Every couple of weeks I update this post to bring fresh news and data on the Cambrian Park real estate market. On Dec 9th  I went onto the MLS and ran the “months of inventory” or absorption rate of houses and duet homes (what our MLS calls “class 1″)  in “area 14″ or Cambrian area of San Jose. This time I broke it down into price points as well as the type of sale (regular, short sale, bank owned)  so you can pinpoint the pricing for the various segments of the Cambrian market. (Reminder: months of inventory reflects how long it will take to sell a property if sales continue at the current rate. Six months or so is considered “balanced”. More is a buyer’s market and less is a seller’s.)

**please note – typo below – numbers were crunched December 9th, 2011, not December 10th.

Cambrian Park (San Jose) Months of Inventory by sale type & price point Dec 9, 2011

What’s selling? “Regular sales” – non distressed. Not faring so well? Short sales.  In many price points, although many are under contract or pending, FEW – sometimes none – are making it to the closing table.  We are hearing a lot about the streamlined processes for short sales, but these numbers hint at a different reality, namely that Silicon Valley and Cambrian short sales sell but often don’t close escrow.

What is the typical kind of home and price for these neighborhoods?  Of the homes which transferred ownership in the last 30 days, a typical house cost about $600,000, has about 1600 square feet and sits on a lot of around 6700 square feet (and is “partially updated”, not fully remodeled).  The price per square foot averaged $376 but ran from $205 (distressed and on a hugely busy road) to $513 (close to the hills near Almaden and Los Gatos).  If the home you want to buy or sell needs remodeling or is “all original” it’s probably going to sell for less. If it’s in a great area, is a regular sale and absolutely turnkey and fully remodeled, it’ll sell for more.  A beautifully remodeled Cambrian house with 3 bed, 2 bath and 1200 square feet can easily run $600,000 or more if it’s a regular sale and in a good area with no “issues” (high voltage lines, backing to busy road or school etc.).

What about the pending sales?

As of this morning, there are 95 houses & duet homes which are sale pending.  Of those, 39 are regular sales (a mere 41%!), 48 are short sales and 8 are bank owned properties (REOs).  How do the pendings compare to the homes sold?  Here’s a quick breakdown for all price ranges in “area 14″ of San Jose:

ALL types Pending – 95   Sold in last 30 days – 37
Regular sales – 39   Sold in last 30 days – 32
Short sales -  48   Sold in last 30 days – 1
Bank owned sales – 8   Sold in last 30 days – 2

This underlines the fact that the short sales are getting into contract…but just not getting to the closing table! Bank owned homes are better, but the ratio of pendings to closings is much, much better with regular sales.  This explains why the regular sales are the hottest ticket in Cambrian Park right now: buyers don’t want to just buy, they want to close!

Some sellers are borderline on being able to sell without either having to bring cash to the closing table or having to attempt a short sale.  What do these numbers suggest?  That if you really want to sell and can do it – you may be best off doing a regular sale, even if you need to bring money to the title company to make it work.   (This is general advice only, your own situation may be different – please consult with your Realtor, lawyer and tax advisor before deciding to do, or not to do, a short sale.)

Here’s a snapshot view what was happening in the 95124 and 95118 areas of San Jose as of December 2nd, 2011. (My last update for this part of San Jose -  a mini update.)

Cambrian Park (San Jose) quick real estate stats for houses Dec 2, 2011

Interestingly, the hottest segment of this market is not the distressed sales, but regular ones, which are being absorbed three times as fast as the short sales or bank owned homes on the market. And it’s understandable: REOs don’t provide any disclosures and may contain surprises after close of escrow, and short sales may never close.  Just look at the huge number of pendings as opposed to the short sales which actually become a finalized transaction!  We hear that the odds are improving on short sales closing, but this graph doesn’t validate that impression at all.

Cambrian San Jose Real Estate Trends & Statistics for Sold Homes

It’s been a “hot sellers market” in the Cambrian district of San Jose for many months now with most homes that sell going fairly close to list price (1-2% off on average).  That doesn’t mean that the best idea is to always offer less than list price, though, as many homes are selling at or above list price.

