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It is a strong seller’s market in the Alum Rock area of San Jose right now: inventory is shrinking and prices are rising after hitting bottom a few months ago. Prices are still way off year over year, but for the last 4 months or so, prices have been rising in this part of Silicon Valley, and it’s quite dramatic.

 

prices-and-sales-july-09-Alum-Rock-area-of-San-Jose

 

As of a few days ago in this area of San Jose, there were 203 single family homes for sale and there were 114 that sold/closed in the last month. To get the “months of inventory” or absorption rate we just divide the 203 by the 114 and we get about 1.8 months of inventory, which makes it a very strong sellers market.

(Because it’s so affordable, first time homebuyers are flocking to Alum Rock in droves. Unfortunately, they are sometimes outbid by all-cash investors and left frustrated as homes get multiple offers and prices skyrocket out of reach.)

The absorption rate can be measured in days, weeks, months (or years) of inventory.  Below is a chart reflecting the days of inventory relative to the last 18 months or so.  As you can see, the absorption rate has been shrinking very, very dramatically (as prices have fallen through the floor).

 

days-of-inventory-july-09-alum-rock-area-of-san-jose

 


The market is a sellers market because homes are selling fast (fast, not at a great price for the sellers). They are selling fast because of one main reason: prices are slashed to “bargain basement” prices, and this has happened because the vast majority of sales are foreclosure related: they are short sales and bank owned property sales

A subset of that market are the few “normal sales”. When I take them apart, there are 66 for sale and 18 that have closed in the last 30 days, which is a 3.6 month supply of inventory – still a seller’s market, but not as strong. (Under 6 months is a sellers market, over 6 months is a buyers market.)

What about pricing?

How much more will a home that’s a “normal sale” sell for as opposed to a foreclosed home (REO) or a short sale?

Let’s take the example of a home that’s about 2000 SF and see how it plays out.

When I look at all homes in Alum Rock that are about 2000 SF, the average price per square foot of the solds is as follows:

Regular sales $319 per SF

Short sales  $237 –  $243 per SF  (the amt varies slightly depending on the precise data I use)
Bank Owned (REO) $200 – $218 per SF   (again, depending on the precise data I use)
When looking closer, there’s a HUGE variety of condition among the short sales and bank owned homes. Some REOs are freshly painted & carpeted, but others have had kitchen cabinetry stripped or the carpets just washed.  Some have good landscaping and some have dead everything.  So generalizing is really hard!!

Of the homes “for sale” in Alum Rock, of homes about 2000 SF there are:

27 in all
7 bank owned
13 short sales
7 normal sales

Of the homes “under contract” in Alum Rock, of similarly sized homes there were:

66 for sale
15 are bank owned
44 are short sales
7 are normal sales

Of the homes that have “sold & closed” in the last 3 months in Alum Rock, there are:

66 sold in all
53 were bank owned
10 were short sales   (note that a high percentage of short sales SELL but do not CLOSE)
3 were normal sales

Normal, non distressed sales are happening in Alum Rock  but since REOs and short sales are so much cheaper, a lot of buyers are going there – sometimes they have no choice, and sometimes they are all-cash investors and bargain hunters.

Buyers: if you buy a short sale or an REO, there will be “issues” but there will be discounts.  Sellers: if you want to sell a home in Alum Rock, you must be very competitive, whether your home is a normal sale (about 5-10% of the inventory only) or a short sale.  If your home is not a distressed sale, you can sell for more – but not oodles more – than the rock bottom pricing that the bank owned or short sale homes will fetch.

Additionally, there’s a difference from one price point to the next. Below, please see the list price by quartile for the most recent week in the 95127 zip code of San Jose. NB how much better the market is performing here in the high end price range. The higher the price, the more the upswing.  Why? Fewer defaults!

If you want to buy or sell a home in the Alum Rock District of San Jose or anywhere in Silicon Valley, please know that to get the right price, it’s imperative to dig down to the local level and specific home type and not rely on general stats. There is wide variation from one subdivision to the next, let along areas with views, no views, small homes, big homes, etc.

Please contact me for assistance in analysing your market and how to make the most of it. And please visit my Alum Rock statistics and trends section of my RE Report.