It’s a January that feels like March, if a dry one. The weather is clear, mild, and temps are sixty to seventy degrees, the skies are blue and trees are beginning to blossom – a great environment for house hunting. Is it too early in the season to begin your search for the right home in Silicon Valley?
Each prospective home owner’s situation is different, but for many people, January is a great time to jump in with house hunting, before the Super Bowl, Valentine’s Day or some other point a little later in the calendar year.
Weather, Inventory, Interest Rates and Silicon Valley house hunting
First, to note the obvious: there is no weather related reason to wait. (Sellers: pay attention!)
Second, let’s discuss selection. Inventory is horribly low (see the inventory data table in my 2020 predictions article). Most people expect the number of available listings to be higher in Spring. Seasoned Realtors know that while this often happens, it doesn’t always, so we cannot count on it. (Check the Santa Clara County monthly real estate statistics here.)
How bad is it? I’m on the MLS right now. For single family homes (houses and duet homes) in Santa Clara County, there are 411 for sale right this moment which are not sale pending or under contract. This is for the whole county, where there are 1.8 million people residing.
There are a mere 154 in the City of San Jose, home to nearly one million people. It’s always low in January, but not this bad. It’s just about record-breaking, tied with about 2 years ago, when the market appreciated in a frenzy the first part of 2018.
It’s clear that this is scrapping bottom. Often Silicon Valley residents think “it will be better next month”. Usually it’s better by March. But sometimes it actually gets worse before it gets better. Things we cannot predict, such as an earthquake, a terrorist event, a stock market crash and other “out of the blue” things can all tank the market. Other things, such as much lower interest rates, a hiring binge by tech giants, can cause the local real estate market to heat up. We just cannot guarantee that the market will do this or that. But today we do know that inventory cannot fall much further.
Third: interest rates. Unless you are buying property “all cash”, the interest rate you pay for your mortgage will impact your buying power significantly. Ordinarily, interest rates are lowest in winter and very often rise beginning in mid-February, when more buyers come onto the market. This is a simple formula of supply and demand. In winter, there’s less demand, so frequently we see the best rates then. That said, both listings and sales are off and if they stay low, interest rates may also stay low (or even go lower).
Let’s circle back to the original question now. Is it too early in the season to be house hunting in Silicon Valley? The weather is good, so that’s no detriment. Inventory is terrible, but it may not actually be any better in a month or two if buyers purchase as fast as new listings appear. And interest rates are still very attractive, with the possibility that they will rise or fall throughout the year. If inventory remains tight, and job growth continues in Silicon Valley, prices may go up, not down, for many or possibly most houses in this area. So no, it’s not too early to be house hunting!
What I’m telling my clients is this: get pre-approved and look now. Let’s see what’s available in the way of listings. If you find the right home, jump on it. ou’ll have less competition now. Interest rates are great. Even the weather makes moving easier than normal. Don’t buy the wrong home in haste, but be ready if the right one comes on the market. you may be very happy to get a jump on the year.