Valuation: Price Per Square Foot is only Part of the Answer

Additons and price per square foot values - house being added onto in Silicon Valley - price per SF with add onsThe “price per square foot” data point can be useful between uniform or very similar homes, but using it with dissimilar properties (size, lot size, school districts, and other elements) will result in a wrong valuation and upset home sellers and listing agents.

An important real estate principle to know is that smaller homes nearly always sell for more on a per square footage basis than 10-15% larger houses in the same area. The reason why is that kitchens and bathrooms are the most expensive rooms, but often there is just 1 kitchen and a similar number of baths with smaller vs larger homes.

Even if the properties are comparable in many ways, more than 10 or 15% difference in square footage can make the price per SF very wrong.

When to use the price per square foot data set

If evaluating condos in the same complex, such as a 2 bed, 2 bath with 1,000 SF, it makes sense to compare units in the same complex with 900-1100 SF (plus or minus 10%). If nothing is available, going to 15% may work, but the data won’t be as reliable – 850 – 1150 SF.

In a subdivision of houses that are all about the same age and with similar lot sizes, the target would again be 10% of the home size. In a 2,000 SF house, that means plus or minus 200 SF, ideally, but not more than 300 SF.

If a 1500 SF house is included in the analysis of a 2,000 SF house, it will mislead the home owner because the 1500 SF house will sell for more on a per SF basis than the much larger 2,000 SF house. The seller will overprice the home if doing that.

As one factor among many, it’s completely fair to include the price per SF when trying to determine what a home’s probable market value ought to be, as long as it’s within that 10% range, ort 15% at the very outside.

 

Other factors that influence valuation – beyond the price per square foot

Remember, too, that a house, condo or townhouse isn’t worth one exact number, but a range – because the terms involved also impact the sales price. Although price per square foot is one way of finding approximate value, often is not the best, especially if you use it alone, because there are other factors besides the square footage of the house.  Here are some of the other factors that can mess up that valuation based on price per square foot alone:

Location and lot / land differences and price per square foot

  • precise location (view, proximity to something undesirable)
    • for example, one house is next to tidy homes, but another has a junky neighbor or two
    • one house is internal to a neighborhood, and another is on a busier road
    • one residence backs to commercial property or a tall apartment building, which another backs to a single story house
    • whether the street is a good one or full of parked cars & RVs
    • whether the house is below or above grade/street level (most people don’t prefer being down from the street)
  • lot size and usability (flat vs sloped)
  • lot shape & access (flag lots may sell for less than homes directly on the street)
  • back yard size

Home changes and condition
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The San Jose Real Estate Market Analysis

San Jose Real Estate MarketThe San Jose real estate market remains in a hot seller’s market, keeping active into winter with slight seasonal cooling. Demand may have shrunk between rising rates and inflation, but inventory remains historically low so it’s still far from balanced!

First, some quick data from my RE Report and hand-pulled from the MLS today. There appears to be a small amount of under- or over-counting between the RE Report and MLS Listings, so numbers vary slightly between the two, but the data is still useful for trend tracking.

  • The January 2024 sale price to list price ratio for San Jose single family homes rose to 104.7% of asking, that’s +1.6% from last month per the RE Report and +6.1% from this time 2023, following the bottom of the market’s decline. For the MLS stats we pulled today, however, it shows 104.4% average, up from 102.8% (+1.6%) the month prior. Either way, the average home is selling consistently over list price in San Jose, and warming up into the new year.
  • Home values for single family properties are up from this time last year by approximately 8% – 19%, and month-over-month closed sales prices rose around 1% – 5%.
  • The time on market slowed slightly month-over-month to a 22 day average (RE Report). That’s still quick turnover averaging well below a month, indicating a clear seller’s market.

Market Data: What Numbers Make a Difference

While prices and overbids have fallen since the peak, in some ways 2023 was even more challenging for buyers. For most buyers, their ability to purchase has been severely impacted by higher rates on home loans and the changing insurance market. But the biggest hurdle for most buyers is the extreme and persistent lack of available homes!

Since March 2023 San Jose has frequently had record breaking low inventory, often marking new lows with the fewest available listings by month in over a decade. And it doesn’t look like inventory will really pick up any time soon, either.

Why such low inventory?

While in a more typical market we might have a number of sellers looking to “move up” or downsize, most homeowners today couldn’t afford to move or don’t want to take on a higher-rate mortgage. Now it seems like a higher percentage of the listings we are seeing comes from investors, people leaving the area, and sales by family after a death – cases where there is no pressure to repurchase or where selling is the only option. One exception we’re starting to see is homeowners with adjustable rate mortgages who don’t have the same low rate to hold on to at their current home. Still, that limits significantly what is available to buyers!

Although inventory remains at record-breaking lows with higher demand than availability, sale prices and overbids are not breaking records like last year’s spring peak. Many buyers are experiencing significantly more pressure from higher interest rates, fluctuating stocks, looming layoffs, and other factors limiting purchase power and lowering confidence. That said, not every home will face the same challenges – there are loads of micro markets that influence how well any given home does, and decent homes that are marketed appropriately still regularly become bidding wars for driven buyers. All said, take this city-wide data with a grain of salt.

