San Jose’s Cambrian, or Cambrian Park, area is a very hot seller’s market.  Multiple offers are not uncommon, especially in the Union School District, where schools are trending upward.  My Cambrian Park Real Estate Report has just been published with the updated numbers from the closed sales in April. Please click on the link to see much more information there.

Prices are up nicely year over year! Inventory is crazy low – just 35 homes for sale in April compared to 57 in March and 84 in April 2011. Days on market is far lower too. All around, it is a deepening seller’s market.

Even stronger is the Cambrian condo market, which is skyrocketing!!!  Please see the Cambrian Condominium & Townhouse Real Estate Report for all of the numbers, but I’ll include a quick summary below.

Here again, notice the ratio of active to pending homes, the sale vs list price (over 100%), and most of all, the tremendous rise in both the average and median sales price.  Few homes closed escrow in February, so it is possible that these numbers are a little exaggerated.  We will know more in a month – if it’s a trend or if this is a fluke.

Now let’s work with Altos Research’s graphs and get a feel for the Cambrian realty market in “real time”.  These use list prices, whereas my REReport uses sold data.

First, the statistics by quartile for houses in San Jose 95118:

Next, the stats and trends by price quartile for houses in San Jose 95124:

Median list price of homes for sale in 95124 and 95118 (all quartiles combined):

Very interesting that the 95124 pricing appears to be swinging upward while the 95118 pricing continues to go down.  I believe that this is mainly because the schools in 95124 have been trending upward strongly with the API scores.  Prices are also at a higher level, and those are less impacted by short sales and REOs countywide.  So it may be the result of multiple factors.  (95124 is about 2/3 of the Cambrian real estate market.)

Inventory in Cambrian area of San Jose 95124, 95118:

Surprising, isn’t it, to see how differently these two San Jose zip codes are behaving from each other?

Average days on Market in San Jose’s Cambrian area

And again, really different trends on these neighboring zips, both in Cambrian!

Another anecdotal story to share: Recently I closed the sale on my listing at 5114 Nerissa Way in Cambrian with Union Schools and Alta Vista in particular. We were listed at $579,000 and received 4 offers and sold at $585,000. Interestingly, we received 2 nearly identical “best” offers, both at $585,000. One was completely As Is and the other was almost As Is (they wanted a fumigation and pest clearance provided).  That is usually a pretty good affirmation of market value, and the property did appraise at the sales price.  The other two offers we got were below list price.  One was all cash and it was extremely low.  Buyers who are purchasing without financing sometimes misunderstand the type of discount that their all-cash status will get for them, so sometimes the worst offers are all cash and that was the case this time.

Want more info on your neighborhood, your house, or your target home to buy? Please call me!

Showing properties 1 - 5 of 35. See more 95124 zip code real estate.
(all data current as of 5/24/2012)

1. $699,000 : 2757 Theresa Ln, San Jose
   
   3 beds, 2 full baths

   Home size: 1,563 sq ft

   Lot size: 8,580 sqft
   
2. $699,000 : 1898 Kay Dr, San Jose
   
   3 beds, 2 full baths

   Home size: 1,331 sq ft

   Lot size: 7,062 sqft
   
3. $1,299,999 : 14904 Leigh Av, San Jose
   
   4 beds, 3 full, 1 part baths

   Home size: 3,340 sq ft

   Lot size: 10,125 sqft
   
4. $682,950 : 3591 Gavota Av, San Jose
   
   3 beds, 2 full baths

   Home size: 1,600 sq ft

   Lot size: 7,500 sqft
   
5. $1,180,000 : 1777 Kirkmont Dr, San Jose
   
   4 beds, 2 full, 1 part baths

   Home size: 2,306 sq ft

   Lot size: 8,249 sqft
   

Listing information deemed reliable but not guaranteed. Read full disclaimer.

