April Silicon Valley Real Estate Market Highlights

Here are the highlights of March's transactions and market comments for Santa Clara and San Mateo counties. Your comments and questions are welcome. If you have an update as to what you are witnessing in your neighborhood, please don't hesitate to share with us. You may leave comments here, or contact me through my website.

> Market Overview -- It's been a year since we saw the bottom of the real estate market in Santa Clara County. Since then we've seen pretty much a steady improvement in market conditions and this is more apparent in Santa Clara County than San Mateo County. Closings of single family residences (SFR) in Santa Clara County were 917 versus 633 last month and 721 in March 2009. San Mateo County also saw higher SFR closings at 322 compared to 250 in the same month a year ago. Higher activity levels and more buyers willing to make the decision to purchase is what we're finding. Buyers seeking low prices AND a chance to garner a tax credit or two are a little late to the scene. My analysis of the transactional information reveals:

* The supply of homes available for sale (inventory) has turned upwards after more than a year of continual decline. This is taking place in both counties. However, the levels are still substantially below the year ago levels. Santa Clara County inventory of available SFR's increased 8% from last month and San Mateo County's inventory increased 12%.

* Headline you don't see in the San Jose Mercury News -- "HALF OF HOME SELLERS GET MORE THAN LIST PRICE FOR THEIR HOMES!" The sale price to list price ratio continues above 100% and stands at 100.9% in Santa Clara County and increased a bit to 99.6% for San Mateo County. Big news continues in the percent of closings where sale price exceeded list price -- Santa Clara County was 49.7% and San Mateo County was 39.9%. This indicates the overall market is stronger in Santa Clara County.

* The Days of Unsold Inventory (DUI) continues to show improvement -- as readers will remember that a lowering of this number translates into a faster market. DUI is conceptually the inverse of inventory turns ratio, where a higher number means improvement. A lower figure for DUI means improvement. For March, Santa Clara County had a DUI of 44 for SFR, 41 for condos/townhouses and 68 for multi-unit properties. San Mateo County had a DUI reading of 45 for SFR's, 45 for condos/townhouses and 105 for multi-unit properties.

> HOT Markets? -- You bet and there are more of them, too! For Santa Clara County the hottest (seller) market areas are South San Jose, East Valley, Evergreen, North Valley, and Milpitas with Cupertino not far behind. For San Mateo County, the hottest markets are those bay-side cities of Belmont, San Carlos, Redwood City and San Mateo, followed by more expensive areas of Menlo Park, Woodside, and Portola Valley. The characteristics of a seller's market are shorter time on the market, fewer number of homes available for sale, higher demand by buyers which translates into a higher probability of multiple offers, sale prices generally exceeding list prices and a tendency towards price appreciation.

> Cool Markets? -- Yes, but there is fewer of them. For Santa Clara County, we see buyer's markets in Los Gatos Mountains and Los Gatos/Monte Sereno. Los Gatos is my current "Best Buy" area in the county. In San Mateo County, besides the more expensive areas, there are buyer's markets in the coastal communities. To refresh you, characteristics of a buyer's market are 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 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) in the prior month which results in days of unsold inventory (DUI). Additionally, this is not based on price levels or my opinion but a supply-demand relationship.

> Median prices jump in Santa Clara and San Mateo Counties -- Santa Clara County median price for SFR's jumped to $600,000 versus $450,000 or 33% increase from March 2009. The median price for condos/townhouses was $375,000 or 57% higher than the same month a year ago. San Mateo County's median price for SFR's reached $800,000, 38% higher than the same month a year ago. Notice that with prices I don't use month to month changes but year over year. This eliminates seasonal fluctuations and is something that newspapers and most online pricing sources haven't figured out yet! Or, perhaps they use this intentionally to scare folks to sell newspapers! I advice my clients NOT to use an entire county's median price level to decide whether to buy or sell but use the trend information in a general manner. To formulate an effective strategy, I use analysis of the supply-demand characteristics of the neighborhood under consideration and advise my clients of the appropriate strategy to employ to maximize their dollars if they are selling and maximize their house if they are buying.

Need help with understanding the market in your area? Contact me at Tom.McEvoy@remax.net for a no-obligation consultation and research to help you make a better decision.


Thanks for reading my blog. I'm Tom McEvoy, Realtor -- Let me know your comments, questions, observations you may have or any future topics you'd like me to address.

January Silicon Valley Real Estate Market Update

This information summary and analysis uses MLS Listings Inc. (MLS) transactional data for December 2007.



