It is a strong seller’s market in the Alum Rock area of San Jose right now: inventory is shrinking and prices are rising after hitting bottom a few months ago. Prices are still way off year over year, but for the last 4 months or so, prices have been rising in this part of Silicon Valley, and it’s quite dramatic.

As of a few days ago in this area of San Jose, there were 203 single family homes for sale and there were 114 that sold/closed in the last month. To get the “months of inventory” or absorption rate we just divide the 203 by the 114 and we get about 1.8 months of inventory, which makes it a very strong sellers market. 

(Because it’s so affordable, first time homebuyers are flocking to Alum Rock in droves. Unfortunately, they are sometimes outbid by all-cash investors and left frustrated as homes get multiple offers and prices skyrocket out of reach.)

The absorption rate can be measured in days, weeks, months (or years) of inventory.  Below is a chart reflecting the days of inventory relative to the last 18 months or so.  As you can see, the absorption rate has been shrinking very, very dramatically (as prices have fallen through the floor).

(more…)