Updating the Campbell Real Estate Market

Tudor style house on graphic that says - How's the Campbell real estate market?How is the Campbell real estate market? Campbell is in a strong seller’s market that continues to outstrip this time last year. This article, updated monthly, offers data and analysis on the residential real estate market within this popular Silicon Valley community. Here are a few details from the latest update on Campbell’s single family housing market:

  • Inventory is growing inch by inch with 15 active listings at the end of April, still just a drop in the bucket! Smaller pools of data can cause more dramatic swings in these statistics, so take these numbers with a grain of salt.
  • The average sales to list price ratio for homes sold last month slipped to 110.2% of asking – that’s red hot, and up +4.8% from this time last year.
  • Average and median sales prices are up +23.4% and +35.5% from last year respectively, and rose +12.3% and 22.0% from the month before.
  • Average time on market slowed to just 12 days while market absorption sped to a slightly shorter 24 days.
  • Closed and pending sales continued to rise above last month and last year despite lower available inventory year-over-year.

The market in this popular west valley city is red hot overall!

The Campbell, CA Real Estate Market

It’s hard to predict what’s coming next, especially since Silicon Valley real estate is connected to the global economy and many buyers rely on stocks and mortgage loans to finance their purchase. On top of that, we’re emerging from an already wild few years!

If you’re selling a well prepared, beautifully staged, and aggressively priced house, you’ll likely see multiple offers on your home for sale. We’ve been seeing more bidding wars, but not with overbids quite as high as last spring. Competition for homes has undoubtebly waned from it’s peak as buyers financial power shrank with rising interest rates. That said, with even fewer homes being listed this year there’s still far more demand than there is inventory, especially for a move-in ready home!

Desperate and worn out buyers want to get their foot in the door before they are priced out of the market altogether by either climbing interest rates or rising home prices.

Don’t expect a balanced market any time soon – the Bay Area still has a severe housing shortage and buyers are clamoring to get property!

Here’s a quick view of the Campbell real estate market stats from Altos Research, using list prices (not sales price) which updates automatically about once per week:

 

Campbell Altos Real-Time Market Profile

The Altos chart is showing Campbell, CA single family homes in a strong seller’s market with continued rises in market action paired with perpetually low inventory. Available listings remain well below typical, and these few homes continue to sell quickly.

And now –  here are some quick stats, pulled from the MLS (Multiple Listing Service) through the RE Report:

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Market comparison: Los Gatos, Saratoga, Cupertino and Los Altos

Market comparison: Los Gatos, Saratoga, Cupertino and Los AltosToday we’re looking at the real estate market for houses in some of the “west valleycommunities along the base of the Santa Cruz Mountains – areas where schools are good, crime is low, residents enjoy scenic views of the hills (or of the valley from the hills, depending on the location) and overall, a highly educated population not too far from Highway 85. This will be a real estate market comparison for Los Gatos, Saratoga, Cupertino, and Los Altos.

Of the four municipalities, three are really very similar to each other in several regards.  Cupertino has the largest population – about 61,000 people – but Los Altos, Los Gatos and Saratoga are all similarly sized, somewhere between 31,000 residents.  The latter three also enjoy a traditional “downtown” area which is popular with pedestrians, bicyclists and motorists alike. (Monte Sereno has under 4,000 residents, which is so small that the statistics are very easily thrown from month to month, so it is omitted in this quick study.)  Of the four, Cupertino, then, is the least similar due to size and lack of a central downtown area for now. This may feel different once the Vallco Mall is redeveloped.

We’ll take a quick look at these areas now in terms of the real estate market trends and statistics for each area, considering just “class 1” (houses and duet homes).  The charts used below are from Altos Research, to which I have a subscription, and they will be automatically updated each week.

Please note:  the Los Gatos data is probably a little artificially low as it will include all 3 zip codes, meaning also the Los Gatos Mountains, which are quite a bit more affordable than the areas “in town”.

In addition, as of this writing we are in the shelter-in-place phase 1 of the pandemic. This post is updated approximately every quarter or half-year, so we’re just starting to see the results of these changes to the market,  but it will take a while to see the full picture. For now you can read more about the Coronavirus impact on real estate sales in my post on the topic.

Also, during the shutdown so far, the Multiple Listing Service (MLS) stopped the timer on all Days on Market (DOM). Therefore these numbers will be off beginning from March 17th through around May 17th. In the data below, this will affect any numbers related to the days on market, the absorption rate, and the days of inventory.

Now on with the analysis!

Market Comparisons

(1) Median List Price (per Altos Research):

 

Real Estate Market Chart by Altos Research www.altosresearch.com

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What is a reverse offer?

A year or so ago, I attended a 2 day negotiation class in Los Gatos. It was quite good! At one point, we discussed negotiating offers in a buyer’s market and how challenging it can be to get showings and offers at all. The topic of a “reverse offer” came up next.

A reverse offer is when a home seller initiates negotiations with a buyer by drafting a purchase agreement. Yes, this is backwards!  The seller may not know the buyer’s ability to pay, what type of loan it could be, or even the prospective buyer’s name! The idea is that if buyers are on the fence, this may get the ball rolling. Only seldom does it result in an immediate agreement. More often, it’s either rejected outright or countered. Or perhaps the buyer and the buyer’s agent will draft a whole new contract. But it may be a useful strategy if a property is not selling and there seems to be interest from buyers who aren’t going to the next step of putting an offer in writing.

