The Santa Clara County real estate market is cooling off, which is very often the case in summers here. It varies from place to place within the region, and one pricing tier to the next, but I am definitely seeing and hearing about fewer offers, more lowball offers, contingencies creeping back into sales, etc. In red hot properties with great schools, you might get a half dozen offers…and three of them may be “bad” offers from home buyers who are pessimistic on the market. They do not get the sale, of course, but it is interesting to hear about an increase in those kinds of bids.
My RE REport just came out, and here are some images and data from that for Santa Clara County. First, the market barometer. Here, you can see that sellers had stronger power in March than they do now – by quite a lot! (Click on the image to go to the report and see a clearer version of it.)
Next, the average and median sale prices and the number of units (again, click on the image to go to the report). This graphic does not look as bad or as much of a change as the one before, though you can see that since May prices have gone down a little, and sales are now tipping downward and are fewer than sales for this time last year.
Next, the sale price to list price ratio is a bit more startling. Sales are still averaging about 1-05% of list price – so that is hard for sellers to complain about – however, it is unmistakable that the climate for home selling in Silicon Valley is undergoing a change and this is literally past its peak. Buyers and sellers alike need to wonder whether it will calm down or continue at the current rate of decline. Is it a buying opportunity, or the beginning of a correction?
The numbers themselves point to a turnaround in the market. I’ll jot the median sale price for the county here – it’s a large enough pool of sales to be pretty reliable as a gauge of the real estate market in the San Jose area:
July 2018 $1,350,000
June 2018 $1,402,000
May 2018 $1,416,000
April 2018 $1,420,000
March 2018 $1,450,000 – PEAK
February 2018 $1,380,000
January 2018 $1,163,000
Between March and July, the median sale price dropped $100,000, or 6.89%. As you can see, it had also jumped considerably between January and March, and even at today’s lower median sales price, it’s still higher than January. It will be interesting to see where it ends up in January of 2019.
A quick look at the numbers for this month’s Santa Clara County RE Report:
Trends at a Glance
|Trends At a Glance||Jul 2018||Previous Month||Year-over-Year|
|Median Price||$1,350,000 (-3.7%)||$1,402,000||$1,175,000 (+14.9%)|
|Average Price||$1,624,690 (-5.1%)||$1,712,500||$1,409,380 (+15.3%)|
|No. of Sales||847 (-13.3%)||977||1,015 (-16.6%)|
|Pending||924 (-0.6%)||930||931 (-0.8%)|
|Active||1,151 (+8.0%)||1,066||816 (+41.1%)|
|Sale vs. List Price||105.6% (-2.0%)||107.8%||105.5% (+0.1%)|
|Days on Market||19 (+13.7%)||17||20 (-6.7%)|
|Days of Inventory||41 (+28.8%)||32||24 (+69.0%)|
It’s now August 10th and it’s too early to know for sure what the August numbers are doing, but normally August is a quiet month with sale prices a little off. So we’ll see.
The next part of this article is from July 31st:
Like most of my readers, I like data. Today, then, I went to MLSListings and I pulled up the numbers for the county. The month of July is closing out today, so it is possible that some of the numbers may jiggle a little if sales aren’t reported right away – but this should be pretty close.
When we are analyzing the Silicon Valley real estate market, there are a few (maybe many) data points to consider:
- how fast are homes selling?
- what is the ratio between available homes and homes sold?
- how many properties are .on the market?
- what are the months of inventory?
- is the sale price still strong?
- how many offers are there? (agents must report for this to be available, most do not)
- what’s traffic like? (not tracked by the MLS)
And you could pick a number of other points as well, such as the number of expired listings (in every market, a certain percentage of homes never sell). We could divvy it up by price point, and school district, as I have done elsewhere. Today, though, I want to look at the major trends on the county level. Here are my select stats, data care of the MLS earlier today. I think you will find that this is NOT what a market crash looks like – but please read on and see the date for yourself.
Average Days to Sell
The average days to sell is not an alarming figure. Check out the July 2018 number of 19 days to Julys going back to 2013. Most were longer. Now consider how any July looks compared to any March or April. Typically, it’s longer. We often speak of the “spring home buying season” because that is often the best time to sell. Summer is not bad, but the peak ordinarily happens earlier in the year.
Median Days to Sell
The median days to sell means that half the homes sold faster than this number, and half sold longer. While most homes do sell quite quickly, there are some that linger on the market forever…and then expire, or get a price reduction or improvements before selling. (Right now, there are 16 homes that have been on the market for more than 300 days in Santa Clara County.) The ones with huge “days on market” make this number larger than the average days on market. The pattern, though, is the same as with the average days on market: most years, July is slower to sell than earlier in the year.
Inventory & Sales
What is the ratio between homes on the market and homes that are sold and closed each month? In the image below, active listings are red and closed listings are green. When the sales outpace the listings, it is a very strong seller’s market, and that is exactly what we saw in March and April. What is more normal is for listings to be larger than sales, because not every home sells, no matter how hot the market.
For this info, I only went back to January 2017.
And here’s the same info, but I exported it to excel to make it easier to read the numbers – please note the disclaimer that the data for July may not be complete, as some agents will report closed sales a little later:
In 2017, the Silicon Valley real estate market never calmed down much, but was in hyper-drive even through the holidays. This makes our current leveling off feel quite severe – the contrast is unmistakable. No doubt about it, the market IS cooling down. Inventory is rising and homes are not being absorbed quite as fast. (This last chart is the one I’m most concerned is off as not every agent reports sales in a timely manner.)
Absorption Rate or Months of Inventory
The absorption rate tells us how long it would take to sell off the current supply of inventory if no new homes came onto the market. It’s another way of looking at the ratio of sales to listings. Right now, we are at about one and a half months of inventory for single family homes in Santa Clara County. Not bad – compared to most of the last 5 years, it’s pretty aggressive for this time of year.
Price per square foot
A visual can really convey what we experience very well – mostly an upward trajectory, but downs as well as ups along the way. We’d all love to “time the market”, both for real estate and for stocks, but usually we aren’t able to sell at the very peak and buy at the lowest trough. Also, this makes the point that how far back you look is really relevant! If we only looked back as far as March (which is the peak), we’d be convinced this is a catastrophic free fall. Taken in a larger context, though, we can see that there really are ups and downs.
Here’s what the numbers look like – this feels a lot more sanitized than the image above!
Year over year, it is a steady march upward. (I appreciate that the graph shows the variations more clearly.)
If we drill it down to JUST houses with 1500 to 2500 SF, the numbers look like this:
Even at this level, we see very steady, sure appreciation.
Despite the “dips” that we see quite clearly in the graph, above.
When we feel or experience a dip, does that mean we are in a correction? Or is it part of the process – a little up, some down?
The dips are an opportunity for those who are not afraid of them.
Some people will see every dip as the end of all, the beginning of a correction, and be afraid to buy. Only when the market surges ahead again do they see that they had an opportunity.
YES, the market will correct at some point. Maybe it’s not – but I am not seeing it. I’m seeing the dip that is part of a periodic trend.
Come September, will prices rise or fall? Stay tuned!
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(all data current as of 11/19/2018)
Listing information deemed reliable but not guaranteed. Read full disclaimer.