Showing properties 1 - 5 of 23. See more 95118 zip code real estate.
(all data current as of 5/24/2012)

1. $670,000 : 4241 Ranwick Ct, San Jose
   
   4 beds, 3 full baths

   Home size: 2,199 sq ft

   Lot size: 5,000 sqft
   
2. $785,000 : 3339 Beacon Ln, San Jose
   
   3 beds, 2 full, 1 part baths

   Home size: 1,952 sq ft

   Lot size: 6,784 sqft
   
3. $998,000 : 5715 Mireille Dr, San Jose
   
   4 beds, 2 full, 1 part baths

   Home size: 2,000 sq ft

   Lot size: 6,566 sqft
   
4. $649,000 : 1373 Adobe Ct, San Jose
   
   4 beds, 2 full baths

   Home size: 1,966 sq ft

   Lot size: 8,800 sqft
   
5. $499,500 : 5576 Dwight Av, San Jose
   
   3 beds, 2 full baths

   Home size: 1,401 sq ft

   Lot size: 6,000 sqft
   

Listing information deemed reliable but not guaranteed. Read full disclaimer.

Browse lists of Cambrian & Cambrian Park homes for sale:
Houses for sale in the 95118 part of Cambrian
Cambrian Park Houses for Sale in 95124

Mary Pope-Handy, Realtor, CRS, ABR, e-PRO, SRES, ASP, CNHS, ACRE
Helping Nice Folks to Buy & Sell Homes Since 1993
Co-Author: “Get The Best Deal When Selling Your Home In Silicon Valley”
408 204-7673 (Cell)
emailto: Mary (at) PopeHandy.com
Blog: www.LiveInLosGatos.com & www.ValleyOfHeartsDelight.com

How’s the real estate market in San Jose’s Almaden Valley? Commentary and statistics…..

It’s actuallya lot hotter than the numbers for the Almaden closed sales in February might indicate; the last 2-3 weeks have seen a heat-up the likes of which I have not seen since 2000. Many properties are selling fast, sometimes with multiple offers.  We are experiencing this trend throughout the west valley areas: Los Gatos, Saratoga, Cupertino, Palo Alto and on up the Peninsula.  These multiple offers are pushing prices higher. In many cases, it is much higher.  I’m seeing some overbids of more than $100,000 in some cases as well as offers with no contingencies for loan or home inspection. Listing agents sometimes write in their private MLS comments for other agents “no pre-emptive offers“.

What’s driving it?  There are years of pent up demand in which would-be home buyers sat on the fence, either because they expected further price drops or because, in the case of move-up buyers, they didn’t have enough equity to budge.  With record low interest rates and prices creeping up – combined with an infusion of cash from high tech employees with either great stock prices (Apple) or an IPO (LinkedIn, Facebook, Yelp, and more), there’s the classic case of more demand than supply. 

Almost every offer I’ve been involved with over the last month has been a multiple offer situation, whether in south San Jose, Blossom Valley, Cambrian, Los Gatos, or Saratoga.  Prices from $400,000 to $1,800,000 – all at least 5 offers, sometimes far more.  As Chris Trappani, the CEO and founder of Sereno Group says, “we’re seeing it now – the papers will report on it in a month”.

Stats for the Almaden real estate market for houses in February 2012 (click on link to see more info):

Note that the median sales price is up almost 15% from January and the average price rose 7% month over month. Year over year it’s not so good but from what we are seeing, it’s unlikely to look like this when the March 2012 numbers roll in.  Also note the jump in pending sales and the lower number of actives – less inventory, more absorption.

Real estate market conditions advisory

This week I’m having a deja vu from 2000.  If you were here in Silicon Valley then, during the “dot com boom”, you remember a frenzy with the hot sellers market, of home buying with multiple offers, and prices rising rapidly.

In some parts of the market, it’s back.

One of the ugly parts of that market is back too, the “non-contingent offer“.  I’m not talking about offers subject to the sale of another home (aka “contingent offers”). I’m talking about home buyers waiving their inspection contingency and their loan & appraisal contingencies.  (Not clear on home buyer contingencies? Please see my article: “Competing against multiple offers: contingencies and timeframes“.)

Listing agents know better than to give a counter offer demanding a non-contingent offer; that’s a lawsuit waiting to happen if the buyer feels coerced and later gets some sort of nasty surprise. But boy oh boy, do they know how to hint that it’s what they want.  And that’s not a lot different from demanding it.

