Here are my observations of the recent market action in Santa Clara, Santa Cruz, San Mateo and Monterey counties. You are encouraged to leave your comments and questions. Feel free to update us on what you are witnessing in your neighborhood.
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Increased Sales or Is It? -- Santa Clara County had higher single family residence closings in December than in November because of the calendar. Since the first of the year, closings have dropped into the higher 500 area with January at 568 and February at 579. Now the media states that sales increased 35% over the last year but that number is deceiving as it blends both single family and condos. First, single family residence sales increased by 37% and condos and townhouses increased by only 30%. This is significant in that it blurs the major shift towards single family residences. Second, the increase, though appreciated by some real estate agents, came off the slowest month since 2001. And third, while we're on this, a much higher level of transactions failed to close escrow than before. For these transactions we call "TFT's" for transactions fallen through, this means that all the paperwork entering escrow in these didn't fly!
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Auctions may cost you more! Many folks think that working with a Realtor as their buyer's agent will cost them money out of their pocket. In actuality, buyer's agents are paid out of the seller's proceeds at close of escrow. The gross commissions earned by the buyer broker and agent do not add to the sales price. Auctions, on the other hand, advertise that they'll sell you a home at 40-50% under market. The homes they sell have NEVER sold at that higher price they compare to, so there is absolutely no comparison! Furthermore, to add insult to injury, many auction houses ADD their fees to the price paid by the buyer. This can be as much as 10% or more. What a deal!
Last year, I represented a buyer interested in bidding on a condo at an auction in San Mateo County. I made sure that my buyer wouldn't have to pay the auction house extra and that I might be able to earn a small fee representing her, of course, paid out of the seller's proceeds. With that cleared up front, she was successful in her bid and purchased the condo she wanted. By the way, my wife doesn't allow me to work for free! Something like "we've got two kids in college on the Mom & Dad Scholarship Program".
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Property tax reviews -- Santa Clara County Tax Assessor, Larry Stone, stated that about 200,000 parcels (single family, condos, townhouses, multi-unit residential) will be reviewed for possible adjustments in their fair market values for property tax purposes. Well, with about 432,000 parcels in the county, that's nearly 50%! The estimated amount of these parcels which will actually be reduced is about 50% or about 100,000. Last year about 44,000 properties were adjusted.
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Free is better than well, not free -- Who wouldn't want to obtain a property tax adjustment? But, why pay extra for something that is essentially free. The county charges a standard filing fee of $30. I'm reminding you that some firms are charging $179 for something that you can do for the county standard filing fee of $30! When you receive a card from the county tax assessor in a few months and think the assessment is too high, go to the
Santa Clara County Tax Assessor's website. You can click on Assessment Appeals under Quicklinks to read how to apply, important dates for homeowners, etc. You must file during the open period to qualify otherwise it's tough luck.
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The median prices for single family residences in the affordable areas of Santa Clara County are now below that of the median prices for condos and townhouses in the moderate price areas.
If you don't like to mow lawns, in my professional opinion, there are currently better deals in condos/townhouses. Case in point, I just closed a transaction where my buyers purchased a San Jose bank-owned or REO condo for $377,000 which was under the list price even after it had been reduced. This same three-year old condo sold brand new in 2006 for $565,000.
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Buyers wait for sellers to reduce list price. One of the indicators I follow constantly is the average sales price to list price ratio. This ratio, currently standing at 97.8%, means that the average transaction sells at only a 2.2% discount to list price. For the most part, buyers will wait until sellers adjust their list prices rather than put in ridiculous offers. High list prices, relative to the current market, on some homes are one big reason that some buyers wait, and wait, and wait!
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Median prices, revisited. The calculation of median prices used to be a reliable "read" of the market. Not so since the sub-prime loan problems hit during summer 2007. Before, market mix (percent of total for different price levels) didn't vary much. Now we have a much higher percentage of low-priced homes closing as a percent of total closings. But just for the record, the Santa Clara County single family residence median price in February 2008 was $785,000 whereas the median for February 2009 was $450,000, a decrease of 42.7%. This does not mean ALL homes went down this much! Median price is the middle transaction and represents the level of those that closed during the month.
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Another revisit? Can't sell your $5,000,000+ home? There have been NO sales of any homes in Santa Clara County priced above $5,000,000 reported through the MLS since early November! There are 34 of them on the market as of 3/11/09. In San Mateo County, one sale has taken place in the same price range. We'll see if it closes escrow!
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Want to sell with multiple offers? The percent of completed sales or closings with a sold price greater than list price now stands at 33.0%. This means that one out of three sellers received more than their asking price. Oh, and 7.5% of sellers received exactly list price.
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What happened, Foster City? -- With 57 homes available to sell and only two sold during February that means the calculation of days of unsold inventory (DUI) exploded to 998! This means that it would take 998 days to sell the existing inventory in Foster City. The calculation is theoretical but it tells me there's no demand from buyers.
This could change quickly but if it doesn't, I see lower prices ahead.
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Investors, where are the investors? Multi-unit investor marketplace has had very few transactions with only 26 closings in February. Tougher lender requirements have contributed to this situation and probably can't leave out the stock market, too! I look at activity in this arena as it is an indicator of investor confidence in the future.
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Go, Monterey, go! Monterey County continues to see more closings than San Mateo County. Most of the transactions in Monterey County are bank-owned or REO's after a flurry of affordable home building in the county a few years ago caused a tremendous over-supply. This has not occurred in Santa Clara, Santa Cruz or San Mateo counties. For Monterey County, the days of unsold inventory (DUI) stands at 89, close to the level we can start to see price appreciation. Shock! Actually, the price levels below $450,000 have already reached the point where we can see price appreciation with a DUI reading of 54! Multiple offers are common for homes priced in this range with final sales prices often going above the list price. Double shock!
Thanks for reading -- what are your thoughts?
