How’s the Cupertino real estate market right now? Let’s start with the most basic window into conditions: supply and demand. (This graph and more info comes from my Cupertino Real Estate Report. Please click on the link for much more data and information – with statistics and trends dating back many years. Also you will find reports which are monthly, quarterly and annually generated. Finally, there’s a “property analysis” tab which enables you to check sales – and see images – around any Cupertino address. Please allow the analysis tab to do its slow load – it’s worth it – enjoy!)

Cupertino Real Estate Supply and Demand

Cupertino Real Estate Market Barometer of Supply and Demand

The realty market barometer is going through the roof!  This implies that it’s very easy for Cupertino home sellers to get their properties into contract and to the closing table, that it is a hot seller’s market in Cupertino.  Please note the darkest line reflects housing inventory – and it’s been plummeting for months.  (Look at each year for October through December and you will note that the pattern is seasonal – but the actual number of homes available does vary considerably.)  Now please note the pale gray line, which indicates the number of homes selling and closing escrow.  The bigger the gap between these lines, the more choices buyers have, and the narrower the gap, the fewer.  Right now, for the first time covered by the chart above, these lines have met, meaning that homes are selling at the same rate that they are coming on the market.  When supply matches or outpaces demand, prices nearly always rise.

But what about home prices in Cupertino?

Here’s a look at the numbers, in brief, as reported with closed sales in December 2011.  Surprisingly, although the market appears to be very hot, prices don’t seem to reflect that – perhaps “yet”.  The median sales price of houses in Cupertino are off significantly from both the month prior and the year prior, and the average sales price is down a little. The number of sales is off a little and the list price to sales price is off some too (both year over year and month over month). Meanwhile, the days on market are growing pretty steadily.

What’s happening? Why this contradiction between the market barometer and pricing?   First, the days on market reflect the inventory which recently sold, not the inventory which is available today.  This tells us that many homes that have been on the market awhile are now being purchased. (Probably others went off the market for the holidays, which is typical for the season.) (more…)

Today we’re looking at the real estate market for houses in some of the “west valley” communities along the base of the Santa Cruz Mountains – areas where schools are good, crime is low, residents enjoy scenic views of the hills (or of the valley from the hills, depending on the location) and overall, a highly educated population not too far from Highway 85.

Of the four municipalities, three are really very similar to each other in several regards.  Cupertino has the largest population – about 58,000 people – but Los Altos, Los Gatos and Saratoga are all similarly sized, somewhere between 27,000 and 30,000 residents.  The latter three also enjoy a traditional “downtown” area which is popular with pedestrians, bicyclists and motorists alike. (Monte Sereno has 4,000 residents, which is so small that the statistics are very easily thrown from month to month, so it is omitted in this quick study.)  Of the four, Cupertino, then, is the least similar due to size and lack of a central downtown area.

We’ll take a quick look at these areas now in terms of the real estate market trends and statistics for each area, considering just “class 1″ (houses and duet homes).  The charts used below are from Altos Research, to which I have a subscription, and they will be automatically updated each week.

(1) Median List Price (per Altos Research):

Los Altos and Saratoga are neck and neck for most expensive areas in which to purchase a house. Over the last year, though, Los Altos has seen a rise in the median list price. There has been a corresponding rise in demand with the success of several local companies in the region (Apple, Google, Microsoft, LinkedIn, Facebook), some of which have gone public and others of which are on the verge of doing so. Los Altos is more convenient to most of these.

Los Gatos, which is a little more affordable than Saratoga and Los Altos, has seen a very noticeable increase in pricing also, while Cupertino’s prices have declined a little.

(1A) Median list price of the bottom quartile of all four:

(1B) And, very interestingly, same data but for the top quartile – the luxury market:

Here we see Los Altos clearly overtaking Saratoga! And also that Cupertino’s pricing is significantly lower than Los Gatos in this tier, and also that it has lost a lot of ground in the second half of 2011.  (more…)

Today I was chatting with my lender friend, Shashank Shekhar, who’s also a very active blogger and social media maven. We discussed a variety of topics, including how to price a home for sale and establishing the real estate market value of Silicon Valley homes.

Sometimes it can be tricky to estimate what a home might sell for or its market value.  I usually talk with my seller clients about trying to find the probable buyer’s value.  The seller may have a range of prices that he or she anticipates and would accept.  So too with the buyer, whose range will likely be lower than the seller’s.  The key is finding where the buyer and seller price ranges overlap. If it’s unlikely that their ranges overlap at all, we’ll have a listing that is difficult or impossible to sell.

Let’s take a hypothetical case of a home worth about a million dollars (see image above). The seller would love for the property to sell close to $1,040,000.  The buyer would like to purchase it for $960,000.  The agent’s competitive market analysis indicates that similar homes have sold or are selling at around a million dollars, give or take a percent or two.  If the buyer and seller can come to a meeting of the minds, and there’s no undue pressure on either one of them, we have (hopefully) a sale and we have market value.

But as we know, sometimes homes sell for much more than they would seem to be worth, and other times much less.

What causes property values to go above or below what would seem to be the probable value?  Undue pressure can certainly cause values to rise (desperate buyer who just has to get into a house, even if overpaying or desperate seller who has got to unload a property, even if selling too low).
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The Campbell real estate market appears to be “past the bottom”, as is the case with much of the Silicon Valley housing market. In some parts of San Jose, “the bottom” was in February or March of this year.  Campbell may have hit that point sooner – but in any event it is now heading back toward a balanced market (30 is the balance point for this formula). (Images and charts from Altos Research, to which I have a subscription and permission to use these, as well as the RE Report, another subscription service of mine. Altos uses list prices, the RE Report uses sold data as well as list prices.)

Let’s look at the data for October in Campbell – actives, pendings, and closeds (care of the RE Report).

While in many parts of the greater San Jose area the Days on Market (DOM) are lengthening, they are shortening in Campbell! Sales are up, but prices are still declining a bit (in several areas of Santa Clara County, prices are again inching up – this tends to happen in less expensive areas).  Pending sales are up and inventory is down.  So there are some mixed indicators but Campbell appears to be at or near “the bottom”.
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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).

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Home sellers want to get as much as possible for their homes. Home buyers want to get their homes for the least amount possible.  “Market value” is when buyers and sellers agree – even if one of them is a little reluctant. This is true universally, whether you’re in the market in San Jose, Saratoga, Los Gatos or anywhere in Silicon Valley (and just as true elsewhere in California or elsewhere in the world).

Real estate agents don’t control the value of the home. However, good agents can maximize the potential of the market. Homes are never worth just one set price. There’s usually a range within which terms (or conditions) can move the value up or down. It’s “price and terms”.

For instance, let’s say you have an upscale home that’s worth about 1.5 million, more or less. If an offer were to come in contingent upon the sale of another home, in a normal or balanced market, the seller would probably want more than the 1.5 because of the uncertainty. Perhaps that home would sell, if contingent, for 1.6 million (only for illustration). On the other hand, if an all-cash buyer showed up, could close in 5 days (I have seen it happen) and allowed a free rentback for a month, the home might sell for closer to 1.4 million – if the seller really needed a fast close to prevent foreclosure or to secure the deal on another home. It’s always about price and terms.

Want a good deal on price? Sweeten the terms.

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