Silicon Valley home buyers are given many disclosure and contract papers to sign when submitting their bids to purchase residential real estate.  It is important to read and understand them and the risks about which they warn.  One disclosure which is used – or should be used – on most every transaction is the “market conditions advisory“, which warns of risks in multiple offers and some of the ways that buyers may try to have the winning bid that may not really be a good idea in the long run.  The full name of the form is this:

ADVISORY REGARDING MARKET CONDITIONS,
MULTIPLE AND NON-CONTINGENT OFFERS,
FINANCING/APPRAISAL AND PROPERTY CONDITION

This entire 2 page form is worthwhile reading & comprehension, but let me bring just a couple of points forward about non-contingent offers:

“. . . a Buyer whose offer is fully “non-contingent” – - wherein all contingencies
are waived – - foregoes important protections. Among these is the right to cancel the contract based
upon an inability to obtain financing or upon a post-acceptance discovery of serious physical defects
and other problems. It is important to note that the discovery during escrow of previously unknown
defects does not (absent fraud) create for the non-contingent Buyer a new right to terminate the
contract.”

So with non-contingent offers, there’s no backing out without risking the entire initial deposit, which normally is about 3% of the purchase price.

How risky is it?  That answer depends in large part on how much information the home buyer is provided up front.  How thorough were the pre-sale inspections?  Are there any major red flags noted, or important further inspections recommended – such as a foundation or drainage inspection?  The form states:

“Risk factors vary in each transaction and must be thoughtfully considered in
each case. For example, where a non-contingent buyer has access to a seller-provided pre-sale
disclosure “packet” containing essential inspection reports produced by reliable, reputable professionals,
the risk to that buyer regarding those issues is far lower than it would be where no inspections have
been undertaken at all. The latter involves maximum risk, and is strongly discouraged by Broker.”

For San Jose area home sellers who would like to receive a non-contingent offer, the odds are increased if you do thorough pre-sale inspections: home, pest, roof, chimney, and possibly others (pool or?).

For home buyers, you need to be aware that other motivated consumers may be throwing non-contingent offers into the pile, and it can be a game changer in multiple offer situations.  The more homework you do upfront, the more carefully you read the disclosures and inspections prior to putting a contract on the table, the more comfortable you may be swimming in this sea of sharks.  Personally, I cannot recommend a non-contingent offer and I don’t think that I would ever do it myself.  But in some cases, unfortunately, that may be what it takes to beat the competition right now.  That’s a personal choice you will need to make should you be up against a lot of multiples.

The Santa Teresa area of San Jose is enjoying a hopping real estate market with the number of pending sales suddenly going through the roof! (Stat below care of Altos Research, to which I have a subscription. List prices are used.)

Homes in this part of south San Jose are often selling over list price as inventory drops. The days on market appears slow, but a lot of homes that have been “just sitting” on the market are now selling.

The great rush in Santa Teresa is, of course, in response to the list prices, which have been falling steadily in most areas – and making for incredible bargains.

Here are the August sales stats for our MLS “area 2″, Santa Teresa (per the REReport, also a subscription, which uses closed sales):

With more pending sales than active ones, you can see that most houses are now selling and the pace is quickening.  A major player in the market conditions of this part of San Jose is the situation with distressed properties: foreclosures, short sales or homes sold under pressure as they’ve got a notice of default on the property.

How big an impact does the REO or short sale label have on a home’s eventual sales price? How much more or less will a home sell for based on the situation as a “regular sale” or “bank owned” or “short sale”?

Buyers are voting with their wallets. Uncertainty causes buyers to be unwilling to pay top dollar. In some cases, the bottom of the heap is short sales – because the condition is less known (there are no pre-sale inspections) and even more, because the time in which the bank eventually responds, if ever, is likewise unknown. In other cases, REOs sell for the lowest amount because the condition of the home may be especially poor. Some REOs are “stripped”, with whole kitchens missing, trim missing etc. I recently visited a Willow Glen REO that even had a missing shower head in addition to the water heater, kitchen appliances, and windowsill.

Regular sales DO sell for more. How much more? Here are the numbers, which may surprise you. I looked at both 95119 (which is most of “Santa Teresa”) but also our MLS “area 2″, looked at pendings (which reflect list prices), solds in the last month and solds in the last 3 months.

Most regular sales are not only unpressured, but there are pre-sale inspections and often work done to put the home into good shape for the sale. So buyers know that they are getting a solid house with a regular sale.  They know that they will get disclosures completed by the sellers.

