The San Jose real estate market continues to be a deepening seller’s market with no signs of letting up.
First, some quick data from my RE Report via the bullets and chart below. There appears to be a small amount of undercounting or overcounting between the RE Report and MLS Listings, but the information is still good for tracking trends.
- The May 2022 sale price to list price ratio for San Jose single family homes slipped again to 113.0% of asking (-3.1% from last month), but remains up from a year ago when was 111.2% (+1.6% from then)
- Home prices are up roughly 17-19% from a year ago (almost a typical 20% down payment!)
- The median sale price is $1,742,500 (a dip from the prior two months, but way up from a year ago, when it was $1,470,000 (+18.5%)
- The average sale price was $1,864,960 (-3.2% from last month, and +17.6% from May 2021)
- The days on market slowed a hair to 11 (same as in May 2021).
War, inflation, stock market, recession concerns – and real estate
Many of our home buyers are financially powered by tech stocks, stock options, and RSUs. When the stock market tanks, some buyers will rush to put their cash into real estate (the quip we often hear is that “real estate does not go to zero” and “at least you can live in it”. At the same time, if the most amply capable buyers don’t want to sell their holdings at a 10% or more discount, that will impact how much they are willing to pay.
For some, the rising interest rates combined with the lower stock values have been a double whammy on affordability in a market still seeing historically high prices.
We are seeing slight signs of cooling in the market with fewer offers and some data points just a hint calmer than a month ago. Prices are not climbing like they were earlier this year, but they’re not falling either and interest rates are rising.
Nationwide, inventory is rising pretty noticeably, and we’re starting to see some growth around Silicon Valley, too. So are we getting back to normal inventory? Let’s have a look at what has historic inventory has looked like in San Jose. (If the chart is too small, click to see in full size.)
At the start of the chart, 2010, the market was still reeling from the 2008 recession, but by 2017 we were seeing a strong sellers market with record low inventory. While listings are certainly up from 2021’s rock-bottom lows, it’s still extremely limited and nowhere near the inventory of more balanced years like 2013 and 2014.
So while inventory has been growing, there is still a shortage. If it continues to grow, prices should level out or drop. But will it be on par with interest rates rising? No one knows.
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 Glance
|No. of Sales
|Sale vs. List Price
|Days on Market
|Days of Inventory
Year over year and related charts from MLS Listings
I pulled these directly from the MLS myself today (6/8/2022). The limited data from this month is included in red, but as it is an incomplete picture with data based only on home sales that closed between June 1th – June 8th it should be taken with a grain of salt. As with the earlier chart, click to view the full size.
The San Jose Real estate market’s sale price to list price ratio – notice the huge jump from last year, and then notice the ongoing streak of record breaking highs!
San Jose sale price to list price ratio – click to view larger
Notice that MOST YEARS, but not always, the sale price to list price ratio tends to peak around April with a rise between March and April and a dip from April to May. It fell a little in 2020, but that did not turn into the correction we all anticipated at the start of COVID. Look into late 2020 and you’ll see that all we were actually experiencing was a slight breather – very slight.
Now looking at the most recent numbers, winter 2022 started off raging hot and spring hit it’s peak for overbids in March and began to decline in April. While the sales to list price ratio is slipping, it’s still higher than any past year.
Please keep reading below.
How’s Cambrian Park condo & townhouse market? Normally we answer this question in brief with regular monthly updates over on the Cambrian Park Real Estate Market Update. However with fantastic neighborhoods like Montanas de Los Gatos, Cambrian condos are not to be missed! So today we’ll take a closer look at the condominium and townhome market in this popular San Jose district!
Before we dive in, let’s see what’s selling now in the Cambrian Park condo & townhouse segment of the market.
Just now (as of May 12, 2022), I looked into the MLS to see the condo and townhome sales in Cambrian over the last month.
