June Silicon Valley Real Estate Market Highlights

Here are the highlights of May'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 over a year since we called the bottom of the real estate market in Santa Clara County -- March-April 2009. Since then we've seen a steady improvement in market conditions and this remains more apparent in Santa Clara County than San Mateo County. Closings of single family residences (SFR) in Santa Clara County increased to 1,230 from 975 last month and was up 23.7% from the same month a year ago. San Mateo County also saw higher SFR closings at 418 from 344 last month and was up 28.6% from the same month a year ago. My analysis of the transactional information reveals:

* The supply of homes available for sale (inventory) is trending upwards in both counties these past few months which is usual. What is not usual is that while the inventory in Santa Clara County is 12.7% lower than the same month a year ago, the inventory in San Mateo is 10.1% higher.

* 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 100.0% for San Mateo County. Big news continues in the percent of closings where sale price exceeded list price -- Santa Clara County was 48.2% and San Mateo County increased to 40.9%. This indicates that the overall market remains stronger in Santa Clara County.

* 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 and represents a calculation using both supply and demand. A lower figure for DUI, then, means improvement. For May, Santa Clara County had a DUI of 61 for SFR, 73 for condos/townhouses and 167 for multi-unit properties. San Mateo County had a DUI reading of 89 for SFR's and 100 for condos/townhouses.

> HOT Markets? -- For Santa Clara County the hottest (seller) market areas are South San Jose, East Valley, Santa Teresa, North Valley and Evergreen Valley areas of San Jose. For San Mateo County, the hottest markets are those bay-side cities of Belmont, San Carlos, Redwood City and San Mateo. A seller's market has shorter time on the market, fewer number of homes available for sale, higher demand by buyers with a tendency to have multiple offers and sale prices generally exceeding list prices and the potential of price appreciation.

> Cool Markets? -- We call them buyer's markets but everything is relative, right? For Santa Clara County, we see buyer's markets in Los Gatos, Saratoga and the Willow Glen portion of San Jose. Saratoga and Willow Glen with Los Gatos/Monte Sereno are my current "Best Buy" areas in the county. In San Mateo County, besides the more expensive areas, there are buyer's markets in the coastal communities like Pacifica and Half Moon Bay. 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 or based on price levels 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).

> Median prices jump in Santa Clara County -- Santa Clara County median price for SFR's jumped to $630,000 versus $490,000 or 29% increase from May 2009. The median price for condos/townhouses was $383,500 or 24% higher than the same month a year ago. San Mateo County's median price for SFR's was $750,000, 2.9% 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! However, I advise my clients NOT to use an entire county's median price level to decide whether to buy or sell or time the market 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.

> Friday Before Memorial Day -- What's so significant about that date? Well, looking back over the last 15 years or so, Santa Clara County's real estate market usually peaks for the year in terms of activity levels and also generally in prices, as well. So far, we have a May peak this year as activity levels have eroded into June thus far so we'll see.

> What a change from a year ago in the market! -- Last year at this time saw 49% of the closings in Santa Clara County being distress sales (bank-owned and short sales or lender-controlled transactions). This year, just 28% are that type! Normal transactions accounted for 51% of the total last year and 72% this year.

> Why do newspapers always report lower prices for the area? They use DataQuick services which scans ALL transactions even though there's no money changing hands like in the case of family to family transfers, divorce settlements, etc. My calculations are based solely on arm's-length transactions through our Multiple Listing Service or MLS.

Need help with understanding the market in your area? Give me a call or email me for a no-obligation consultation and research to help you make a better, more-informed 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.

How NOT to sell your home

It never ceases to amaze me when reviewing the Property History portion of listings how many potential missed opportunities there are to sell a home. The Property History section, viewable only by a licensed agent who is also a member of the local Multiple Listing Service (MLS), contains all listing information in chronological order. The information by MLS number includes, list price, date of sale, close of escrow date with final selling price and ALL price changes. It will also show realty firms, listing agents and relisting under a new MLS number. A good buyers agent will be able to explain the reasons for all changes to a listing.



Based on my opinion, here is a sampling of categories I've named based on the characteristics they exhibit. Perhaps you'll be able to readily identify someone you know that's struggling with selling their home.

First characteristic is what I call the "stair-step" approach to pricing. In this approach, a seller lists their home a little above fair market value to assure they don't leave any money on the table and with the belief that their home is better than all the others even though they haven't seen their competition. I've noticed that sellers keep reducing their list price but just a little each time. This does two things. One, the price reduction generally follows the market lower rather than being aggressively competitive. And two, like the proverbial Pavlov's dog, it trains or conditions potential buyers to be patient for their next award by waiting for another little "treat" or price reduction.

The second characteristic is what I call the "wishful thinker" approach. In this approach, a seller sets a list price way up on the range and keeps it there! You might also call this a "wishin' and a hopin'" strategy. Pricing your home using this approach gets a seller frustrated and perhaps even angry at their agent as there will be little or no activity from the marketing effort that will generate a sufficient interest for a buyer or buyers to make offers. The Property History is riddled with listing agent changes!

Keep in mind that with the ability for potential buyers to easily and quickly pour over home listings on the Internet, a buyer won't show up without a compelling reason or reasons to do so.

This leads me to my recommendations for sellers who want to sell their home. Either you know someone who is currently in this predicament or know of someone considering a sale who you would like to save from getting stuck and making costly errors in marketing and pricing their home.

• Look carefully at your competition. A close look at the Property History of each listing that would be considered your competition is key. Your agent can research and review this revealing information with you, hopefully BEFORE it goes on the market.

• Price it to add value to the marketplace. All buyers look for value. Value is a combination of price and benefits. Sometimes a higher price is a better value! Why are there so many Lexuses on the road! Though it is important, to add value to the market don't think just of price. More than likely, you'll add value with a combination of price and your home's features and benefits. Examples of features include recent upgrades to the kitchen and bathrooms and ideas of benefits may be about the community or a set of schools.

• Price it with good information and old-fashioned good advice. Some agents looking for business will accept a listing at any price the seller wants as they think that getting the listing is business and they can always go back to the seller for price reductions employing, you guessed it, the "stair-step" approach described above. It is difficult to locate an agent who will be upfront with advice and current market information and be willing to walk away from a potential listing where the seller is being unrealistic with their price. I have and wish them the best of luck! After all, as a real estate professional, I make an out-of-pocket investment in every listing and would rather not expend a lot of time and marketing money without a reasonable chance to see that sale come to fruition.

If you have questions or feedback, please feel free to leave a comment.

Thanks for reading!