With the massive housing correction, we saw a rise in real estate inventory which has now begun to subside, and we saw a wave of short sales and bank owned properties begin to roll through Santa Clara County.  In the “West Valley” communities of Los Gatos, Saratoga, Campbell and Cambrian Park, we have seen the impact of this to varying degrees.

Today I pulled the numbers for these four areas of Silicon Valley to see this history of inventory and pending sales over the last six years to get a year-over-year view of the market.  (Status 1 = homes available, Status 2 = homes under contract with a seller’s contingency, they might be available, Status 3 = sale pending with normal contingencies on the buyer’s side for inspections, financing, and/or appraisal, and Status 4 = all contingencies have been removed.)

What do these numbers reveal to us?

As you probably realize, the larger the inventory, the more of a buyer’s market it is, meaning it is a more ideal time to buy generally.  Buyers usually do not buy in a buyer’s market, though – which is why the inventory is so large.  Most wait until it’s swung into a seller’s market, when the panic of rising prices and/or rising interest rates gets them “off the fence”.   Our now shrinking inventory tells us that the market has shifted into the sellers’ favor in many areas and price points (not all).  That doesn’t mean that prices are where sellers want them – only that buyers cannot wait to get a good home and will not get the sellers to do all the repairs, as most would have done in 2009 or 2008. Many homes are now selling strictly “as is”.

Another interesting number to track is the “status 2″ figures, which are homes under contract but with a contingency on the seller’s side.  In years gone by, this would normally reflect a “contingent offer”, meaning that the sale was subject to the buyers being able to sell their home.  You can see that usually this is a very tiny fraction of the homes which are sale pending.  In recent years, though, that number has gone through the roof.  Almost all of them now are short sales, and the seller’s contingency is for bank approval & seller’s acceptance of the bank’s terms for the short sale transaction. The seller can back out of the deal with this type of sale. 

Most of the short sales are happening in entry level priced homes, but no part of the San Jose area is now immune.  Of these four parts of the west valley, Cambrian is the most affordable – and it has the most short sales.  Saratoga is the most expensive of them – and it has the least.   Short sales are now closing more than they did in the past, but are still not something you can count on.  Short sales may take 3-6 months to close, or perhaps will not close at all.

Also noteworthy is that the pending sales in the more expensive areas of Los Gatos/Monte Sereno and Saratoga are up from last year.  These parts of the valley have been slower to get busy and it’s encouraging to see the activity finally pick up there. Part of it is no doubt due to an increase in the number of distressed sales, but also some luxury homes are selling too.

Inventory overall is about normal in Saratoga and Cambrian. Campbell and Los Gatos are a still bit high.  If you’re selling a home in Campbell or Los Gatos/Monte Sereno, pay attention to the inventory of homes similar to yours. If your home is simply priced “similarly”, it probably won’t sell. Yours needs to be a “good deal”, which is what buyers are all searching for these days, in order to sell.   Highly motivated? Make sure your property is priced aggressively enough that it’s in the bottom 20% of similar homes and that should get the attention and traffic that will lead to a sale. 

For Saratoga and Cambrian Park home sellers, you can be a little less worried but if you still want or need to sell, make sure your home is priced in the bottom half of similar homes, ideally in the bottom 30-40%. 

Home buyers, remember that while many homes in all of these areas are not selling, the well-priced ones are going fast and often getting multiple offers. 

Can you still get a “good deal”?  A normal 20% down offer will be where the balance is for most home buyers.  Most sellers will give you preference if you have more cash down, but it’s not going to be a 10% discount (probably closer to 3%).  If you are a buyer using FHA financing, please understand that most sellers will not be super excited about your offer because of this so you will probably need to pay more than someone with 20% down to get the same house.  The terms and price work together – if your terms are great, your price will be better (lower).  If your terms are not great, your price will be worse (higher).  It is crucial to factor this in realistically when bidding on homes for sale in Silicon Valley: cash is king – the more you have, the better a deal you will likely get.

The tide is turning for Silicon Valley real estate: fewer listings are coming onto the market and more homes are being purchased by homebuyers anxious to get into a house before interest rates rise and the $8000 first time homebuyer’s credit expires.