- there are 13 units listed for sale as “active” (not pending or under contract)
- 8 are listed as condos (3 are “agent only” status) – average size is 894 SF and average list price is $673,111 4
- 5 are listed as townhouses (2 are “agent only” status) – average size is 1574 SF and average list price is $1,168,800
- 1 home is under contract with one or more contingencies
- 13 homes are pending with no contingencies (average of 9 days on market, 4 condos, 9 townhomes)
- 13 condos / townhomes have sold and closed escrow in the last 30 days (9 condos, 4 townhomes)
- They sold with an average of 6 days on market (condos 5 days, townhomes 8)
- average sale price to list price ratio was 116% (range 98% – 129%, condominiums averaged 113%, townhouses 122%)
Now let’s have a look at some of the numbers from my Real Estate Report:
Real Estate Report: Cambrian Park Condo & Townhouse Market – San Jose
It’s a hot spring market for the Cambrian condo market with prices up double digits over a year ago. This chart represents all of MLS Area 14, which is primarily 95124, a good deal of 95118, and a tiny sliver of Campbell 95008.
|Trends At a Glance
|No. of Sales
|Sale vs. List Price
|Days on Market
|Days of Inventory
Altos Research Live Charts
The market profiles are live, updating automatically once every week, with active inventory from MLS listings.
Most of Cambrian Park falls under the 95124 zip code. Here’s a quick look at the main real estate market data points for Cambrian 95124 this week:
Why is inventory so low? Part of it is that homes are selling as fast as the come on the market.
Why is inventory so low? As of today, January 24, 2022, there are 426 single family homes for sale in Santa Clara County (population appx 2 million people). A year ago it was about 800 and the end of January. Where have all the listings gone? And when will it get better for home buyers? (You can check Santa Clara County inventory and other real estate stats on this blog.)
We have a supply and demand imbalance, with demand strong but available homes for sale low. One question involves equity. Since home prices have doubled in the last few years, home owners can afford to sell. With so much equity, why is inventory so low? After the downturn from 2008 – 2010, we knew that many sellers could not afford to sell. But now they can. Some homes have appreciated enough in 6 months that there is sufficient equity to sell and at least break even. What gives?
Why is inventory so low? When will it get better?
First, let’s consider the root causes of the problem, and which ones may not be ongoing.
Reasons for the low supply of homes for sale include these:
- Tax considerations (ongoing)
- for long term home owners, there will be a significant capital gains consideration in many cases
- for property owners under age 55, moving will likely mean an increase of property taxes
- last year, CA Prop 19 was passed, making it possible for older sellers to transfer their property tax base anywhere in the state, but that has not helped as much as hoped with the inventory crisis
- Fear of selling and not being able to buy a replacement property keeps many people from selling (ongoing as long as inventory is so restricted)
- If home owners refinanced at a lower rate, they may be concerned about selling at the low interest rate and then buying with a higher rate tomorrow
- Covid may be causing temporary slowdowns with homes coming onto the market. Some sellers cannot get their homes ready as planned due to being sick themselves. having workers for sprucing the property up become ill with the coronavirus, or supply chain issues with needed items coming slowly. Some clients just don’t want to sell during the pandemic, period, so that angle may not be more long lasting.
Often we see more listings hit the market in January and even more in February. It’s way down now, and I am suspecting that Covid and its impact has become a bigger issue with the Omicron surge. If that’s the case, as Omicron recedes, we should see that seasonally typical rise in available properties. The usual February increase may end up happening in March (possibly April). We may still be asking in April “why is inventory so low?”, but hopefully it will be much improved over the current numbers by then.
When will it get better? (more…)
As 2021 comes to a close, it’s time to start looking forward to 2022. What are your real estate related goals and resolutions for this new year? Do you plan to buy, sell, or remodel your Silicon Valley home? If so, this is a great time to sketch out your objectives and start early preparations to get the wheels in motion.
For South Bay home owners who want to make 2022 the year to sell and move, it’s wise to plan ahead so you can maximize your return on investment of time and money. A clean, well-prepared listing gives buyers greater confidence, and confident buyers tend to make higher offers! Take the time to do it right and you will reap the rewards of your effort.
Quick Tips for Planning to Sell a Home in 2022
- Hire your real estate professional early in the process so that she or he may provide additional guidance from the beginning. It won’t cost more to hire early and you get more help. You may even save money by avoiding costly mistakes. A good agent will help you prepare your listing and determine a timeline to sell, whether you plan on selling this spring, next year, or next month.
- Decluttering is one of the biggest task for home sellers and it can be where you get the most bang for your buck. Presenting a property to buyers in a way that feels like home, but not your home is a balancing act. Some homeowners choose to move out and stage their home to sell, which has been increasing in popularity and is certainly a successful way to declutter! Sellers occupying a listing should commit to depersonalizing the house and creating a marketable space. Some sellers will discover this is a much bigger undertaking than expected, and requires more time and energy than originally planned. This can be particularly challenging for long-term residents, sellers who are downsizing, and seniors. Talk to your Realtor before embarking, as some items may be helpful for staging and you don’t want to totally empty the house! Completely empty homes do not sell as well as those which are thoughtfully furnished.
