Sometimes the list price on a Silicon Valley home for sale isn’t at all what the listing agent or the seller is expecting in terms of a sales price.

Sometimes it’s closer to a lost leader – that is, it’s really only intended to get home buyers into the door. Lots of them. The idea is to create excitement, and hopefully a feeding frenzy with multiple offers.

Other times, of course, a house or condo in the San Jose area may be an overpriced listing. In those cases, it’s more like a “fishing expedition”. More like, “let’s see if anyone bites”. There are always a percentage of these on the market. When you see homes listed for 60, 90 or more days on the valley floor, most often the culprit is an inappropriately high price – and most buyers aren’t biting at that bait.

Right now, it’s a mixed market in Santa Clara County real estate. If you find a home you like, the next question is this: what’s it worth? And finally, what’s it worth to you? Many times, the best advice is to ignore the list price, if it’s a new home, and just do your homework on what the current competition is and what’s been selling.

You may find that the home you love is priced high, on the mark, a little low, or crazy low.

While it’s helpful to know what the average ratio is between list prices and sales price, that information can never substitute for market knowledge.  The most powerful figure to understand is the absorption rate or months of inventory (or days or weeks of inventory).  Six months of inventory is considered a balanced market.  The smaller the months of inventory is, the quicker the pace of the market, and the bigger a frenzy there is over good inventory. 

The other day I did a post on the micro markets of the Willow Glen real estate market and I specifically called out the absorption rate in varioius price points and school districts within the Willow Glen area of San Jose.  I have one client couple in Willow Glen who are thinking of selling their home.  In their case, they’re in The Willows area.  Most of those homes are worth more than the “jumbo conforming” rate of about $729,000, which puts it higher than where most of the buyer activity is happening right now.  Absorption rates for that part of WG, with San Jose Schools, is about 3 1/2 months. Not bad – it’s well under the 6 month marker for it turning to a “buyer’s market”.  But homes priced between $500,000 and $600,000 which have Campbell/Cambrian schools are selling about 3 times faster! The absorption rate for that segment of WG is only about 1 month.

When deciding how to price your home to sell or the offer price to make on a home bid, it is imperative to understand the market nuances.  Your real estate agent can run you the comps, and in fact can download them to a spread sheet so you can tweak the numbers by sale type and other factors.  If prices are rising or falling, you must factor that in, too.  Homes all getting 10 offers and each price selling higher than the last? You may want to consider jumping ahead in the trajectory.  Same if you’re selling and prices in your part of the market are falling.  Prices going down 10k per month? Then put your price under that limit to get your home sold.

There are no “easy answers” on pricing.  To pinpoint what it takes to buy or sell a home in Silicon Valley today, there’s no substitute for market knowledge, which means finding out how many offers homes are getting and if possible, the sales price, and for simply doing the math.  If prices are moving against you, it will cost you dearly to misjudge the market, so it is well worth the effort to get it right – hopefully the first time.

Today we’ll have a look at the Campbell real estate market. Sitting on the western side of Silicon Valley between downtown San Jose and Los Gatos, Campbell has small town charm with big city ammenities.  The schools are good, the crime is fairly low, and there’s a nice sense of community identity & participation. The downtown area is vital, but so are the shopping hubs outside of the historic zone.  The local parks are a big draw too.

Homes range from modest condos to historic properties and large, estate-like homes on big lots. Just about every type of residential architecture can be found here, with of course a preponderance of ranch style homes but also Eichler homes, Victorian houses, Craftsman style homes, Spanish or Mediterranean design, and Contemporary homes.

“How’s the market?” will elicit different answers by neighborhood, home type, school district, and price point.  We’ll separate out the “markets” by pricing quartile in this post.

First, an overview of listing activity among single family homes in Campbell (data from Altos Research, used by permission/subscription):

And now the same but for condominiums and townhomes:

Generally speaking, inventory is somewhere between flat and barely declining. List prices appear to be falling slightly among single family homes and rising slightly among condos (which are more likely to qualify for FHA loans and benefit from some of the first time homebuyer credits).  Nothing dramatic here, but the condo market may have already hit bottom while the market among single family homes is coasting there … almost there….

Visually, the median list price ”looks” like this when viewed over the course of the last year and both the conglomerates of single family homes and condos are shown (rather than broken down by price quartile):

These kinds of graphs and charts can be a little deceiving, though. The perception has a lot to do with which data you’re looking at. Below is JUST the combined “curve” for the median price of single family homes over the last 1 year.

