Absorption Rate

Cambrian Park Plaza SignThe months of inventory for any part of the real estate market can vary, depending on many factors, including age of home, house size, lot size, and school district, whether or not there’s a pool, and many other things. It can be very useful to understand this metric when selling a Silicon Valley home. I’ve done market numbers crunching tied to the specific characteristics of a property (say, small yard with pool or big yard with no pool) to find the impact of those characteristics on the probability that a home will sell – or how fast.

The Cambrian area of San Jose is a very “hot market” overall, but it can be confusing to know how hot it really is, just like the rest of Santa Clara County, because there are multiple school districts – and schools are probably the number one driver of home values in this highly educated valley.

An explanation of “months of inventory”

What does “months of inventory” mean? This figure references how long it would take to sell a property if homes continued to sell and close at the current pace with no new inventory coming on the market. A good analogy is to consider a bathtub which drains. If you add no new water to the tub, how long will it take to empty out?

The months of inventory is sometimes called the absorption rate. The question is simple: how long will it take for the current inventory of homes for sale to get absorbed by the home buyers purchasing them? It doesn’t have to be calculated by months. It could be in days, weeks, or years. But months is probably most common.

The Cambrian area of San Jose’s months of inventory as a whole, and in one price point

Cambrian was once an enormous zone of the Santa Clara Valley. Today we mostly think of it as within San Jose in the 95124 and 95118 zip codes. Some of it it adjacent to Campbell – a very tiny sliver is IN Campbell, and a tinier still area is in San Jose and is under the Campbell School Union District. Most of this area is in one of three elementary school districts: Cambrian, Union, or San Jose Unified.

Here’s the breakdown – first, for ALL of Cambrian (MLS area 14 for my Realtor readers) that’s within the City of San Jose and second, by elementary school district. The area for Campbell Elementary is so small that the numbers are usually not of use (no offense to the Campbell school residents). It can just jump around too much to be helpful and often gives us no usable data. Please have a look:

I highlighted the Cambrian Elementary School District in both charts as the current lowest MOI. You’ll see that past charts show the fastest market shifts around. Aside from Campbell, which has numbers too small to register a MOI, these are the hottest tickets in the district.

Here are the numbers from two months ago for comparison:

The message I’d like to convey is this: you can read about information for your part of Silicon Valley, or your city or zip code, but it’s not until you drill things down to an area that closely matches your own home will you have a better sense of your own home’s “real estate marker.” It’s never “how is the market?” so much as “how’s the market for YOUR home – or the one you want to buy?”

If you were only tracking Cambrian, you might see 0.519 months of inventory. That’s a lightning fast seller’s market. But it’s not nearly as good if you’re selling in the area with San Jose Unified Elementary Schools in the entry-level market. There, you’re looking at over 0.6 months of inventory for homes around $1 million, while the same price point with Cambrian Schools is a mere 0.167, and Union is 0.375 months.

Years ago, I had a Willow Glen listing where the whole back yard was the pool. I did a study on the months of inventory and learned that pools in properties with that lot size took substantially more time to be absorbed. Likewise, I had a Los Gatos estate property on an acre of land, and the reverse was also true: the months of inventory showed that large lots on $2 million and up homes for sale did not sell nearly as well without a pool.

The math is simple: using the same criteria, divide the number of active listings by those of homes sold in the last 30 days. The criteria can be anything you like – a property’s size, location, number of bathrooms, price, age, etc. Often I include approximately the same home and lot size together with the school district. That usually provides much more accurate info on “how’s the market” as compared to just getting it by zip code alone.

If you are looking to buy or sell a home in Cambrian, or anywhere in San Jose or Santa Clara County, this kind of information is really important. It is not hard to do, but very few real estate agents will provide this information before you list or before you make the final determination on the list price of your home.

Looking for a good Silicon Valley Realtor who will get you that extra data? Please call or email me. I would love to chat to see about possibly working together.

Bel Estos Drive near Carlton and Rosswood in San Jose's Cambrian areaMy Cambrian area of San Jose Real Estate Report was recently published with the updated numbers from the closed sales last month for this part of San Jose (95124 and 95118 with a little of 95008 too). Please click on the link above to see much more information there.

In this district of San Jose, we have been experiencing dreadfully low inventory of homes for sale, and buyers aren’t backing off as much as usual for this time of year – I believe because there is just a whole lot of pent up demand from upwards of two years in a deep seller’s market. What does that mean? Sellers, if you have a problem home, or one not updated or well maintained, this is the time to sell it – buyers have little to choose from so are purchasing properties that need more work than they would bother with in a more balanced market.