 

Inventory - San Jose CA listings of houses / Single Family Homes for sale

 

Inventory remains severely low – currently showing the second lowest January inventory over more than a decade (only January 2022 was lower)! If you’re an active home buyer, it is slim pickings!

The data below in the “trends” chart is from our Real Estate Report for the City of San Jose.

San Jose Real Estate Market Trends at a Glance (RE Report)

 

Trends At a GlanceJan 2024Previous MonthYear-over-Year
Median Price$1,600,000 (+4.9%)$1,525,000$1,347,500 (+18.7%)
Average Price$1,693,940 (+1.0%)$1,677,520$1,563,350 (+8.4%)
No. of Sales157 (-25.2%)210128 (+22.7%)
Pending197 (+20.1%)164152 (+29.6%)
Active120 (+25.0%)96250 (-52.0%)
Sale vs. List Price104.7% (+1.6%)103.1%98.7% (+6.1%)
Days on Market22 (+14.1%)1931 (-28.7%)
Days of Inventory23 (+67.2%)1459 (-60.9%)

 

Available inventory is less than half of was at this time last year, while pending and closed sales have risen above 2023 numbers. Demand is extremely high! The chart clearly shows a strong seller’s market launching out of a slightly cooler December and into the new year. Winter tends to be the best time for buyers to snag a “deal”, however we’re beginning to leave the winter trends behind and spring is fast approaching! Keep reading below for more data and market analysis.

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What has waiting cost you?

Row of houses with arrow indication price appreciation - What has waiting cost you? Indecision can be expensive If you’ve been on the fence about buying a home, have you considered what has waiting cost you? Indecision can be financially and emotionally crippling. 

Both home buyers and home sellers can experience delays in buying and selling, and also experience losses in what they could accomplish in a real estate transaction because of slowdowns in execution. Since our Silicon Valley real estate market has more periods of home prices rising than prices falling, the majority of damage from delays appear to fall on home buyers.

Sellers may be locked in with low rates and may now be upset that they did make their move up or move down purchase when mortgage rates were better. Buyers may feel like their opportunity window has passed them by.

  • If you’ve been thinking of buying a home for 5 years or more, that wait has cost you lower home prices. There is a chance that you may be priced out of the market.
  • For those who bought a home before rates bottomed out during the worst of the COVID pandemic (rock bottom was January 2021), there was a chance of refinancing and getting a loan at under 3%.  Today rates are closer to 7%. Buyers now are watching rates for a chance to refinance and get a better deal and lower house payment. Rates are hugely important when gauging housing affordability.
  • A fair chunk of buyers are hoping that prices will decline.  Demand far outstrips supply, though, so for now that appears to be wishful thinking.
  • There are some times when home prices go up faster than you can save. Right now appears to be one of those periods. If you decide to “wait and save”, the gap will increase between you and the home you want to buy, sadly.

Home buyers, what has waiting cost you?

Since 2012 our housing market has experienced prolonged periods of rising home prices with only a few corrections here and there. For would be owners, those few corrections were opportunity moments. Our last one was the second half of 2022. When home values are soft, few buyers jump in, though, waiting to get more for their money by holding off.

Trying to time the market seldom works, though. Blink and the market shifts back into the other direction! There’s almost never a perfect time and some objection to buying.

As am example, here are the average and median sale prices for Cambrian Park (MLS area 14), a section of San Jose that is often fairly reflective of the county’s appreciation overall.

The first year is 2013 since from 2006 – 2012 we had a bit of a wild ride with the Great Recession, but by January 2013 we were solidly into an appreciating market.

Cambrian home prices over time - what has waiting cost you?

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Mountain View CA real estate market trends and statistics

Mountain View real estate market trends - by Mary Pope-Handy and Clair Handy - blue house with wordsThe Mountain View CA real estate market was a strong market and continued heating up, even breaking some recent records!

Quick summary on the realty market in Mountain View, CA

  • The average sale price for houses is up month over month and year-over-year.
  • The median sale price is also up for both.
  • Days on market grew from 15 to 28, but still in “hot market” territory.
  • The sales to list price ratio slipped but remains well over 100%

Mountain View CA real estate market trends at a glance

First let’s have a look at the Real Estate Report for residential sales data.