Overall, pricing looks grim because of the rapid looking falloff on the chart. Take a look at the numbers, though. The median list price slipped from about $796,000 to $766,000, which is actually not a huge price change over he course of a year. (But please note that these are list prices, not sales prices.)

 View of Campbell Houses Median List Prices By Quartile

Now let’s see the single family homes broken down by quartile for the year. Below, the chart displays all four quartiles, each one representing 25% of the market. Interestingly, the top two quartiles look as though they haven’t lost much ground from one year ago, while the lower price points have slipped consistently.

All four quartiles shown together:

Somehow, taken together, the above chart does not seem so bad. But is that correct?

Next let’s pull out the market data on list prices one quartile at a time - one of the segments representing 25% of the market – to see how it looks.

(1) List prices of upper quartile (1st) of houses in Campbell:

On the whole, these top tier homes are not asking less than they were a year ago, but they are far less than at the beginning of 2009. (The question, of course, is whether these prices are causing sales to happen or not. In many areas, while prices among the most expensive haven’t slipped so much compared to entry level housing, the highest priced homes are not selling nearly as well either. A look at the very first image on this post will show that few of these homes are selling, with 22 homes available and only 1 pending sale.)

(2) Upper middle (2nd) quartile for the median list price of single family homes in Campbell, CA:

That appears more dramatic, doesn’t it? The real surprise is not today’s list price as compared to a year ago, but the spike upwards over the winter to early spring months. The year over year slippage is extremely minor.

(3) Lower middle quartile:

The lower middle quartile also took a beating, with the median list price diving from $755,000 to $690,000, close to a 9% drop year over year.

(4) Lowest or bottom quartile of list prices among Campbell houses:

This group looks dismal – list prices are down about $100,000 from $650,000 to $550,000 or about 15% lower – but it’s informative. It appears that listed prices really fell through the floor beween last fall and March (so using “comps” from prior to March is truly not helpful), but that the fall has been far more gentle since March first. Is the worst behind us?

What about the condo market?

I’m not going to pick apart the townhouse and condo market quartile by quartile, but if you have a good look at the actual numbers (and not just the dips in the lines representing the median list price), you’ll see that again the lowest price points have taken the largest hits with price drops, wheras the most expensive condos and townhouses in Campbell appear to be listing for more than they were a year ago.

So you get the idea – it’s not what “Campbell” is doing, it’s what your type of home and price point are doing. The lowest priced houses have come down the most, percentage-wise, on prices.

To further drive the point, let’s shorten the timeframe and instead of looking at one year, let’s take a 90 day view. Next, see the median list price for ALL single family homes in Campbell over the last 90 days.

And now  see  the median list price for ALL Campbell (95008) condos in just the last 90 days.

Back to houses now – Divide these into quartiles and it’s a bit messier (no “easy answers” for home buyers or home sellers!). Suddenly it looks like there’s NO change going on. How can that be?

Let’s pull just one of these out – again, just to make the point. For this example we’ll use the 2nd from the top (upper middle). With the above chart, we can see that there’s a gentle downward slope (orange line).  If we look at it by itself, how will it seem then?

Here it’s very, very clear that the market needs to be micro-analyzed to get pricing right. The chart above this one implies a “nothing” change among list prices in this quartile of houses in Campbell. But look closer and there’s a drop of several percent (almost 875k to 840k – about 4%) over the last 90 days.  Being off by 4% can mean the difference between your home selling and not selling because it’s overpriced (or leaving money on the table if it’s badly underpriced).

There are endless stats on Campbell’s real estate market, including days on market and inventory as well as pricing. While the overall market may be “flat to mildly declining” among houses overall, and “rising gently” among condos generally, it’s all a matter of which market segment you’re viewing and what timeframe.

To get the pricing right for the home you want to sell or buy, it is crucial to understand what your particular part of the market is doing. The point of this post is to give both an overview of the Campbell real estate market in terms of list prices but also to make it clear that a lot of data tied specifically to “your market” is key to understanding how to price your home or what a home you want to buy may now be worth in that market’s climate.

This post is not comprehensive – we have looked only at list prices, not at inventory levels, days on market, absorption rates, sales prices, etc.

Please contact me for more assistance with your own particular needs in buying or selling a home in Campbell, San Jose or in the west valley areas of Silicon Valley.