Want to learn more about Cambrian Park real estate, the Cambrian district, Cambrian neighborhoods, school districts and zip codes? Please also see this article: Cambrian Park: Good Schools, Low Crime, Close to Los Gatos and Campbell. Cambrian neighborhoods can be located at the menu bar:  Neighborhoods –> San Jose (all areas) –> Cambrian Park (SJ).

Be sure to read to the end to see the live Altos charts too – they are near the end of the article so please keep reading into the next page!

Generally speaking it is still a hot seller’s market and great time to sell a Cambrian home.

 Please see the whole Cambrian Real Estate Report for charts, stats and more.
Other related Cambrian district resources:
Learn about the Cambrian months of inventory, or absorption rate, by elementary school district.

The condo and townhouse real estate market for San Jose 95124 & 95118

Another Silicon Valley real estate market bubble? (Image of bubbles in a hot tub.)Hearing the real estate market “war stories” about dozens of offers on Silicon Valley properties and overbids ranging from 20 – 55% had convinced me that we were in a Silicon Valley real estate market bubble back in early 2013. At least, this is what a bubble looks like, sounds like, feels like, and acts like.   At the time I thought, “how much longer could this continue?”  Four years and counting – that is the answer.

I tell my family and friends that we are in “crazyland” as buyers purchase homes with no contingencies of any kind, houses sell in 10 days or less (if everything is right, which seems to be the case 75% of the time), and those same properties are selling at well over list price and with much more than 20% down.

The absorption rate, or months of inventory: it is a Silicon Valley real estate market bubble?

What do the numbers say?  I just logged into MLSListings.com and see that right now, in all of Santa Clara County there are 817 single family homes (houses + duet or attached single family homes).  The pending and contingent homes measure 1074, far more! That ratio alone suggests that the market is in overdrive.  In the last 30 days, 950 single family  homes have sold & closed escrow.  So the months of inventory is 817 divided by 950 = .86 of a month of inventory, so about 3.5 weeks of inventory. (When I originally blogged about the potential bubble, it was 1.8 months of inventory.)

In other words, things are flying off the shelves. And they have been, with only a few minor blips here and there, since early 2012. Does that sound like a Silicon Valley real estate market bubble to you – a crazy strong seller’s market lasting 4.5 years?  I could be wrong, but I think of bubbles as being something fairly swift, not a multi year trend.

Homes are selling faster than new ones are coming onto the market!

It’s one thing to say that one city, town, or school district has a very low months of inventory (or high absorption rate).  It is another altogether to say an entire county is that low.  This is a major trend, not a tiny blip in the statistics.

How soon we forget that after the outrageously deep seller’s market in 2000, we had a steep drop in 2001.  Or that all the crazy buying in the San Jose area (and other places) in 2005-06, combined with bad financial regulations, lead to the crash of 2007-2009. But perhaps that enormous “correction”, in which Santa Clara County lost about 50% of its value on average, had more room to recover than we initially realized. Jobs keep flowing in, and housing starts are not keeping up. Supply and demand – the age old equation. That would seem to refute the idea that this is a Silicon Valley real estate market bubble. Perhaps low inventory and strong demand are what we should be expecting going forward. Continue reading

If you are house hunting in the Cambrian area of San Jose, you are probably aware that home prices and the real estate climate generally differ based on a number of things, but the most important factor of all is the schools.   While it is helpful to view the Cambrian real estate market as a whole, it’s more accurate to look at a smaller segment of that realty market and study it by school district.

One data point we use to analyse the market is the absorption rate, or months of inventory.  The question is this: if no new inventory came on the market, how long would it take for the current supply of houses for sale take to sell, if sales continue at the same rate?  For this we look at the currently available list of homes for sale (some people including pending with contingency in place, but nearly all of these do close, so I omit them) and also those of the same criteria which have sold and closed escrow in the last 30 days.  The same study could be done on a weekly basis rather than monthly, but with such small numbers of inventory, that would likely not be so reliable.  I ran these numbers from MLSListings.com this morning?

Cambrian months of inventory by elementary school district as of 2-5-2016

Cambrian as a whole has 1.07 months of inventory – that’s pretty good if you are a seller, and a bit scary if you are a buyer.  A closer look, though, and you see quite a huge difference between either the Cambrian or Union School District, which both have a very brisk .83 months of inventory, versus the homes in the San Jose Unified School District area, which are moving at 3 months of inventory – a great market for most of the U.S., but sluggish compared to the other areas.