If we took a close look at what’s selling and closed recently, we would find that some Cambrian houses are selling for more than list price, some right at list price and others below or well under the offered price.  Some Cambrian real estate is listed strategically low in order to get multiple offers and drive the price up.  Some are overpriced and others are priced “right on the money”.

Data on real estate solds in Cambrian area of San Jose, for November, October, September and August 2011 among houses from my Real Estate Report:

Next, October:

September:

Next, August (note that prices were higher, pending prices were higher in August as opposed to September).

Inventory is down about 32% from a year ago.  Prices are down, too, both year over year and month over month. Even so, the Cambrian real estate market is fairly hot, a good strong seller’s market as long as homes are priced well, staged well, and marketed well.  That doesn’t mean that every home is selling, but those which are nicely staged and marketed and correctly priced are selling at a good pace – and many of them get multiple offers, as the overbids attest.

Just now I checked what has closed in the Cambrian area in the last 30 days. There were 36 houses that closed. Of them 9 sold over list price, a few sold right at list price but most sold under list (and a very few sold grossly lower).

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:

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 63. See more 95124 zip code real estate.
(all data current as of 2/10/2012)

1. $685,000 : 1671 Zinnia Ln, San Jose
   
   3 beds, 2 full baths

   Home size: 1,410 sq ft

   Lot size: 6,240 sq ft
   
2. $549,900 : 2423 Loment Pl, San Jose
   
   3 beds, 2 full baths

   Home size: 1,539 sq ft

   Lot size: 4,232 sq ft
   
3. $639,000 : 1695 Merrill Dr, San Jose
   
   4 beds, 2 full baths

   Home size: 1,396 sq ft

   Lot size: 7,200 sq ft
   
4. $550,000 : 5051 Nerissa Wy, San Jose
   
   3 beds, 2 full baths

   Home size: 1,120 sq ft

   Lot size: 10,824 sq ft
   
5. $748,000 : 1830 Curtner Av, San Jose
   
   5 beds, 2 full, 1 part baths

   Home size: 2,191 sq ft

   Lot size: 6,000 sq ft
   

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

Showing properties 1 - 5 of 28. See more 95118 zip code real estate.
(all data current as of 2/10/2012)

1. $575,000 : 3213 Gardendale Dr, San Jose
   
   4 beds, 2 full, 1 part baths

   Home size: 1,800 sq ft

   Lot size: 6,313 sq ft
   
2. $489,900 : 1349 Lyonsville Ln, San Jose
   
   4 beds, 2 full baths

   Home size: 1,692 sq ft

   Lot size: 9,583 sq ft
   
3. $499,000 : 3119 Santa Margarita Av, San Jose
   
   3 beds, 1 full bath

   Home size: 1,071 sq ft

   Lot size: 7,840 sq ft
   
4. $430,000 : 1560 Hillsdale Av, San Jose
   
   4 beds, 2 full, 1 part baths

   Home size: 1,654 sq ft

   Lot size: 6,890 sq ft
   
5. $534,888 : 3183 Cheshire Dr, San Jose
   
   3 beds, 2 full baths

   Home size: 1,570 sq ft

   Lot size: 6,000 sq ft
   

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

Are you interested in buying your first home?  Interest rates are very good and home prices have “rolled back” to about 2003 levels in many parts of Silicon Valley.  So if you’re earning a living and want to purchase a home, it’s time to work up a game plan.

Where do you begin? The foundation of home buying is good credit and a downpayment.  Do you know what your credit scores are? If not, there are many online sites where you can run this info at no cost or very low cost. Here’s one: AnnualCreditReport.com.  There are three credit scoring bodies: Equifax, TransUnion and Experian.  Some of the “free” sites aren’t really free – so check the small print.

