The absorption rate, or months of inventory, indicates that it’s a seller’s market:

The hottest segment is the bank owned or REO part of the Campbell condominium or townhouse realty market, and the slowest segment is the short sale section (which is about 20% of the available inventory). That’s very typical of other nearby areas: the hardest homes to sell are the short sales.  As a side note: there are 39 condos available and 29 which are sale pending. That is a high ratio, which also points to a seller’s market.

How does this compare to a year ago?  It’s completely different!

A year ago, the months of inventory was a whopping 72% higher at 8.8 for May 2009 vs 2.5 for May 2010. Solds are up 42% from 12 months ago.  Pending sales are up 200% from a year ago also.  So from every vantage, it’s much, much better than a year ago.

What about other data?  I have a subscription to Altos Research, which also charts the market but does it a little differently.  Often the numbers I crunch line up but sometimes theirs is an opposing view.  Here’s their current summary, which puts this market as a buyer’s market, not a seller’s market:

I like the fact that they track flipped homes, relisted homes and the percent of properties with price decreases.  This is especially important when you consider how many homes may get a price change and then a new MLS number, which may confuse some of the statistics.

Altos also breaks down more info by price quartile (they use list prices, not sales prices, for this info).   What I like about the following chart is that it gives you an idea of what your money will buy. (Seeing 4.5 bathrooms is throwing me, though – I don’t recall ever seeing a condo or townhome with that many bathrooms anywhere!)  Also of interest: the majority of condos or townhouses in Campbell seem to be around 1300 SF with 2 bedrooms and are offered somewhere in the 400’s.  That’s useful information for buyers and sellers alike.

So what can we say about the conflicting assessments of the Campbell real estate market for condos and townhomes?

I think Altos has some valid concerns about the long days on the market – 88 DOM does not sound like a “seller’s market”. I looked at the pendings to see if I could blame short sales – but even among pendings that are “regular sales”, the DOM is 64 (it’s actually less among short sales, oddly). That’s pretty long. We tend to think of a seller’s market as being applicable when homes sell in 3-4 weeks. Two months is a bit much to call it a seller’s market. Of the seven “normal type sales” which are pending, only two of them sold in under three weeks.

All in all, I think it shakes down to a fairly balanced market right now.  It’s not a bad time to sell, and it’s not a bad time to buy a Campbell condo.

There just aren’t many of them!

As of today, in Los Gatos (95030 and 95032 zip codes) and Saratoga (95070) , there are 185 single family homes (houses, perhaps a few “duet homes”) for sale.  Of the 185, a mere 14 of them are distressed properties (6 bank owned, 8 short sale).  That is just 7.5%!  For those who want Los Gatos or Saratoga Schools (not Campbell, Union, or Cupertino), the odds are even worse.  Only two of those homes go to the Los Gatos-Saratoga High School District. (Prices of all distressed properties currently available in these areas range from $699,000 to about $3 million.)

There are some good deals to be found in addition to this very small pool of bank owned properties and short sale listings in Saratoga and Los Gatos.  Often the best deals are found among homes which have been on the market a long time but aren’t selling due to cosmetic issues.  Homes which need changes such as fresh carpet, paint, or “easy” updating and remodeling (like new countertops, light fixtures, etc.) can be the best bargains around, particularly if the seller is truly motivated.  So don’t lose heart – just broaden your strategy a little and you’ll be far more able to locate a suitable home.

What about San Jose area short sales? Lets start with the lay of the land in Santa Clara County specifically (Silicon Valley includes Santa Clara County and a bit of Alameda, Santa Cruz, and San Mateo Counties). Some areas are loaded with short sale listings, others have few, if any. The ˜best deals, in terms of low pricing, are going to be in areas with a lot of the short sales because they sell for less and pull property values down, making them more and more affordable. Those are the areas with lower priced homes, generally, the entry level areas.

In places like South San Jose, the south county areas, and Blossom Valley, for instance, most of the entry level homes are short sales. Values are plummeting there.

In places like Cupertino, Saratoga, and Los Gatos, there are hardly any short sales. Virtually none. And home values are rising.

If you can afford one of the rare short sales in the higher-end neighborhoods, this can be a good opportunity for you. No guarantees, but if you can purchase in an area that’s appreciating, you may be able to get equity in your home without waiting years for the market to recover.

If you are looking to buy an entry level single family home for about $500,000, though, there are a lot of pitfalls that you need to be aware of. I’ll list a few here:

• Home values in most of these areas are falling quickly
• If you buy today, the home will likely be worth less tomorrow
• The seller may agree with you on a purchase price, but with a short sale, you will need the approval of at least one bank (or in some cases, the lender has a servicing company, which is another issue, and in other cases, there will be a first mortgage and a second mortgage, so there may be more than one bank involved)
• Lenders are overwhelmed with short sale requests and are taking a month or longer to respond to buyers and sellers who’ve agreed on the contract – some banks are taking 90 days, and some never respond at all. A few are saying that they will not process any short sales at all. Period.
• It is important to calculate out how fast the market is changing, because if you agree to an amount one day but the bank doesn’t say ˜yes for 30 or more days, it may no longer be a good price!
• There is a lot of ˜smoke and mirrors going on with short sale listings, duplicity on all sides. Be aware that things may not be as they seem!
  • Many homes are listed as available but they already have a ratified contract between buyer and seller and it’s awaiting bank approval. (Agents are not supposed to do this. Technically it should be reported as a pending sale. On the other hand, the home is sort of available because the bank has to approve the sale and reserves the right to take a better offer.)
  • Although a buyer and seller may have a ratified contract, the bank may continue to look at offers (perhaps until they approve an offer, perhaps later). So a buyer may be ˜bumped” at various points in the attempted transaction. In a normal sale, that really cannot happen unless the buyer badly missteps and is in default.
  • Also, some buyers are putting offers out on multiple homes, even though obviously they can purchase only one. The reason is that banks are responding so slowly, if at all, that buyers are thinking “I will go with the first one that responds”. So in some cases, listing agents have changed the status to sale pending, the seller is counting on that sale, but the buyer may not really try to complete the purchase at all.
  • You may be preapproved to buy and find out that your lender decides to change the loan conditions. Recently some of the larger lenders stopped being willing to loan to folks with 10% down and insisted that they now have 15% down. This is an unhappy surprise for buyers who are relying on their preapproval!

My advice: skip the short sales and wait for them to go through the process and become bank owned properties. Most of them will go through the process and will be less expensive and not involve the risk of having to evict someone when it’s all said and done. With the bank owned homes, there may also be issues (usually with property condition) but if you get into contract to purchase a home, the bank will do its best to see that you can close escrow on the deal.

Related post (on my Live in Los Gatos blog):
Can a Real Estate Agent Help You to Buy a Distressed Home or Pre-Foreclosure in Los Gatos?