For a home owner wanting to sell in the SJ Unfied section of Cambrian, this is critically important information to understand so that you don’t overestimate the enthusiasm for your house.  It is going to be more important for you to price aggressively, stage well, market thoroughly than in the other areas, which may be more self-selling due to the very high quality of the public schools.

For a home buyer wanting to purchase in any of these areas, knowledge is power!  You might be able to get away with contingencies in your offers in the San Jose Unified neighborhoods as you may be the only offer in some cases, but that may not get you into your next home in the more competitive areas where many people are just trying to get their children into excellent schools and you’ve got multiple offers and overbids in that superheated market.   (We Realtors do not love seeing our buyers get into contract with few or no contingencies, by the way.  We prefer where there’s a little more balance.  This imbalanced situation is a classic case of supply and demand: too much demand, not much supply.)

Finally, it should be noted that schools are a major driver all of Silicon Valley.  I have similar studies, using high school districts, for Saratoga (on this site) and Los Gatos (on the Live in Los Gatos blog),  if you’d like to check those out also.  Because those areas have a really big spread in pricing, the absorption rates have been considered by price point too.

Check out what’s happening in the Cambrian market in the map below.

  1. 3 beds, 2 baths
    Home size: 1,155 sq ft
    Lot size: 5,998 sqft
  2. 3 beds, 2 baths
    Home size: 1,286 sq ft
    Lot size: 6,181 sqft
  3. 5 beds, 3 baths
    Home size: 3,896 sq ft
    Lot size: 5,667 sqft
  4. 4 beds, 3 baths
    Home size: 1,912 sq ft
    Lot size: 5,998 sqft
  5. 4 beds, 3 baths
    Home size: 3,166 sq ft
    Lot size: 9,374 sqft
  6. 4 beds, 3 baths
    Home size: 2,258 sq ft
    Lot size: 5,401 sqft
  7. 4 beds, 2 baths
    Home size: 1,496 sq ft
    Lot size: 6,599 sqft
  8. 2 beds, 2 baths
    Home size: 1,212 sq ft
    Lot size: 1,981 sqft
  9. 5 beds, 4 baths
    Home size: 3,989 sq ft
    Lot size: 11,639 sqft
  10. 3 beds, 3 baths
    Home size: 1,467 sq ft
    Lot size: 1,197 sqft

See all Real estate in the Cambrian community.
(all data current as of 9/19/2017)

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

Sorting out the local Los Gatos real estate market can be a bit tricky, but one of the best instruments for measuring performance is the months of inventory (MOI, or absorption rate).  In this article we’ll consider the MOI houses in Los Gatos 95030 and 95032 by high school district and price point, since I believe those are the two main drivers of our residential real estate market.  (Explanation of the MOI is at the end of this post.)  Also, this time I’m adding in the pending sales as an indicator of where the market is going, too – just to cover the bases!  Finally, since I did a similar study the first week in November, but without the pendings, I’ll keep those below the current tables for the sake of comparison.

Overall, right now we have a brisk 2 months of inventory for houses in Los Gatos.  But homes in the lowest price point are selling far faster – at about 10 days of inventory!!  The MOI increases very clearly with higher price points, where it becomes increasingly challenging to sell.

Los Gatos all schools by price point

About six weeks earlier, it looked like this chart below -the MOI is now a lot faster (4.19 then to 2.04 now) as inventory has shrunk by about a third and sales have increased (21 to 28 now).  Perhaps most striking is the change in the luxury or high end market over the last six weeks.  It seems far harder to sell a luxury home now as opposed to then.

Los Gatos 95030 & 95032 all schools

Next up – homes “in the schools” with Los Gatos High School, then those in the Leigh HS and Westmont HS attendance areas.  How will these numbers stack up compared to the town as a whole?
Continue reading

Hot sellers marketWhat does it mean when real estate professionals, journalists and consumers refer to a “hot seller’s market“?  Simply put, it means there’s an imbalance in the market which is very much in the seller’s favor.  In terms of supply and demand, it translates to far more demand than available inventory for sale (supply). It’s a good time to sell, but a hard time to buy.

We measure or note the market conditions using a variety of data points;

  • days to sell (and days on market for all homes, including unsold)
  • sale price to list price ratio
  • absorption rate (months of inventory, weeks or days of inventory)
  • number of listings available vs pendings and recently closed homes
  • rapid rise in home sale prices, especially if to unsustainable levels
  • number of offers received on a property at once (multiple offers)
  • buyers upping their price and improving their terms voluntarily, without getting a counter offer
  • buyers writing offers with few or no contingencies, fast close of escrow or other extremely strong terms
  • overall market trends of inventory lessening, prices rising, buyers getting more desperate – how all of these look when viewed as a whole

While some of the above can be easily tracked on our multiple listing service, some are not findable anywhere except in conversations with real estate agents who are actively working the market, writing and receiving contracts.    What isn’t tracked includes the number of offers placed on a home for sale, whether buyers are engaging in “bidding war” tactics such as upping their price before even getting a counter offer, or offers with no contingencies.