- Fix everything that is broken or in disrepair. No home is perfect, and buyers will not expect it to be (unless it’s brand new, of course), but everything you can repair is one less thing the buyers will worry about when writing an offer. That lightbulb that’s burnt out? Replace it now so that it doesn’t wind up in inspections or worrying buyers about the electrical system! Low cost repairs are often an excellent investment, but so can some more expensive fixes. I have had sellers who willingly go above and beyond preparing their home, from repiping to reroofing, see a clear return on investment for their efforts! However most sellers don’t want or need to do that much work. A bid with a price for the work from a reputable company is usually enough. Speak with your listing agent before tackling any major projects.
- Clean everything: windows, window tracks, hardware, lamps, mossy patios, etc. A clean home is inviting and feels well cared for. Professional cleaning can make lightly used carpets look new again. Areas that easily show wear, like grout, caulk, and kitchen appliances, can give that “new home” feel when they are looking fresh!
- Plan to have pre-sale inspections, but hire inspectors with your real estate salesperson.
Tips for Silicon Valley Home Buyers This Year
The Silicon Valley real estate market tends to have seasonal pricing patterns. They are not rigid, and some years the typical or expected patterns don’t really hold. Generally, though, we expect the Spring market to be hot and the winter period to be cool. Is that true? Let’s take a look at the stats that I pulled today from MLS Listings.
I spot checked the median sale price as well as the average sale price for houses in Santa Clara County, and they both followed the same seasonal pricing patterns. In the chart below, we have data from January 2013 (when the recovery really began) to November 2021. I’ve named the months with the peak prices and also the biggest dip each year. The pattern is a bit like the stock market – it does not only move up or down, but there are a lot of both with a generally upward trend.
This image is best seen on a tablet or desktop computer. If it is too small, please click on the image to view a larger version of it.
If you prefer a data table, here’s one with just the peak bolded (please click to view larger image):
Are home prices dropping in San Jose CA and nearby? Is the Silicon Valley real estate market seeing price reductions? San Jose is a large, sprawling city with about 1 million residents, so checking the San Jose real estate market a good marker for how the region is doing as a whole.
About the price drops, the quick answer is yes and no. Month over month, it’s true that home prices have inched down slightly. But year over year, they are still up significantly. The year over year part is more significant, because many years, maybe most, prices pull back a little from May to June and June to July. In other words, it is seasonally typical for prices to fall a little during this time of the year.
Are home prices dropping in San Jose CA? What does the data say?
Here’s a look at the average sale prices in S.J. from 2004 to the present for single family homes. The month of July is highlighted in yellow, generally. Most years are the darker yellow, but the “off” years where prices are a lower are in a paler yellow.
This same data may be better understood visually by some readers, so here’s a graph of the average home price in San Jose, CA, from 2004 to the present.
Today I want to share with you some stats provided by my real estate brokerage, Sereno Group. One of our own has crunched the numbers by school districts across various counties. Schools are a major driver in the real estate market, often more than zip code or city name, so here’s a very valuable approach to understanding the local housing market a bit better: a view from the vantage point of school districts.
Most of Silicon Valley is in Santa Clara County, followed by San Mateo County and a few neighboring areas. (It is sneaking into San Francisco and has also been present in pockets of Alameda and Santa Cruz Counties also.) Today, I’ll just focus on Santa Clara County.
Many cities or towns have multiple school districts. For instance, in Los Gatos, students may be served by Campbell, Los Gatos, or Union schools – depending on the address. San Jose, being the largest city in the county, has far more school districts than that.
First up, here are the numbers for Santa Clara County by high school district, a market update for May 2020:
Continue reading to see Santa Clara County’s real estate market data sorted by elementary school district.
How can you tell if it’s really a buyer’s market or seller’s market? One important data point is the months or inventory, also known as the absorption rate.
The months of inventory (MOI) tells us how long it would take for the current inventory to be absorbed if sales continue at the same rate and no new inventory were to be added.
What is the months of inventory?
The best explanation given to me for the absorption rate uses the analogy of a bathtub draining. If the tub has water in it, and no new water is added, and the drain is opened (and drains at a constant rate), how long will it take for the water to all be eliminated?