Trends at a Glance

Trends At a GlanceJan 2024Previous MonthYear-over-Year
Median Price$2,325,000 (+13.4%)$2,050,000$1,980,000 (+17.4%)
Average Price$2,482,800 (+14.5%)$2,167,460$2,289,530 (+8.4%)
No. of Sales10 (-23.1%)13(+11.1%)
Pending(-42.9%)14(+60.0%)
Active(+28.6%)714 (-35.7%)
Sale vs. List Price103.3% (-2.4%)105.8%100.7% (+2.6%)
Days on Market28 (+87.2%)1524 (+15.7%)
Days of Inventory27 (+67.1%)1647 (-42.1%)

 

Mountain View CA real estate market trends and data by neighborhood or district

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Los Altos: Beautiful Silicon Valley Suburb

Los Altos downtownLos Altos is a scenic town, semi-rural, conveniently located, with notably good schools (Los Altos or Cupertino schools). The charming old style downtown enjoys superior restaurants, shops, and is a pleasant place to stroll. The town enjoys a community college and a golf course. Its a great place for pedestrians and cyclists (lots of paths), and is a quick jaunt to both Palo Alto and Mountain View, both very popular peninsula destinations.

There’s a brief history of Los Altos on that city’s website that I found interesting. First, the land that started the community was originally 140 acres purchased from Sarah Winchester. Second, Foothill Expressway used to be a right of way for the Southern Pacific Railroad. The train line ceased operations in 1964, and the expressway was put in. Love local history from the Valley of Heart’s Delight? The Los Altos History Museum is a worthwhile destination.

The zip codes don’t stay within the city’s boundaries. Both 94022 and 94024 can be found in Los Altos and adjacent Los Altos Hills.

Los Altos Real Estate Market Conditions

Below please find first information from Altos Research, and then from the RE Report (we have subscriptions to both). Altos’ data is for the city and by zip codes. It uses list prices and its charts and reports are updated automatically each week. The RE Report uses data for each full month and provides it for the city as a whole and also by four distinct regions or neighborhoods. Both reports offer a subscription option if you click on the links.

The next 3 charts are from Altos Research and they are updated weekly, so check back often!  You can see the weekly report, with even more data, by visiting the link. Subscribe for Los Altos, for one of its zip codes, or anywhere else nearby by first entering the desired zip or city in the “Search Anywhere” button and then clicking on subscribe.

Whole town- both 94022 and 94024

 

 

94022

 

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The Monte Sereno Real Estate Market

The Monte Sereno real estate market is similar to Los Gatos, but distinct - Monte Sereno shares many features with Los Gatos but is a distinct cityHow is the Monte Sereno real estate market? Because the city is small, with just about 3,500 residents, there usually are few homes listed for sale or selling, and with small numbers we can get seeming volatility. This article is updated monthly with new data and analysis, so scroll down to read the latest and check back regularly. Here are a few details from the latest market update:

  • With so few sales and listings, Monte Sereno real estate data can swing quite wildly in the charts below so take it with a grain of salt.
  • This city appears to be in a seller’s market with severely low inventory, just 4 available homes at the end of January. That’s slim pickings!
  • There were just 2 closed and 3 pending sales last month, which together are not far off from this time last year.

There are ALMOST no condominiums or townhomes in Monte Sereno. As of Febuary 2024, the MLS showed just 6 sales in these two categories in total – and that’s going back to 1998! And one of those, at least, appears to actually be in Los Gatos. One of the major challenges for this city is to ensure that at least some housing units are deemed “affordable.” You can find the city’s housing plan here (an online pdf):  http://www.montesereno.org/DocumentCenter/Home/View/674

Because this is such a small city and there’s a tiny pool of data, please also have a look at the Los Gatos real estate market post on this site.

Below is a quick market profile for the Monte Sereno real estate market. This is updated automatically weekly, so please check back often.

 

Monte Sereno Altos Real-Time Market Profile

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Sunnyvale real estate market trends & statistics

The Sunnyvale real estate market, remains a hot seller’s market.

Sunnyvale real estate market  trends and stats at a glance

Here is a quick rundown of the trends at a glance for the Sunnyvale real estate market, with more in the charts below:

  • The average sale price of Sunnyvale homes rose 16% from a year earlier, and up 8.5% compared to December.
  • The median sale price is up both monthly and annually.
  • Inventory rose tremendously compared to December, but it’s down compared to the year before.
  • Pending sales are up from last year from the month before.
  • The sale to list price climbed to 107.7, amazingly high for January.

PLEASE visit our ReReport page for data here, throughout Santa Clara County, and also for San Mateo and Santa Cruz Counties.

(If you’re viewing this on a mobile phone, swipe horizontally to see the full chart if it goes off the screen.)

Trends at a Glance

Trends At a GlanceJan 2024Previous MonthYear-over-Year
Median Price$2,368,000 (+16.7%)$2,029,500$2,130,000 (+11.2%)
Average Price$2,309,890 (+8.5%)$2,128,840$1,990,860 (+16.0%)
No. of Sales19 (-9.5%)2114 (+35.7%)
Pending20 (+11.1%)1814 (+42.9%)
Active17 (+183.3%)630 (-43.3%)
Sale vs. List Price107.7% (+1.0%)106.6%98.6% (+9.2%)
Days on Market13 (-34.2%)2039 (-66.8%)
Days of Inventory27 (+213.2%)964 (-58.2%)

 

You may also want to see how Sunnyvale stacks up to other communities in Santa Clara County. If so, click to see the PDF Real Estate Report for Santa Clara County, updated monthly.

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