Often there are small errors on your credit report (such as an old bill which you did eventually pay but is showing as due or delinquent), but you can write to the agency with whatever is amiss and provide documentation to clear it up.  This can take time, though, so you want to start this process when you are not in a hurry. 

If your credit is not stellar, do some research before deciding how to fix it.  Some people mistakenly think that they should close all of their credit cards, and in fact this might not help, but rather hurt, your credit.  Inactivity on some of yourcards may also be counterproductive to your scores. And, of course, if you are over your limits, you definitely want to pay those bills down both to get a lower interest rate and to improve your credit scores.

Downpayment

While the media is full of hype about first time home buyers purchasing with FHA loans and very small downpayments (5%), in actuality it is extremely difficult to purchase a home in Santa Clara County with such a tiny downpayment.  Most sellers and their agents view “small downs” as risky – that is, that there’s a higher probability that these transactions won’t close.  Most of the time, if you have a small downpayment and are bidding in a multiple offer situation, you will lose.  The only way to “win” in those circumstances is to overpay for the property.  I would not call that winning!

Ideally, you will have saved 20% down plus closing costs (about 2%) plus “reserves” – so perhaps 23-24% is what you really need in the bank to get the good deal when buying a home.  Yes, that IS a lot of money, but if you want to buy a home and get a great deal, cash is king.  Twenty percent down is a normal loan.  A next best option is 10-15% down with a conventional (not FHA) loan.

All that saving – if you can only get into the new home, then you can “relax” and go back to spending, right?  No, not right.  Real estate takes money to maintain, and even if you’re in a condominium or town house in the San Jose area, you need to have money in case something breaks or in case your dues are raised or there’s a special assessment by your HOA.  To be a homeowner who’s not going to get into financial trouble, you really need to have new habits.  You need to love to save, save, save rather than spend, spend, spend.

Many Americans tend to live off of 105% ore more of their annual income – they cut it too close and then when they hit a problem (for which they did not reserve any money), they go into the red.  Credit card bills begin to mount.  They take out a line of credit on their home and use it all up.  Even before the current financial crisis, every couple of years I was helping home owners to sell when they had taken out all the credit they could and no longer were able to stay in their home.  They were living off credit cards and it was a nightmare.  Now we see this on a big scale with all the foreclosures.

But that doesn’t have to be your story.  You can plan to live on less and sock away the rest for a rainy day, for retirement, for future plans, whether someone’s college education, purchasing income producing property or world travels. 

All of this is to say: if you cannot save more than 5% for a downpayment, perhaps the first thing to do is to focus on saving money and living on less. Make this a way of life. First you will accomplish your goal of having the downpayment, but if you can keep that habit in place, you will be building for a more solid future for yourself.

If you’re out to buy a Silicon Valley home this year, you may be tempted to look at real estate priced far above your ability to pay and hope that you can write a low offer that the seller will accept.

Don’t count on it.

Lowball offers are contracts written substantially below the list price (and often well below market price).  How low is too low? It really depends on the micro-market of the home you’re interested in (the neighborhood, price range, school district, etc.).  In most of Silicon Valley, houses, condos and townhouses sell within 5% of list price most of the time. The average list price to sales price ratio is usually closer to 1 – 3% of list price. 

My usuall advice to buyers is this: if you don’t think that the home is worth within 5% of list price, then keep looking until you find a home that is.  Most of the time, sellers aren’t prepared to come down more than a few percent. 

Once in awhile, of course, a million dollar home will sell for nine hundred thousand. But it is very rare that a home will go for 10% or more off of list price.  Most often, in fact, the seller will be angry about an offer that far off the mark and will simply write a high priced counter offer.  For example, let’s say a home’s listed at 1 million dollars (to use round numbers) and a buyer writes an offer for eight hundred ninety thousand dollars.  Most likely, the seller will volley back at something like nine hundred eighty thousand.    The best listing agents will tell the seller, “rather than take an offer more than 10% below list, let’s reduce your home’s price 4-6% and see if we cannot sell it for more than that”.  And usually, they can.