So too with Silicon Valley homes for sale. How long would it take for the current supply to be bought up if no new listings came on the market? That’s the question. It can be days of inventory, weeks of inventory, or months of inventory – or any other chunk of time you want to use. My monthly Silicon Valley RE Report uses days of inventory, referenced via DOI in the chart below, where you can see that the average days of inventory for the county is 61, or about 2 months. A quick scan down that column will provide a sense of the market for each city and town.
The faster the absorption rate, the easier it is for sellers to sell and the harder it is for buyers to buy. In the U.S., about 5- 6 months of inventory is a balanced market. Here in Silicon Valley, balanced is probably closer to 4 months of inventory.
Readers of this blog know that I really like the multi year view of data, and I think with the months of inventory that’s also really helpful. Here’s the rate for Santa Clara County, single family homes, from January 2014 to May 2020 (needs a full month to be accurate).
For the month of may, the months of inventory was 2.2, which is significantly more than most of the last six years, and double the height of the market in 2017 and 2018. Translation: buyers, this is the best it’s been for you to buy in years. Yes there may be multiple offers – but if so, it is very likely to be much calmer than this time last year or at any other time for this same season in years.
What does it mean when real estate professionals, journalists and consumers refer to a “hot seller’s market“? Simply put, it means there’s an imbalance in the market which is very much in the seller’s favor. In terms of supply and demand, it translates to far more demand than available inventory for sale (supply). It’s a good time to sell, but a hard time to buy.
The Elements of a Hot Seller’s Market
We measure or note the market conditions using a variety of data points;
- days to sell (and days on market for all homes, including unsold)
- sale price to list price ratio
- absorption rate (months of inventory, weeks or days of inventory)
- number of listings available vs pendings and recently closed homes
- rapid rise in home sale prices, especially if to unsustainable levels
- number of offers received on a property at once (multiple offers)
- buyers upping their price and improving their terms voluntarily, without getting a counter offer
- buyers writing offers with few or no contingencies, fast close of escrow or other extremely strong terms
- overall market trends of inventory lessening, prices rising, buyers getting more desperate – how all of these look when viewed as a whole
Basically, when buyers are competing against one another with multiple offers, when properties are selling quickly and over list price, and prices rise, the ball is in the seller’s court and you’ve got a hot seller’s market!
While some of the above can be easily tracked on our multiple listing service, some are not findable anywhere except in conversations with real estate agents who are actively working the market, writing and receiving contracts. What isn’t tracked includes the number of offers placed on a home for sale, whether buyers are engaging in “bidding war” tactics such as upping their price before even getting a counter offer, or offers with no contingencies.
A summary of tips for multiple-offer situations in Silicon Valley real estate contracts
Should you write an offer with no contingencies? What is the risk with a non-contingent offer?
Mistakes that buyers’ agents make which damage their clients’ chances of winning in multiple offers
It can be really challenging for people moving to Silicon Valley to get a sense of real estate prices, and perhaps more, comparing cost of from one town or district to another.
One question I get a lot is this: what does it cost to buy a 4 bedroom, 2 bath house of about 2000 square feet?
So to answer this question, let’s see what houses like this are selling for (4 bed, 2 bath, appx 2000 SF or 185 square meters) and see how the cost looks in one Santa Clara County / Silicon Valley area versus another.
Today I compared several areas and cities using this criteria: single family homes of 1800 – 2200 SF, 3-5 bedrooms, 2-3 bathrooms, on lot sizes of 6000 SF to 10,000 SF. Normally I would chart this over the last 2 months, or 60 days, but because of the low inventory causing the sellers market I have expanded the search to the last 3 months, or 90 days, for a better range. Because some areas have had a scarcity of inventory, I’ve added an addition to the chart titled NoS for Number of Sales within the given range.
Here’s how it shakes out in the “west valley areas” along the Highway 85 corridor, most of which are known to have good to great public schools. What areas are most affordable? One way of analyzing this is the “price per square foot” figure. Whenever I update the chart, I re-arrange the order of the cities from high to low based on the price per square foot, although there’s usually minimal movement.
Within this range, Campbell only had one sale over the last 90 days, so data for that segment may or may not be a good average. Both Los Altos and Saratoga had no sales within the last 90 days within these criteria, so their searches have been expanded to 0-180 days (or 6 months / half a year) and 0-120 days (or 4 months / a quarter year) respectively to provide data for comparison for this chart. Now that we have the data, let’s analyze it!