The numbers above display a wide range of prices per square foot, but in all cases, the distressed properties are selling for less than regular homes.  In some cases the difference in the average price per SF of the solds is double digits.  Among the pending sales, the list price is 10 – 18% less than amoung short sales or bank owned homes.

The widest gap for the average sales price is about 20%, but if we looked at individual sales we’d find some lower and some higher than that. The worst ones will be abused houses, and the best ones will appear almost like a normal sale, but perhaps a bit dirty.  One of the problems with the “auto comp” sites is that they don’t factor in these conditions, which have such a giant impact on a property’s value.

What is a home really worth? Usually it’s what an informed buyer will pay for it.  In Santa Teresa, as in other parts of San Jose, informed buyers are scooping up bank owned homes and short sales, but only if they’re getting a sizeable discount.  Aggressively priced, well staged and marketing “regular sales” are getting top dollar here and throughout Silicon Valley.

“How long will it take to sell my home?” This is a perenial question among home sellers in Silicon Valley. Real estate professionals can look at the statistics and, when experienced and active in your local market, tell you what they believe will happen based on the absorption rate and days on market numbers.

We know that the national average is that for approximately every ten showings, a home should get an offer. It may or may not be an offer that results in a sale. Today’s market in the San Jose area is more sluggish than usual, but homes are still selling in many areas within a month if all is right when it’s offered for sale. One thing is for certain, though, and that’s that sellers have to see offers to be able to sell a home, and there are no offers if there’s no qualified traffic.

What kind of traffic is good enough? Three showings a week is decent after the initial flurry of a new listing. There will be more visitors to your property in the first week or two, both in regular showings and in open house visitors who are serious about buying. If you are not getting three showings a week (and it’s not a major holiday, a heat wave, or something along those lines), you have a problem. There are three most likely culprits to the problem: price, conditon, and marketing.

The feedback from showings and open house visitors is of key importance and will help you and your agent to understand the public’s reaction to your price and condition. Agents can ask (without being pushy) questions about how the buyers think or feel about the home. Or ask their agents. (I use a system called HomeFeedback.com that requests feedback by email with a very short 5 question survey. Normally I get about a 65% response rate from agents.) When most of the consumers or agents tell us “the home is dated” or “it needs too much work”, we know it’s an issue. Or perhaps the home is turnkey, but is priced 10% too high. Sometimes the condition issue is fixable but sometimes the only way to address it is in lower, more attractive pricing (when huge renovations appear to be necessary or there’s a time or money issue for the seller).

A very clear indicator of a problem, besides lack of showings, is when there are drive bys with no stopping – not even to get a flyer out of the box. A lot of those indicate an issue with either condition or price or both. A good place to begin addressing this is curb appeal, in that case. If the home isn’t sharp looking from the street, those buyers may never go in at all!

To uncover marketing issues, use your computer, not the newspaper (print ads have a very very low rate of actually helping to sell a property). Start with the multiple listing, because it is the MOST IMPORTANT. What does the MLS printout look like? What do the comments say? Is the buyer’s agent offered a competitive commission? (I once saw $1 – one dollar – offered.) Are there plenty of photos? How about a virtual tour or video?

Beyond the MLS, where is your home being advertised online? What happens if you Google your home’s address? Right now I have a listing in Los Gatos which is a pending sale. When I go to Google and type into the search bar “120 Magneson Terrace”, I see that there are 120 results. One of the best things about this listing of mine is that it’s a short distance to schools and shops. Again at Google, if I type in “Los Gatos close to schools” (but no quotation marks), 3 of the results on page 1 of Google are for this listing of mine (I have several sites).

If your home is being aggressively marketed and the condition is great, there’s only one thing left to blame for a home not selling, and that’s price. Every location and market is a little different from each other. Silicon Valley is composed of many micro-markets. Even within San Jose’s beautiful Almaden Valley, there are smaller markets. The Oak Canyon neighborhood may be performing very differently from the Graystone community, and they are likely to be extremely different than the rural and sometimes remote communities closer to Mt Umunhum. So when analyzing price, be sure to look at recent, local data of homes most similar to yours. Looking at sales from more than 3 months ago will not be helpful now – the market in Santa Clara County has changed since then.

