If you are purchasing a condominum or townhouse in Silicon Valley, you will need to consider a few things more than if you were buying a house that’s not held in condo ownership*.

Like what?

Most of all, with a condo or townhome (or planned unit development) you are buying a fraction of the entire complex as well as your own living space (condo or townhome). Condominium ownership includes a percentage of the community’s property. You will benefit from it, but you also will be responsible for it.

Additionally, there are a lot of  documents to read and understand when purchasing a condominium or town house. You will need to be able to accept the rules, bylaws, financial statements, meeting minutes, articles of incorporation and more.  You will want to read the newsletter (and minutes) carefully to see if there are any “issues” in the complex.  Plan to invest several hours in reading and digesting the information in the 2-3″ stack of papers.

Naturally another difference is that your neighbors will be in very close proximity.  If you are a non-smoker but the neighbor in the unit next door smokes, you may not be too happy about it later.  A few months ago I showed a Rivermark (Santa Clara) townhouse that was just darling but the next door neighbor came out and smoked on the front porch while we were there.  My buyers didn’t want to purchase the home for that reason – they did not want to deal with the smell later. You may have similar concerns about other odors or noises. 

Perhaps most important are the financial issues and risks:
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How is the Campbell condo and townhouse market?  The answer may well depend on both what part of that market we’re discussing and which data we’re focusing on.

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.

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The condominium & townhouse market is improving dramatically now.  It is evident both in looking at the stats countywide and in my recent experiences holding open my townhouse listings in Saratoga and Sunnyvale as well as recently participating in the sale of a townhome in Almaden Valley (representing a buyer) – all different areas and price points but all very active.

Here are the numbers for May sales of condos and townhomes for all of Santa Clara  County:

As you can see, the days on market are shrinking and prices (both median and average) are rising.  A few numbers cut back slightly in May: the sale to list price ratio retreated a little to 99.9% and the pending properties went down a little too.  But the number of sales were up.

The “months of inventory” or absorption rate is a great way to know how much of a buyer’s or seller’s market it is in any given place. Six months is considered balanced, less is a seller’s market and more is a buyer’s market.  Here are the months of inventory for selected communities in the “west valley” area of Silicon Valley – they are all “seller’s markets”, but some are strong and some are approaching balanced:

Of course, this is still painting with a broad brush.  The absorption rate for any of these areas may not be accurate for the various price points or school districts that might be found there.  For instance, a large luxury townhouse in Los Gatos which is downtown might be a really different type of market than a small, entry level one bordering Campbell or Cambrian Park.

What everyone’s wondering is if this seller’s market for condominiums and townhouses will continue despite the end of the federal home buyer credit.  To utilize that credit, homes had to be in contract by April 30th.  Most of those should be closed now, or nearing that date at best.  So we’ll really know more as we move into summer. My sense, though, is that what’s driving this market is much more the affordable prices of homes and of loans. The credits are a bonus, but many in Silicon Valley make too much money to be able to use them.

For information on your particular part of the Silicon Valley condo or townhome market, please give me a call or email me!

How’s the San Jose real estate market for condos in Cambrian Park?  Let’s have a look at some of the numbers from my Real Estate Report):

As you can see, inventory is way down year over year – it’s down by 2/3!  The market is largely about supply & demand.  Right now, home buyers know that interest rates are poised to rise (one half to one full percent) sometime this year, so many are finally jumping off the fence and wishing they’d done this a year ago. 

Sellers, meanwhile, are not happy about the new, low prices so are holding off on selling.  Hence, we are experiencing a shortage of supply. 
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How’s the market in Saratoga?  Your view of the market will be influenced by whether you’re looking at the homes that have sold, the ones on the market, or the ones that are sitting and not selling. 

Here’s a look at the numbers from my Real Estate Report for single family homes: 

Among the sold homes, the median price has been slipping.  This is an “overall” number though, not reflecting price points, location, or school districts.

Here’s the same info for condos and townhomes in Saratoga:

As you can see there were no sales of condos in Saratoga in November – hence all the zeros.   What is managing to sell are the very least expensive homes – not the luxury condos.

Now let’s turn our attention to what’s happening now amoung the active or for sale homes in Saratoga (using Altos Research, to which I have a subscription).

Here’s a graph displaying the overview of list prices for condos and single family homes in Saratoga:

Oddly, list prices appear to be up even though the median sales price is clearly down.  Are sellers out of touch, or what’s happening?  We’ll need more data to answer that.

Here’s a similar graph but just of the single family homes, and this time with a breakdown by price quartile. (Please note that the info would be even more precise if broken down by school district, but this particular program doesn’t yet filter by schools.)

Interestingly, the middle quartiles showed upward movement in pricing over the last 12 months. I have buyers in the lower 3 quartile and it seems that there’s not much inventory among thouse in Saratoga or Cupertino Schools, and when the home is nicely fixed up and has no issues (problems), prices seem to be inching up. 
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The following post was written in May 2009. For a more current update, please see the June 2010 post, 
The Condo and Townhouse Market Update in the West Valley for June 2010

March 11, 2009

The real estate market for condominiums and townhomes in the west valley area of Silicon Valley is similar to the rest of Santa Clara County in one main regard: the most expensive homes are having far more trouble selling than entry level homes.

Today we’ll look at the months of inventory for condos and townhomes in four areas of the west valley: Almaden Valley, Cupertino, Los Gatos and Saratoga.  Since this is a fairly small subset of the overall residential real estate market, I’ve also looked at them as a group (upscale areas with good to great schools near the  foothills) and wanted to see the overall trend when the four neighborhoods were viewed together.

As a reminder, under 6 months is a seller’s market, 6 is neutral and 7 or more is a buyer’s market.

Interestingly, the overall trend of these four areas combined shows consistent improvement in the market toward neutral, from 23.5 months in January to 8.6 months in April.  It’s really very dramatic when viewed as a whole!

Cupertino area condos are faring well in the last 30 days with more closed escrows and just 8 months of inventory. Los Gatos is even better now with 6 months of inventory.

The market is much tougher in Saratoga, CA, where almost no condominiums or townhouses are selling.  Those that do go under contract are in the lowest price ranges.  Many properties are “just sitting”.  Buyers are waiting for prices to drop.  Nearly as tough is the condo market in Almaden Valley.

The challenge for luxury condo owners is that buyers now are primarily buying either for shelter or for investment.  Investment buyers seldom purchase a luxury item (it’s safer to buy two small condos than one large one to hedge against vacancy).

For many condo sellers, now may just not be the right time to sell. On the other hand, if you’re moving up, now may be the ideal time since prices in the higher priced homes are fairly soft compared to “normal”.