Related reading:

A summary of tips for multiple-offer situations in Silicon Valley real estate contracts

Should you write an offer with no contingencies? What is the risk with a non-contingent offer?

Mistakes that buyers’ agents make which damage their clients’ chances of winning in multiple offers

  1. 3 beds, 2 baths
    Home size: 1,512 sq ft
  2. 4 beds, 2 baths
    Home size: 1,811 sq ft
    Lot size: 6,599 sqft
  3. 3 beds, 2 baths
    Home size: 1,476 sq ft
  4. 3 beds, 3 baths
    Home size: 1,440 sq ft
    Lot size: 1,197 sqft
  5. 2 beds, 2 baths
    Home size: 1,464 sq ft
  6. 3 beds, 2 baths
    Home size: 1,440 sq ft
    Lot size: 5,000 sqft
  7. 4 beds, 4 baths
    Home size: 2,800 sq ft
    Lot size: 7,348 sqft
  8. 2 beds, 2 baths
    Home size: 1,344 sq ft
  9. 2 beds, 3 baths
    Home size: 1,257 sq ft
    Lot size: 1,428 sqft
  10. 2 beds, 2 baths
    Home size: 1,174 sq ft
    Lot size: 1,611 sqft

See all Real estate in the city of Sunnyvale.
(all data current as of 9/19/2017)

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

At last, home buyers are beginning to see an easing up in the Santa Clara County real estate market. Although it remains a strong seller’s market, it’s inching back in the direction of more normalcy with fewer numbers of offers and a flattening of prices.  It’s way overdue.

This morning I logged onto MLSListings and ran some quick stats for the county as a whole for single family homes. We see the months of inventory rising, the gap between available and sold inventory widening, the sale price to list price ratio dropping and prices flat.

First  – Santa Clara County months of inventory last 12 months as of July 1 2013

Santa Clara County months of inventory last 12 months as of July 1 2013

 

How does this look compared to a longer period of our local real estate history?  I ran it back to January 2004:

Santa Clara County Months of Inventory Jan 2004 through June 2013 single family homes

Overall, 3.6 months of inventory looks pretty healthy (anything under 4 months is a seller’s market, though the National Association of Realtors says that 6 months is balanced). The question is whether this was a blip or a trend reversal.  We’ll have to watch and see. Continue reading

Is it a good time to sell a home in Silicon Valley?  One of the best ways to get a pulse on the real estate market is with the months of inventory (MOI), also known as the absorption rate.  The way we calculate it is simple:  find the current available inventory (not under contract or sale pending), then find the number of homes with that exact criteria which have closed escrow in the last 30 days.  Divide the first by the second and you get the months of inventory.

Today I spent a little time on MLSListings.com, our local mls association (of which I am a member) and I ran the numbers for single family homes (houses and duet homes) in Cupertino, Los Altos, Los Gatos, Monte Sereno, Mountain View, Palo Alto, San Jose (all areas combined), Santa Clara, Saratoga, Sunnyvale and three of San Jose’s districts: Almaden, Cambrian, and Willow Glen.  Below, please find the results of that study.   (This is for single family homes of any price range or school district in each city or area named.)

Months of Inventory for many Silicon Valley Communitites

Which are the hottest markets?  They’re the ones with the smallest MOI – Mountain View is at .56 of a month (about 2 weeks), Sunnyvale at .66 month (about 2.5 – 3 weeks), Cupertino at .8 of a month, Palo Alto .81.  All of these are very, very red hot seller’s markets.  Every area, city or town studied was a hot market except for Monte Sereno, which at any given time has few listings and few sales plus a wide range of pricing, so often for this small city it’s best to look at the Los Gatos and Saratoga stats to see what’s really happening.    A few very high priced listings may make the whole area look slow, when it fact it may be just a function of the pricing tier. Continue reading

Many of the statistics quoted by news agencies and real estate information analysts refer to the “active” inventory as not just the homes which are truly available, but also those which are sale pending but with contingencies still in place (whether huge contingencies, such as bank approval on a short sale or the normal ones, such as property inspection and loan approval).  This often results in a more bloated look at what’s available than what is really the case, and it gives buyers the sense that it’s easier to purchase than it truly is. Let’s look at some statistics to see what’s happening over the last year, when it shifted from being a buyer’s market to a severe seller’s market for houses in Santa Clara County.

