Today the San Jose Mercury News ran a story (”Million-dollar home sales plummet in California“) about the falling numbers of high end home sales in California, which are down statewide about 43%.   Here in Santa Clara County, million dollar plus real estate sales were down a milder but still quite noticeable 34% in 2008 as compared to 2007, with just 3055 such transactions.  That number is the second highest in the state for numbers of sales of homes over one million dollars, behind only Los Angeles County.

It’s not surprising that there were so many sales in this arena of move-up to luxury homes. Neighborhoods such as Silver Creek, Almaden Valley, Los Gatos, Monte Sereno, Saratoga, Cupertino, Los Altos and more all feature fine homes & neighborhoods and their matching elevated sales prices.  What is perhaps not helpful, actually, is lumping everything over $1,000,000 together. There is an enormous difference between what one million dollars will buy in Silicon Valley versus what three or five or more million will buy. The million dollar home in Silicon Valley is not a luxury home or an estate - often it’s just a solid home in a good school district (and sometimes not even that - it is sometimes a tear down in a good school district).

What about the high end housing market in Silicon Valley?

So what is happening among those sales of homes over one million dollars here?  Are prices falling, holding, or rising among Silicon Valley’s more expensive homes?  As always, it varies by location, price point, school district, land, views, and so on.  Today we’ll have a look at Saratoga, and we’ll consider list prices among Saratoga houses by quartile, since often the luxury or estate market does not behave in the same way as the more affordable market. Most of Saratoga’s houses are worth over a million dollars, but not all of them are luxury or estate properties.

Before diving into the discussion on the Saratoga real estate market, though, I would like to make a cautionary statement about statistics, charts and graphs. Depending on where or how you focus, the information could appear to be twisted one way or the other, seeming either innocuous or doomsdayish.  I will show some of this information independently and relationally (with 4 price points showing, with shorter and longer windows of time), and you’ll see that it’s good to have a look at the information from several angles to get the most complete picture of what’s happening.

With that disclaimer, let’s have a look at the Saratoga real estate market. First, the Median List Price among Saratoga single family homes over the last 30 days only as divided by price quartiles (4 pricing segments of the market).

 The above graph looks like not much is happening. What happens if we expand the timeframe beyond 30 days? Let’s have a 12 month view next.

Now we see more movement, at least in some pricing segments. Combine the quartiles and narrow the pricing field, and suddenly the change looks far more dramatic still, even chilling if you’re a home seller.

Of course the reason for the drama is that in early graphs, we were looking at a span of about five million dollars, but here we’re zooming in to a view of about three hundred fifty thousand dollars in pricing swings. Both are “true” but it’s easy to be misled if looking at just one or the other.

What does appear to be happening is a falloff on the list prices of homes in Saratoga. How much is it? It appears as if from last year this time prices may have risen about 10% from the starting point, fallen back to the point from a year ago, and continued to fall another 10% or so. 

How does it look given a broader timeframe?  Here’s a view of the median list price in Saratoga houses since January 2005, all price points combined.

If we break it down by quartile (four pricing segments)…

By showing a very wide range of median list prices (up to about $5,000,000), it may be possible to get a false sense that “it’s not that much of a change”. So just for clarity, let’s look at a these price points individually.

(1) Highest Priced Quartile of Homes in Saratoga - List Prices

These sales represent luxury real estate - homes are often on an acre or more, sometimes with views, possibly equestrian property,  not infrequently new construction or total remodels.

(2) Second Highest Priced Quartile of Homes in Saratoga - List Prices

Saratoga homes priced at two to three million dollars often sit on large lots (half an acre or more), enjoy perhaps three thousand square feet, are usually nicely remodeled (or have either a lot of land or an otherwise exceptionally good location) and feature the Saratoga School District in most cases (though there are spacious homes on large lots in the Parker Ranch area that have Cupertino Schools, and they may be in any of the upper price points for Saratoga). 

(3)  Lower Middle Quartile of Median List Prices of Saratoga Homes

These Saratoga homes represent the segment of the market just under the middle price point for this upscale city and are usually between 2500 and 3500 square feet. Some will be in the Saratoga School District, some Moreland or Cupertino Schools.

(4) Lowest Priced Quartile of Saratoga Homes - Median List Price

Finally, the entry level pricing for Saratoga houses for sale - they tend to be smaller (1500 to 2400 SF or so), often on the border with Campbell, Los Gatos, or Cupertino.  Most of these homes are not elegant, but they are in very decent neighborhoods with solid schools.

 

Looking at these charts, and various configurations of them, it’s clear that list prices are trending downward in Saratoga and have been doing so (more or less) for awhile.  No price point is immune from this direction - all are impacted.

What next?

Usually the market activity picks up in spring, usually beginning after the SuperBowl - perhaps by the middle of February it’s started most years. I’ve circled in red the upward activity usually experienced in February, March and April in local real estate sales (these are all in Saratoga). Have a look at the graph on listings being absorbed:

So the question is this: will the regular pattern return this month or next? Will we see an uptick in home buying in Saratoga and elsewhere in the South Bay?

Our inventory usually follows a somewhat predictable, seasonal pattern. Most years, inventory rises from early spring to summer, usually peaking at around July 1st, and then falls off through the end of the year. Last year, though, we did not peak anywhere near July 1st. In fact, inventory in Saratoga (like much of Silicon Valley) continued to rise until far later into the year than normal. Have a look:

As you can see, we are beginning this new year with a fairly saturated market (meaning that we have a lot of homes on the market relative to the time of year). So that is a concern for home sellers, and an opportunity for home buyers.

How long does it take to sell a home in Saratoga these days?  Only two homes have closed escrow in the last month (both were under $900,000), and just thirteen are currently pending sales in Saratoga (and there are 115 currently available, so about one home in ten is selling and the rest are not selling).  Of the pendings, the average days on market (”DOM”) was 58 and the average continuous days on market (”CDOM”) was 112. So it’s taking the homes that do sell three to four months to sell.  For all homes currently for sale, the days on market are longer: DOM is 91 and CDOM 127.  Here’s how the graph looks:

As the graph makes clear, the days on the market worsened dramatically in early 2007 and have remained fairly challenging for most segments of the Saratoga real estate market since then, with some easing in the middle of 2008.

What IS  Selling in Saratoga, CA, right now?

Of the thirteen pending sales in Saratoga today, most range between one and two million dollars. two are between two million and 2.6 million, and three are between $700,000 and $900,000.  Other numbers:  average square footage 2303, average price per SF $609, average lot size a bit over 18,000 SF, and average list price about $1,375,000.

Are the luxury homes selling in Saratoga?

Over the last year, there have been 21 homes sold over $3,000,000 in Saratoga. The most expensive home to sell went for $6,250,000 and the next most expensive one to sell was at $4,600,000. There are 32 homes for sale with a list price of $3,000,000 or more in Saratoga as of today.  The most expensive is about $7.4 million, and the average list price of this group is $4,370,522.  The average days on market within this price range is 142 DOM and 170 CDOM.  So it is more difficult to sell the most expensive homes in Saratoga right now. That is often the case, though, relative to other price points because there is not a large pool of buyers for multi million dollar homes.  These buyers can afford to take their time and to be discriminating, and they do.

If you’d like information on buying or selling a home in Saratoga or anywhere in the west valley, please contact me for an appointment. I’ll be happy to provide you with market data specific to your wants and needs.

Tags: estate properties, high end housing market, luxury home market, market trends, Saratoga CA real estate

This entry was posted on Wednesday, February 4th, 2009 at 5:49 pm and is filed under Market Reports, Saratoga. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.