The shift is most visible in areas with the most affordability, but even is more upscale, higher priced areas, it’s still a noticeable change.

Today I’ll share with you a series of graphs, by area, of single family homes in terms of new listings, current inventory, and pending sales (sales under contract).  These were created using our mls system (information deemed reliable but not guaranteed).

Here’s the “key” (since if I put it alongside each image it would not fit without making all of it unreadable):

Description of each graph is ABOVE the image.

Almaden Valley (95120 area of San Jose) - this is a more expensive part of Santa Clara County, but the market improvement is very clear. Cool market.

Blossom Valley (95123 and 95136 zip codes, an area of San Jose) – this is a very affordable part of Silicon Valley and has taken a huge hit on the “price rollback”.  But it’s getting better now – note the rise in sales, low number of new homes coming on the market and overall lessening of inventory. Number of pendings is almost the same as the total inventory. Hot market.

Cambrian Park (95124 & 95118 area of San Jose) – trends among listings, inventory, and sales for single family homes. The trend of less inventory and more sales is quite evident. Warm market overall – very hot under $500,000, cool in higher price ranges. (But hot only if prices are deeply reduced.)

Campbell (zip code 95008) – sales are up, new listings are declining, overall inventory is getting absorbed.

Cupertino – upscale Cupertino has improvement with numbers of sales and new listings are dropping off a bit, resulting in a slight trend change.

Evergreen – the Evergreen area of San Jose is a mix.  Parts are very expensive and some are very middle-class or entry level. This is one of the most dramatic change in available inventory anywhere in Santa Clara County. New listings are nearly non-existent and there are nearly as many pendings as there are available homes. The “good odds” and low level of oncoming listings probably has a lot to do with the deep pricing cuts there.  Many sellers would rather wait then sell now. Very warm to hot market in lower price ranges.

Los Gatos (area “16″ which also includes Monte Sereno) -  The same trend can be seen for increased numbers of sales, but on a lesser scale. If we were to break this down by price point and school district, though, we’d find that there’s a big difference from place to place within Los Gatos. There are many “micro markets” in the town. Biggest challenge: overpriced homes that aren’t selling because the buyers simply won’t pay that much today for most of the homes on the market. Cold Market

Monte Sereno is a very pricey part of Santa Clara County.  With just about 4000 residents, it is often viewed the same as Los Gatos but it’s a bit more expensive. Overall inventory is declinging, but sales are not robust and new listings keep coming.  Homebuyers, if you ever wanted to buy in Monte Sereno, now’s the time!  Cold Market

Santa Teresa – entry level area of San Jose – more affordable homes, better price cuts – homes are selling. Market is hot!

Santa Clara -Santa Clara is a middle class city in the heart of Silicon Valley, with a diversity of areas, housing types, and price points from entry level to mid-range. It’s a good guage of how the valley’s doing as a whole.  In the graph below, it is very clear that pendings are increasing (yellow), total inventory is decreasing slightly (orange) and new listings are not running rampant (red). This is fairly reflective of Santa Clara County as a whole. Overall market in Santa Clara is cool but improving.

Saratoga – like Monte Sereno, this cute city by the foothills is not for thin pocketbooks. While prices haven’t been pulled down severely, the numbers of sales are way down and new listings are still fairly high. Inventory is not being absorbed too well.  Of course, if prices would be dropped a bit, sales would pick up, but many sellers are hoping to wait it out.  Cold Market

Willow Glen – this quaint part of town features homes with a wide variety of styles, from those with unique, craftsman, Victorian, Spanish, mid-century modern or historic architecture to small bungalows and ranchette homes. Except in lowest price ranges, market is cool but improving.

In conclusion, the “Silicon Valley Real Estate Market” varies from place to place and price point to price point, but the overall trend is improving in terms of the number of sales and overall supply/demand.  It’s really a split market, though. The lowest priced homes that are cute and priced well are flying off the market with multiple offers.  The higher priced homes that are “testing the market” are just sitting.  The lowest priced homes are now being driven UP, but the highest priced homes, in most areas, are still being pulled DOWN.