Normally there are more homes available (for sale, without a “sale pending” status attached) than there are closed sales each month.  But right now, the available properties are being gobbled up much faster than new ones are getting put onto the multiple listing.  Let’s view the graph to see the relationship between these two figures for houses listed and sold in Santa Clara County in 2012.

New listings vs sold throughout 2012 in Santa Clara County CA

At the beginning of 2012, please note that the new listings (the red line) outpaced the sold and closed properties (green line).   The delta between them shrinks over the course of the year, until in the fall they are nearly equal until closed sales far outstrip new listings.   That is a complete flip in the market, and it represents a shift in power from the buyer to the seller, too.  For those who prefer just the numbers, here they are: Continue reading

Cash is KingHow common are “all cash” transactions for Silicon Valley real estate right now?  Throughout Santa Clara County, they were 25% of all sales, up from 20% in October 2011,  among houses, duet homes, condominiums and townhouses (class 1 and class 2, does not include mobile homes, 2-4plex or apartment buildings or raw land).   What’s trending? Lots, including more cash offers.

Some areas and some types of sales are more frequently all cash than others.  Here are a few quick stats for the last month (last 30 days from today – numbers from MLSListings, crunched by me – disclaimer on good intentions but no guarantee). Also, please note that this is for CLOSED SALES. As of this writing, we are seeing a huge uptick in multiple offers in all price ranges in many parts of the valley, and it seems that many are all cash or very large cash downpayments.

  • Santa Clara County: 25% all cash
  • San Jose (entire city): 27% all cash
    • San Jose short sales: 27% all cash (down from 33% in Oct 2011)
    • San Jose bank owned or REO sales: 39% all cash (38% Oct 2011)
    • Short sales & REOs were 52% of all sales in San Jose in last 30 days (was 48% Oct 2011)
    • Of SJ homes listed at $300,000 or less: 44% all cash (was 48% Oct 2011)
    • Of SJ homes listed at/under $500,000: 33% were all cash (didn’t track in October 2011)
  • Los Gatos: 9% all cash
  • Saratoga: 8% all cash
  • Almaden Valley area of San Jose: 10% all cash

Some of these sales will have no financing and the new owners will occupy the home.  Particularly in lower priced homes, though, these are investor buyers who will be renting out the property.  This is often the case with the lower price distressed properties in particular.  In higher priced homes, some new owners will put financing on the property after close of escrow.

With the crazy new demands that keep coming at us from banks and new requirements being imposed on appraisers, now more than ever, cash is king.  That doesn’t mean that the cash buyer will get a deep discount, but there will be a slight one in most cases and certainly preferential treatment that will create a great advantage in multiple offer situations.

Learn more about buying and selling Silicon Valley real estate with cash offers:

Cash offers: what do you need to know if buying “all cash”?

Q & A: Making an Offer

What’s My Silicon Valley Home Worth? Estimating the Probable Buyer’s Value  (financing impacts market value)

  1. 3 beds, 3 baths
    Home size: 2,055 sq ft
    Lot size: 1,646 sqft
  2. 3 beds, 2 baths
    Home size: 1,155 sq ft
    Lot size: 5,998 sqft
  3. 5 beds, 7 baths
    Home size: 8,085 sq ft
    Lot size: 4.79 ac
  4. 6 beds, 8 baths
    Home size: 9,800 sq ft
    Lot size: 51.34 ac
  5. 3 beds, 2 baths
    Home size: 1,286 sq ft
    Lot size: 6,181 sqft
  6. 3 beds, 3 baths
    Home size: 2,913 sq ft
    Lot size: 3,680 sqft
  7. 4 beds, 4 baths
    Home size: 4,308 sq ft
    Lot size: 40,001 sqft
  8. 2 beds, 2 baths
    Home size: 1,104 sq ft
    Lot size: 1,132 sqft
  9. 3 beds, 3 baths
    Home size: 1,625 sq ft
    Lot size: 814 sqft
  10. 3 beds, 3 baths
    Home size: 1,740 sq ft
    Lot size: 6,141 sqft

See all Real estate matching your search.
(all data current as of 9/19/2017)

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

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Mary Pope-Handy
Realtor
ABR, CIPS, CRS, SRES
Sereno Group Real Estate
214 Los Gatos-Saratoga Rd
Los Gatos, CA 95030
408 204-7673
Mary (at) PopeHandy.com
License# 01153805


Selling homes in
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