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The San Jose Real Estate Market Analysis

San Jose Real Estate MarketThe 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.)

San Jose Historic Active Inventory of Listings 6-8-2022

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 May 2022 Previous Month Year-over-Year
Median Price $1,742,500 (-0.4%) $1,750,000 $1,470,000 (+18.5%)
Average Price $1,864,960 (-3.2%) $1,926,180 $1,585,920 (+17.6%)
No. of Sales 450 (-9.8%) 499 551 (-18.3%)
Pending 656 (-2.4%) 672 652 (+0.6%)
Active 441 (+19.5%) 369 295 (+49.5%)
Sale vs. List Price 113.0% (-3.1%) 116.6% 111.2% (+1.6%)
Days on Market 11 (+18.5%) 9 11 (-1.0%)
Days of Inventory 29 (+37.1%) 21 16 (+83.0%)

 

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 Historic Sales to List Price Ratio 6-8-2022

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.

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Relocating to Silicon Valley? We Have Micro-Climates!

Micro-ClimatesLocals to the San Jose area (Silicon Valley, Santa Clara County) know, and newcomers often do not, that we have micro-climates here. Our weather is mild everywhere, of course – we enjoy a “sub tropical climate” where citrus grows and palm trees thrive – but it varies a lot nonetheless.

What kind of variation exists in Santa Clara County’s weather?

Consider that our terrain is shaped somewhat like a funnel with the San Francisco Bay on the wide end, and the two mountain ranges making up the sides of the funnel, narrowing at its base (near Morgan Hill).

View Larger Map

Together with our funnel shaped valley, the Pacific Ocean and the San Francisco Bay are the major influences on our climate. The Santa Cruz Mountains are warmer and wetter than the eastern foothills. The Pacific Ocean brings in the rain, fog and winds pulling storms in from the ocean to the valley. Much of the weather stops at or near the coastal mountains, though, and the influence lessens as you go east such that the east foothills are very, very different from the Santa Cruz Mountains. The areas close to the bay get more breezes than those sheltered by smaller valleys or nooks.

So what are Silicon Valley’s Micro-Climates?

Here are a few basic notes for newcomers:
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Ratio of Regular Sales to Short Sales & Bank Owned Sales in Silicon Valley Areas

Mini update for Santa Clara County as a whole as of September 17, 2012 for houses in SCC:

Actives = 1295

Regular sales for sale = 1157 (89%

Short sales for sale = 95 (7%)

Bank owned houses for sale = 43 (3%)

Sold in the last 30 days = 859

Regular sales closed in last 30 days = 675 (79%)

Short sales closed in last 30 days = 151 (18%)

Bank owned houses sold in last 30 days = 33 (4%)

It seems that although short sales are in increasingly smaller part of the inventory of available homes, they are highly desirable and are showing up in the solds at twice their ratio of actives. Put another way, the absorption rate looks to be higher.  Let’s check the math on the moths of inventory:

All houses in SCC:  1295/859 = 1.51 months of inventory

Regular sales in the county: 1157/675 = 1.71

Short sales in SCC: 95/151 = .63 moi (63% of one month!)

Bank owned homes: 43/33 = 1.3

All of these numbers are low, low, low – but the short sales are the lowest of all!

-mph

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POST FROM APRIL 22, 2011:
Yesterday we looked at the types of home sales around Silicon Valley by price point.  Not terribly surprising, most of the short sales and bank owned homes were in the lowest price ranges.  Today we’ll look at this type of information not by pricing tier but instead by geography – in other words, by either town, city or district of San Jose (area).  This post will not cover every area but will be a sampling a few communities, mostly on the west side of the valley (since that’s primarily where I work). Santa Clara County, houses for sale categorized by sale type (regular, short sale, REO)

By way of reminder, the small image to the left reflects Santa Clara County’s houses for sale as a whole – all areas and all price points. (You can see the full sized image by clicking on it.) The green area represents “regular home sales” and the brick red and light orange signify distressed  properties listed on the MLS for sale (red is short sales and orange is bank owned or REOs). Next let’s see a few regions within the county to see how things are faring geographically.

1. Almaden Valley area of San Jose – homes listed for sale by type – very few distressed properties on the market!

Almaden Valley houses for sale - shown by "sale type" (distressed or regular sales)Almaden is a lovely southwest San Jose suburban community (zip code 95120) that grew up initially with the cinnabar or mercury mining activity.  Today it’s an upscale area of more expensive homes than most of the county, it enjoys really good schools and scenic views of the coastal range as well as the Santa Teresa Foothills.  Housing here is costly but residents love the quality of life. Since the cost of homes for sale here is high, it’s not super surprising, after seeing yesterday’s post, that there are very few distressed homes on the market here. Next we’ll check the other extreme…. (more…)

Types of Home Sales in Silicon Valley: Concentrations of Distressed Properties in Silicon Valley by Pricing Tier

The Silicon Valley real esate market is heating up but it’s not heating “evenly”.  Some price points and areas (or school districts) enjoy a hot seller’s market while other segments are lagging.  A big factor in the overall health of the realty market in the San Jose area is the percentage of listings which are distressed properties, meaning short sales and bank owned homes.  Today we’ll see the ratios of these homes to the regular sales using graphs to get a quick visual take on the market trends and statistics.

Today we’ll look at homes listed on the MLS in all of Santa Clara County (including San Jose, Campbell, Los Gatos, Saratoga etc.) by price point. All of the graphs in this post will reference houses and duet homes combinesd(about 99% houses), not condos or townhomes.

 

Santa Clara County all "class 1" (houses & duet homes) for sale by sale type

 

Overall, it looks like about 1/3 of all homes for sale in the county are distressed sales. Next let’s look at this data by price point and then we’ll check it by area.  The images below will be smaller but the colors will represent the same elements in each one (green being regular sales, brick being short sales and light orange being REOs).

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What is the Williamson Act? Will it be eliminated?

White Horse FenceThe Williamson Act, also known as the California Land Conservation Act, was passed by our California Legislature in 1965 in order to encourage rural & agricultural lands to remain undeveloped longer. When land owners enter into a contract under the act, they benefit from lower property taxes, which are based on the property’s current use, rather than paying market value based tax rates.  In exchange, the property is to remain undeveloped and continue to function the same way for the duration of that contract.  The contracts run for 10 years and are automatically renewed unless the farmer or rancher cancels it.

Why does the Williamson Act matter?

According to the Committee for Green Foothills, there are 362,000 acres of land in Santa Clara County under the Williamson Act (that article appears to have been written in 2003, so the numbers may have changed a little since then).  Much of it is in the east foothills of east San Jose and the south county areas near Morgan Hill and Gilroy, but there are patches of it in Los Gatos, Saratoga, Cupertino, Almaden Valley, Blossom Valley and throughout Silicon Valley. The tax breaks make it possible for many farmers and ranchers to stay in business and not feel forced to sell their land for development.  If they were paying “market rate” taxes, it would not be long before most or all of our rural and agricultural uses gave way to housing and other development.

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