What’s the Silicon Valley real estate market doing? Silicon Valley is composed of many micro markets, and they may all behave independently of one another, but we are seeing some general trends.We’ll have a look at them today.  Things have really, really changed from six months ago. It’s very dramatic.

First, a city by city comparison of the numbers for the county and Campbell, Cupertino, Los Gatos, Saratoga, San Jose (as a whole), Sunnyvale, etc. This first chart is for houses in the cities and towns of Santa Clara County. On the first line, which is for the entire county, please notice the sales price to list price ration – it is over 100%.  This is perhaps the best indicator of the market heat we see here.  Also note how low inventory is for the county – from a year ago, it’s off 29.2% (and that year was low also).

Perhaps not surprisingly, the sales price to list price ratio is highest in Palo Alto, where it was nearly 109%. Mountain View came in at 103%, Cupertino and Los Altos at 102%, Los Gatos, San Jose and Sunnyvale at a little over 100%.  Some areas, such as Monte Sereno, have so few sales that their numbers fluctuate wildly (in the case of Monte Sereno, best to look to similar areas of Los Gatos for the best sense of pricing, usually, as they share schools, parks, police etc.).

Next, the same type of data but for condominiums and townhouses rather than houses & duet homes:

The condo market has been taking a beating for years, but at long last, the sales price to list price ratio is now very close to 100% (99.9% for the county) and many areas are more than 100%: Campbell, Cupertino, Los Altos, Milpitas, Mountain View, and Palo Alto. Most of the rest of the county is at 99% with just a couple of exceptions.  What’s happening? The inventory here tells the story: county wide, it’s down 74% from last year.  In Campbell and Los Altos it’s off 75%.

Inventory is at record lows, buyer demand is way up: we have a strong sellers’ market with multiple offers and overbids

First, there’s extremely low inventory. In February there were just 1389 single family homes for sale in Santa Clara County.  A balanced market is somewhere around 3000 homes – so this is quite severe!  In fact, it’s the lowest amount of inventory for any February going back 10 years.  Here’s what it has looked like in other Februarys, per my Santa Clara County Real Estate Report (you can see these numbers yourselves):

2012  1389
2011  1812
2010  1739
2009  5443
2008  5338
2007  2876
2006  2235
2005  1412
2004  1672
2003  3410
2002  1965
2001  1784

Prices are moving up

Second, prices have started to climb in much of San Jose and other areas, especially in cities or towns with really good public schools like Cupertino and Palo Alto.  Talk of triple or other “dips” is long gone. Looks like 2009 was our low point for pricing, and since then we’ve been bouncing along the bottom – until now.

How do we know that they are rising? For those of us who are in the market, we are seeing it each time we have a listing that gets multiple offers and sells so high that we know that we have an “appraisal problem” or when we put offers out for buyers that are over list price with great terms but we lose out to a bidder who’s all cash and $100,000 over the list price, where there are NO comps to support it.  And that is what is happening right now in many areas and price points.

Also, of course, we can do the math.  I’ve been crunching numbers on what’s happening in Cupertino (insanely fast rising prices), Saratoga, Los Gatos, Campbell, Almaden, Cambrian, Willow Glen, Santa Clara and more  – all with rising prices very noticeably but not 10% per month, which appears to be what’s happening in Cupertino.

Other things are at play, too – unemployment is better, Apple stock is trading at $600 per share, and of course, there are IPOs happening on the Peninsula and in the South Bay.

How is this different from the seller’s market we’ve been in for the last few years?

It is true that it’s been a seller’s market for awhile here, but it was a seller’s market with soft or even falling prices.  Buyers were willing to buy as long as the prices were so low that they hurt.

Now the shoe is on the other foot.  Almost overnight, it went from a seller’s market with soft pricing to a seller’s market with rising prices, and in some areas such as 95129 with Cupertino schools, it’s dramatically rising prices.  Really not the same thing, though the following chart might mislead you into a complacent sense that nothing has really changed.  That would be a mistake.

 

Every market is good for someone. Right now, it’s good for sellers, especially if they are selling and moving out of the area. But many sellers continue to wait, hoping that in a year they will sell for much more.  They may well be right.  Meanwhile, the dire shortage of inventory combined with buyers who’ve been sitting  on the sidelines for years waiting for prices to quit falling have all jumped in at once.  It’s been like this before – it was like this in the late 80s when Jim & I were trying to buy our first home, and a decade later when we did our move up.  We saw craziness in 2000 and again in 2006-2007.

The risk, of course, is that in this overheated market, what we really have is another bubble.  It’s certainly possible but one never knows when it’s happening if that’s the case or not.   To those sellers who want to wait, please understand that this can be a risky game. It’s very hard to time the exact top or bottom of the market.  If you are ready to move, analyze everything.  What you hope may be the sales price in a year may or may not be there.  It could be better than today, it could be worse.  My sense is that it is likely to be better but we don’t ever know what’s around the corner.  If you are thinking of selling now, the opportunity is fantastic.  Call or me if you’d like to discuss your plans and hopes.  I’ve been selling homes since February of 1993 and know the ups and downs of the market in Silicon Valley.

Mary Pope-Handy, Realtor

Working with home sellers and buyers in Santa Clara County
and focusing on the “West Valley” areas of Los Gatos, Almaden, Cambrian, Saratoga, Willow Glen, Campbell, Cupertino, Monte Sereno, Santa Clara, and other parts of San Jose and the rest of Silicon Valley

Sereno Group
408 204-7673
mary (at) popehandy (dot) com

Tags: low inventory, mary pope-handy, overheated market, Real Estate Trends, Realtor, rising prices, Santa Clara County Real Estate, silicon valley, Silicon Valley real estate, update

This entry was posted on Sunday, April 15th, 2012 at 8:04 am and is filed under Market Reports, San Jose (all areas). You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.