real Estate Market Comments

Here are my observations of the most recent July 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 -- The amount of homes (single family and condos and townhouses) available for sale continue at low levels. The level reached in July was the lowest for this time of the year in at least 12 years! Most areas in both counties have the characteristics of a seller's market with more than half of the closings during July had a sales price greater than a list price (57% in Santa Clara County and 51% in San Mateo County). That said, a well-priced listing has a tendency to attract more activity and multiple offers.

Which Half Are You? --  In July, it took just 13 days to sell half of the homes in Santa Clara County and only 15 days in San Mateo County!  If you're home has been on the market longer than the median days on market then there must be something wrong with its condition, location, and oh yes, maybe the price.

Median Prices Increase -- Median prices of single family, condo and townhouse homes continue to march upward. For July, Santa Clara County's median price for single family residences, half above and half below or the middle transaction, increased to $695,000, compared to $598,000 the same month a year ago representing an increase of 16.2%. The median sales price for San Mateo County was $810,000.


Inventory of Available Homes for Sale Continue at Low Levels -- There were just 1,328 single family residences for sale in Santa Clara County and just 598 in San Mateo County. Not record lows but each are about 55% lower than in July 2011.

Apple's Campus of the Future - Courtesy Cupertino City Hall

What's HOT and What's NOT -- In Santa Clara County, the hottest market area is Cupertino and Sunnyvale with a Days of Unsold Inventory (DUI) of 25. In San Mateo County, the hottest area is Foster City/Redwood Shores with a DUI of 27. What's not is Los Gatos/Saratoga in Santa Clara County with a DUI of  102 and the expensive areas of Menlo Park, Atherton, Portola Valley, Hillsborough and Woodside in San Mateo County with a DUI of 117.

Lender-Controlled Transactions Take a Dive -- Last month the percentage of homes on the market that are lender-controlled (short sale and bank-owned) shrank to just 10% in both counties! That means 90% of the active status homes are regular or equity sales. Of course, this percentage will vary throughout each county depending upon the area.



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

August Silicon Valley Real Estate Market Highlights

Here are my observations of the most recent market actions for Santa Clara, San Mateo, Santa Cruz, and Monterey counties. You are encouraged to leave your comments and questions or even update us on what you are witnessing in your neighborhood or area.

> Market continues improving! Market activity continues to display improvement, something that we've been saying for the past four months. For instance, in Santa Clara County, July saw a 38% increase in closings over the same month last year. My analysis of the transactional information reveals:

• Buyers continue to trip over each other to submit offers for homes in the more affordable areas of Santa Clara, San Mateo, Santa Cruz, and Monterey counties. Many offers submitted are for all cash or substantial down payments like 50%. There are only 20 days of unsold inventory on single family residences in Santa Clara County with a price of under $450,000.
  
• The supply of homes available for sale (inventory) continues to trend lower in each of the four counties, except a flattening in Santa Cruz County. Normally, inventory is increasing at this time of the year. Lowered inventory and strong demand means HIGHER PRICES!
  
• The number of initiated sales (in contract) have changed directions and heading lower as summer periods are normally less active in real estate. July initiated sales in Santa Clara County was still 18% higher than the same month a year ago.
  
• The Days of Unsold Inventory (DUI) has generally improved (decreased) substantially in the last year in each county for single family residences. Santa Clara's DUI stands at 55 (47 for condos and townhouses), San Mateo's DUI is 75, Santa Cruz's DUI is 102 and Monterey's DUI is 64.
• Median prices have increased in every county and is up 31% in Santa Clara County since March!

> Bank-owned and Short Sale Home Marketing -- Bank-owned homes are also called foreclosures or REO's for "real estate owned" (by a bank). Short sale homes are those still owned by the seller (not by the bank) but with the estimated proceeds of a sale not sufficient to cover the loan balance. For transactions with both types of homes, offers need the bank's approval. Now, the bank in each case has already lost money but their marketing has recently taken on a new look. They've given approval to the listing agents they hire to use an extremely low list price strategy to draw a huge number of offers and in a hurry too!.

Recently, I sold a bank-owned home in San Jose that generated 17 offers as my buyer's offer beat the other 16. As first time buyers who were pre-approved for an 80% loan, they are extremely pleased to be in contract. I employed my research on the fair market value of those in the same neighborhood to recommend an offer price range and my buyers accepted my recommendation.

> Seller's Markets? -- Yes! the hottest markets in Santa Clara County were Santa Teresa, South San Jose, Blossom Valley, North Valley, East Valley, Santa Clara, Cambrian, Evergreen, Milpitas and Downtown San Jose. To refresh you, characteristics of a seller's market are shorter marketing time, fewer number of homes available for sale, higher probability of multiple offers with many sale prices exceeding list prices with added price appreciation.

> Buyer's Markets? -- OK, yes, there are some of those too! Areas of Santa Clara County experiencing a buyer's market condition are: Mountain View, Los Altos, Palo Alto, Willow Glen in San Jose, Saratoga and Los Gatos. To refresh you, characteristics of a buyer's market are longer marketing time, higher number of homes available for sale, lower probability of multiple offers or even an offer with most sale prices below list price with price depreciation.

Where do I get "Seller's" and "Buyer's" market information? This is not an opinion thing but a calculation I make using the number of homes for sale (supply) and the number of sales (demand) which results in days of unsold inventory (DUI).

> Median prices. Up 31% since March to $590,000, Santa Clara County was at $450,000 as recently as March! This is down 18% from the same month a year ago. Less lower-priced homes in the mix of what sold last month and a corresponding higher portion of moderate homes and higher-priced homes was the main culprit. I do repeat, though, that an entire county's median price level should not be used as part of a strategy for buying or selling -- analysis must be done on a much smaller area as small as a neighborhood to form the basis of a strategy.