What if prices are dropping? In places where values are falling, which is most of Silicon Valley, it is important to get ahead of the curve if you’re trying to sell your home now. Let’s say you have a home worth $700,000 and in your exact part of San Jose, prices are falling at the rate of 2% per month, more or less. In areas where this is happening, there are many more sellers than buyers. Perhaps only 8% of all homes are going to sell at all (this is just a fictitious example). How do you get your home into that 8%? First of all, you have to be priced in the bottom tier of available inventory. You have to be priced lower than most of your competition. If only 8% are selling, it would be wise to price your home in the bottom 5, 10, or 20% (depending on your home’s condition and other factors that cannot be generalized here). To price your home in the top half of the market is very likely not a good idea.

So back to our example of the $700,000 San Jose house. If it stays on the market for 6 months, at the end of that time, assuming that prices continue falling at 2% per month, where would the value be? It would be about $620,000. Obviously that would be a very expensive mistake to make, allowing the home to take 6 months to sell. But if you get ahead of the curve and market your home for 30 or more days from now’s price – put it at 2-4% less than today’s perceived value – you are more likely to sell now and not be part of the 92% of all homes that aren’t selling but simply continue to decline in value. It’s a matter of “cutting your losses” as it were.

In summary, if your home will go on the market soon and you are concerned that it won’t sell OR if your home is on the market and is not selling, there are a few key things to consider. Here are some questions to use in studying your situation.

(1) First, how is your home’s local market? – that is, what is happening in your neighborhood, your price point, your type of home? The luxury homes in Monte Sereno, Los Gatos, Almaden or Saratoga will not really be the same “market” as a condo in those areas, so it’s more than just geography. A modest but remodeled ranch style home that’s a few blocks from schools may be an entirely different “market” than the very unique home in the same pricepoint. If you have a view home high on a hill with acreage, don’t use recent sales activity in the flatlands as any kind of comparison, even if the home’s square footage and price point are similar.

Are there really no “comps” for your type of home? Hire an appraiser, especially if you have a luxury home or something which makes your home very unique, whether in terms of architecture, location, history, or amenities.

(2) What kind of traffic are you getting or seeing in similar homes? Where is it coming from? It is important to understand what buyers are considering your home so that you can learn if there’s a need to work that segment more or if perhaps there are groups that are just not aware of your home, but should be. How can your home appeal to a wider pool of potential buyers?

Some sellers of townhomes or condos are paying for a year’s worth of HOA dues to make it financially easier for the buyers to get their foot in the door. Some sellers are doing “carrybacks” with the financing – perhaps letting the buyers pay back 5% or 10% over a period of years to the seller rather than getting all of their financing through a lender.

(3) What is the feedback from the agents and the consumers about your property’s condition and pricing? In a sellers’ market, you can “tell” the agents and the buyers what price you want. But in today’s market, sellers need to listen. The home is only worth what the buyer will pay for it. If the agents think your home needs work or is overpriced, you’re going to need to “sell” your home to them first. Saavy buyers do not buy homes when the agents suggest otherwise.

If your home is vacant and stark, professional staging with furniture can help. Even adding colorful or attractive curtains to bare windows can be a huge help. Sometimes small tweaks can make a huge difference. Is your home priced at $1,025,000 and not moving? Perhaps getting it just under the price point, setting it at $998,000, will do the trick. Getting drive bys? Maybe your home needs fresh landscaping and a new driveway, or perhaps a new roof. A home that’s gorgeous inside will never be seen if the outside puts the buyers off. Ask for the feedback, and act on it.

The last alternative, of course, is to just wait out the market, if you are a seller and you don’t really need to sell now. The market is always changing and eventually it will be a sellers market again. No matter when you sell your home, though, real estate homebuyers will always look critically at your property’s condition and pricing, and the traffic to your home will still be impacted by marketing, so these three crucial areas will be important to you no matter when you sell or how the real estate market is performing. And this is true whether you are in Silicon Valley or anywhere in California or the U.S.

Broderick Perkins of Deadline News lays out what is going on with our split Silicon Valley Market in his article Silicon Valley Haves-Have-Nots Rift Widens.

The article matches my experience that the wealthier areas of the valley (mostly in the west side communities of Los Gatos, Saratoga, Cupertino, Sunnyvale etc.) have low inventory and multiple offers and prices are rising, wheras lower priced housing on the eastside is much more of a buyer’s market.