For single family homes in Santa Clara County, December saw the fewest closings (closed escrow) of not only any December but any month going back to 1984, when the MLS first started publishing data! There were 488 closings in the month with 450 initiated sales (accepted offers) that indicates that closings in January will be lower still.


This lower closings record occurred in each of the counties I track closely: Santa Clara, San Mateo, Santa Cruz and Monterey.


Inventory of available homes was 4,031 in December compared to a high of 4,925 in late October. Since then, we've seen a higher than normal level of listings expire at the end of October and again at or near year-end. Normally, inventory of available homes decreases during the late fall months due to seasonal factors. I suspect that we'll see a jump in inventory either in January or February as at least some of those homes come back on the market for another try.


Days of Unsold Inventory (DUI) or the intersection of the inventory (supply) with the recent sales level (demand), shows Santa Clara County at 303, San Mateo County at 190, Santa Cruz County at 351 and Monterey County at 579. Clearly, these are all indicating a buyer's market condition as a reading of DUI above 90 depicts. For comparison, a seller's market will have a DUI of less than 45 and a balanced market will have a DUI between the two. However, real estate is local (down to the neighborhood level) and market conditions can vary within each county and even within cities by a large amount.



For instance, within Santa Clara County, the Mountain View, Los Altos and Palo Alto area has the best market climate in the county with a DUI reading of 83 while South County (Morgan Hill, San Martin and Gilroy) has the worst reading of 698 followed closely by a 662 reading for East Valley part of San Jose. In San Mateo County, the best market climate is in Foster City with a DUI reading of 70 contrasting with a 210 reading on its coast that includes Half Moon Bay and Pacifica. The following is a ranking of selected Santa Clara County cities or areas with their current DUI readings:

• Los Altos, Mountain View, Palo Alto - 83
• Cupertino - 94
• Almaden Valley - 120
• Los Gatos, Saratoga - 126
• Campbell - 128
• Cambrian - 148
• Sunnyvale - 152
• Willow Glen - 163
• Milpitas - 210
• North Valley - 263
• Downtown SJ - 275
• Evergreen - 303
• South San Jose - 446
• East Valley - 662
• Morgan Hill, Gilroy, San Martin - 698

The median price for single family homes in Santa Clara County was $799,000 in December and compares to the record high reached in April 2007 of $868,400. This is a decrease of $69,000 or about 8.0%. Much of the increase to the record price was the result of a mix shift from lower priced homes to higher priced homes. In other words, less transactions out of the total occurred in lower priced homes and a higher percentage occurred in higher priced homes, resulting in an increase in the median. This mix shift was predominately caused by the mortgage problem that started in February when lenders started to increase their scrutiny of and place a higher standard on underwriting loans for borrowers hitting entry-level homes the hardest.

Median prices for single family homes by county in December 2007 were:

• Santa Clara County - $799,000
• San Mateo County - $875,000
• Santa Cruz County - $546,000
• Monterey County - $520,000

Has this drop in median prices been felt evenly throughout the county? Absolutely not. With seller's markets in the northwest portion of Santa Clara County (Palo Alto, Los Altos, Mountain View), their characteristics are price appreciation along with good demand whereas those affordable priced home communities have characteristics like a buyer's market with price depreciation and very poor demand.



We call the "sweet-spot" of the market that price range which has the lowest DUI. For December the $1,000,000 to $2,500,000 range is the most brisk. Next comes the $750,000 to $1,000,000 range and then the $2,500,000 to $5,000,000 range. This is unusual because a normal market has the more affordable priced homes with the lowest DUI.



For condo/townhouses the picture is similar but slightly better with a DUI reading of 264. Real estate investors take heart as the DUI picture has degraded substantially to a reading of 529. This means under the current rate of sales of multi-unit properties, there are about 1.5 years of supply! Even though rents have increased about 10% during both 2006 and 2007, the demand is just not there making this the best time for an investment purchase since 1994. Lenders have substantially increased the borrower's requirements to obtain a loan for investor property purchases. Does this foretell a price drop? We'll have to wait and find out.



Why follow all this, spending time dissecting statistics, reviewing trends and investing time doing old-fashioned real estate analysis? Simply, with this information I am armed with the latest information to provide my clients an advantage when it comes time to make a change in the market. Newspapers and other sources tend to generalize too much (i.e., the national real estate market, the Bay Area real estate market, etc.) and you lose the fineness of being able to use information strategically to make better decisions.



This effort forms the foundation of more effective strategies I advise my clients whether or not to buy or sell or just wait!



If you have any comments or questions, please feel free to post them here or send me an email at tom.mcevoy@remax.net.



Thanks for reading!