> Lost Wages and Other Things -- For this, "lost wages" affectionately refer to Las Vegas. Sales in Las Vegas in June 2009 were 44% higher than in June 2008 - a welcome sign. Median price was 41% lower than the same month a year ago. Comparable numbers for Portland were a 6% drop in sales and a 13% drop in median price. For Phoenix, the number of sales spurted by 40% but the median price was 37% lower than the same month a year ago.

> Tale of Two Markets -- Sales of affordable homes in Santa Clara County less than $450,000 level have gotten even hotter than the past few months. There are just 20 days of unsold inventory for single family residences below $450,000. There are more homes in sales pending status than available for sale! The DUI was 38 for those less than $600,000. Even with adjustments made for the portion of transactions that do not close escrow, these figures represent seller's markets with one characteristic being price appreciation.

However, sales of higher-priced homes are sluggish at best. For instance, we are back to having no sales of $5+ million homes in the last five weeks in Santa Clara County. Last month, there were 90 sales of homes with a list price of at least $1,000,000 with the highest a home that sold in Palo Alto with a list price of $3,700,000. Sunnyvale saw four such sales, 13 in Cupertino. For closings, there were 62 that closed escrow last month in the county, a higher number than in previous months which help increase the median price.

> Sellers Be Sooner -- I maintain my recommendation for sellers of higher-priced homes that they should consider selling sooner and having an initially more-aggressive list price as the market usually softens when we go deeper into summer. In any case, check with a Realtor knowledgeable about the technical aspects of the market conditions to guide you in positioning your home for maximum activity and price while minimizing time on market. There are more than ten months of unsold inventory in the $2.5 million to $5.0 million price range on the market in Santa Clara County.

For those considering a purchase of a home in an expensive area, your time is getting closer! Be ready but I think we'll see list prices reduced and sale prices dropping more before they are likely headed higher.

> Santa Clara County Foreclosure Ranking -- With all the "talk" about the amount of foreclosed homes in the county, here's a couple of things to think about. First, Sean O'Toole of ForeclosureRadar said recently that Santa Clara County ranks 45th among 54 counties in California in foreclosures per population. My yes, we have a lot of dwellings to house more than 1.6 million folks in the county as there are some 430,000 single family homes, condos and townhomes in the county according to the Santa Clara County Tax Assessor's office. Second, more than 30% of these have NO loan on them and are owned "free-and-clear" and have enjoyed their mortgage-burning parties. Of those that do have a loan, the rate of foreclosure based on the 591 homes that were foreclosed in the county in June would be about 2.25% or about one out of 44 homes.

> Investor's Corner -- Activity continues to trend upwards as more and more investors reenter the market. For Santa Clara County, there were 75 sale pending properties during the month with more than 50 of them in the less than $600,000 price range as that price range had a DUI of just 44, making it on the border between balanced and seller's market. Not so with higher priced multi unit properties.


Thanks for reading -- what are your thoughts, comments, questions?

Why you should choose me to help you buy your next home

I work exclusively by referral. Working by referral allows me to focus on my clients and not on prospecting for other clients like most other agents do. My clients refer me to those that they know who are thinking about buying or selling a home or investment property. In this manner, fully 85% of my business is directly attributable to working by referral with the balance of my business derived from networking and website sources. I do no "smiley-faced", self-promotion type ads in newspapers, magazines or load your mail box with what are known as "farming cards" or as most call it -- junk mail!

How does working by referral benefit you? Simply by the fact that if I don't perform, you wouldn't think about referring anyone. Poor service or results would cause my business to vanish! Instead, I work for my clients before, during and after each transaction. In actuality, during 2007 my business continued to grow and amounted to my best year ever. Working by referral allows me to be careful as to whom I choose to work for. And, I'll be the first to tell you that we each have a decision whether or not to work with someone. I would caution you that it is critical to know the person you will entrust to advise and help you with what will probably be your largest monetary investment -- a home.

In California, we have what's known as "buyers agency". Buyers agency is simply that upon execution of a legal form, your chosen agent becomes your buyer's agent and works for you while legally being paid out of the seller's proceeds. Thus, there is no money out-of-pocket for the buyer when represented by a buyer's agency agreement. Going through an Open House, responding to an ad online or in the newspaper puts you in front of someone working for the seller who may not have your best interests in mind. Legally, they should be acting solely for the benefit of their principal as one of the four Fiduciary Duties that agents should honor. The other three are: to use skill, care and diligence; to be accountable; and, to disclose material facts.

My background consists of extensive, real-life experience in business, investments and finance with more than 23 years in corporate financial planning, analysis experience. My last position was a director of planning for a company which was purchased for $9 billion. This is important for my clients because it means I have a grounding in reality and can take a longer-term or investment approach to advising clients. Contrast my background with someone who might have sold shoes, computer chips, insurance policies and now homes. More than likely, they're looking for the next transaction. Please don't get me wrong, there's nothing wrong with selling -- I'm in sales, too! But before there is a transaction, I advise my clients of what is solely in their best interests -- whether or not it culminates in a transaction for me. I do a substantial amount of market research to uncover or spot trend changes to devise the appropriate negotiation strategy I advise my clients to use so that they accomplish their real estate goals.

A decision to purchase is always up to the client, in that manner, I don't sell, I advise. If you'd like to meet and get to know me better, please give me a call at 408-830-0092. Feel free to comment with your questions on:

• REO or foreclosure properties
• buying in areas still likely to have multiple offers (yes, there are some)
• TV unreality realty shows (show three and buy one)
• or, other real estate topics you have in mind.

Thanks for reading!