Buyers: if your budget is appx $500,000 or less, please don’t waste everyone’s time by looking at homes priced at $600,000.  Look at $500,000 or less – maybe a tad higher than five hundred, but not much.  Look within 5% over your budget, tops.

Sellers: if you are getting lowball offers but no “close” offers, the buyers are telling you something about the market conditions. Consider reducing your price so that your sales price can be reasonably close to list price.  Ask your agent for his or her unbiased opinion of your home’s probable sales price. (Some sellers browbeat their agents on price, feeling that if they can convince the agent the home is worth more, it will sell for more.  Give your agent the permission to be honest with you – that will be your best help.)

Are you interested in, or thinking of, buying a home in Los Gatos? If so, there’s a Los Gatos homebuyer “start kit” page full of information targeted directly at the needs of Los Gatos homebuyers. Whether you want to browse houses, condos, or neighborhoods, you’ll find tools to help you begin your homebuying journey there. It is a launch pad for loads of information, including:

• Los Gatos homes for sale – view by map
• Los Gatos homes for sale – broken down by price point
• Los Gatos real estate market reports
• Los Gatos home sales prices by map
• Information on Los Gatos neighborhoods, subdivisions and areas
• Information on Los Gatos schools
• Photos of Los Gatos
• Information on Los Gatos history, architecture, parks, and more

Please stop by and bookmark this site. It’s a very helpful “starting point” for buying a home in Los Gatos.

Many Silicon Valley home sellers want to sell their homes As Is. In the case of short sales, it is likely that the sale will be As Is, and with foreclosed or bank-owned properties, you can be fairly sure that it will be an As Is sale.

But what does that mean, exactly?

As Is means that the home will be conveyed to the buyer at the end of the transaction in the same general condition it was in on the day that the buyers wrote the offer. If the roof has leaks, the crawl space is full of termites, and the appliances do not work, that is how it will be on the day escrow closes.

What it does not mean is that the seller can let the property condition deteriorate. The seller must continue to maintain the home and land in the same general condition. So if the lawn was green and well trimmed, the seller cannot suddenly let the grass die and neglect to mow it. If a baseball breaks a window after the buyer and seller have a ratified contract, the seller must repair it. The condition will not have to be better, but it should not be worse, either, than on the day the buyer and seller agreed on the price and terms of the sale.

What do Silicon Valley home buyers and sellers think of the As Is clause? Ask and you will usually get very different impressions.

Silicon Valley home sellers may feel that the home is in good enough condition and they do not want to have to run around doing repairs in order to close escrow at the end of the sale period. They want guarantees going into the deal that they are not going to be surprised with a lot of demands to improve the home. They view that as coming straight out of their proceeds.

In other words, they know that if there are surprises, their net will be less, not more. Buyers never investigate the property and say, ˜gee, its in such great shape I will pay more than I initially promised! No, the sales price is usually the most the sellers will be able to get, and any further negotiations are going to be downward from there.

Silicon Valley home buyers will not be thrilled with a seller’s request for an As Is sale when there are no pre-sale inspections or if those inspections revealed a lot of problems, or even a lot of unknown further inspections. However, if the seller did the inspections and then made needed repairs, buyers will usually accept an As Is Sale. Buyers do not like surprises either. In fact, surprises are what usually kill home sales!

An As Is sale can work in Silicon Valley real estate sales as long as there is transparency and the sense of risk is minimized. It is crucial for sellers to have good pre-sale inspections before selling As Is. And it is just as important for buyers to be fully pre-approved so that sellers know they are not wasting their time with a buyer who may not really be qualified.

When both buyers and sellers do their work upfront and come to the negotiations truly prepared, the chances for a completed transaction rise, and so do the odds of everyone feeling like it was a ‘win win’ situation in the end.

Be careful what you wish for. The news stories make it sound so attractive – get a home for 10% less than market value. That may happen. Sometimes. The national average for short sales actually closing is extremely low, by some counts as low as 10 or 11 percent.

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?