Related reading:

What is the difference between the CAR and PRDS purchase agreements? Does it matter which contract is used?

What is a sharp offer or relative bid?

What is a blind real estate offer?

Q & A on making an offer (on my popehandy.com website)

 

 

 

 

How much time do you need for inspections when buying a home?

Ability to inspectThe real estate contracts in use in Santa Clara County (PRDS and CAR forms) both include a space for stating how many days are requested for the property condition contingency, which includes inspections as well as other investigations.  How much time does it usually take? The CAR contract has a boilerplate number of days offered, 17, as well as a blank.  The PRDS doesn’t make any such suggestion.

In Silicon Valley, unlike most of the rest of California, most home sellers provide pre-sale inspections for viewing by potential buyers. Often it’s at least a termite or pest report plus a home inspection. In many cases the disclosure package includes not just these two inspections, but others as well, possibly roof, chimney, or other components.

When there are no pre-sale inspections available for home buyers to read prior to writing the offer, the number of days requested for inspections tends to be longer.  In this case, prospective buyers don’t really know the condition of what they’re purchasing so they will need a couple of weeks or more, in most cases, to be satisfied that they understand the condition of the property. Sellers are far less likely to see non-contingent offers or contracts with short numbers of days for investigation if the buyers aren’t given full disclosure upfront. (more…)

Ratio of closed sales versus new listings in Santa Clara County underlines the inventory crisis

Many of the statistics quoted by news agencies and real estate information analysts refer to the “active” inventory as not just the homes which are truly available, but also those which are sale pending but with contingencies still in place (whether huge contingencies, such as bank approval on a short sale or the normal ones, such as property inspection and loan approval).  This often results in a more bloated look at what’s available than what is really the case, and it gives buyers the sense that it’s easier to purchase than it truly is. Let’s look at some statistics to see what’s happening over the last year, when it shifted from being a buyer’s market to a severe seller’s market for houses in Santa Clara County.

Normally there are more homes available (for sale, without a “sale pending” status attached) than there are closed sales each month.  But right now, the available properties are being gobbled up much faster than new ones are getting put onto the multiple listing.  Let’s view the graph to see the relationship between these two figures for houses listed and sold in Santa Clara County in 2012.

 

New listings vs sold throughout 2012 in Santa Clara County CA

 

At the beginning of 2012, please note that the new listings (the red line) outpaced the sold and closed properties (green line).   The delta between them shrinks over the course of the year, until in the fall they are nearly equal until closed sales far outstrip new listings.   That is a complete flip in the market, and it represents a shift in power from the buyer to the seller, too.  For those who prefer just the numbers, here they are: (more…)

In a buyer’s market, few want to buy, and in a seller’s market, few can buy

Deep seller's marketSome of my buyer clients had been looking casually for the last 2-3 years and now are in a bit of a panic.  Not just any panic, but an exhausted, sick-of-looking panic, accentuated by the fact that prices are now rising pretty noticeably and their buying power is diminishing.

Why is it than when it’s a buyer’s market, and prices are soft and inventory plentiful, buyers are so picky – and when inventory is scarce, and buying conditions terrible and there are gobs of multiple offers, most of them clamor to purchase something, almost at any cost or in any condition?

As real estate professionals, we see this happen as the cycles change.  But it’s very hard, in a buyer’s market, to tell a Silicon Valley home buyer: “hey, you’re lucky, buy now, while it’s easy!” because it always looks so self-serving (since we are only paid if the buyer buys and closes on the transaction) and a buyer’s natural response to this is “hey, don’t push, I’m in no hurry!”  So we tend to step back and let the buyers go at their own pace.  When the market turns, we tell our clients that it is a different game now, but often these home buyers don’t believe us for several months.  Eventually, though, it sinks in and gets so bad that they are nearly despondent and wondering how this could have happened.

Tonight I got an email from avery  discouraged San Jose area home buyer. She told me that they saw an open house of a place that seemed like a good fit, but that it was so packed with people that it felt like a “black Friday sale”.  She told me that when they left that house, she was in tears.  I knew what she meant. I have seen that frenzy, too, due to far more demand than supply. In fact, I showed a Sunnyvale townhouse during an open house on Saturday and it was exactly like that.  I bet the agent gets 20 or 30 offers. (more…)

In Santa Clara County, The Market is Turning Overall

What happened to the strong buyer’s market, where bargain hunters could scoop up great deals at ridiculously low prices?

Many buyers have waited to “find the bottom of the market”. Now’s the time to get off the fence; the market’s turning and is headed into seller’s market territory (at least in some areas and price points).

One of the best ways to understand the real estate market conditions is to track the absorption rate or months of inventory. Approximately 6 months of inventory is a balanced market. Five or less is a seller’s market and seven or more months is a buyer’s market.

Here’s a view of what’s happening among single family homes in Santa Clara County (about 60% of the county is represented by the City of San Jose):

 

scc-market-2009-abs-rate1

 

Inventory is down, sales volume is up, the median sales price is up (it had been holding steady at appx $450,000 for the last three months – this is the first uptick we’ve seen this year). The days on market are holding steady at close to 100 and the percent of list price is hovering at around 97%, where it’s been throughout 2009.  No real signs of slippage here, but there are signs that inventory is being absorbed.

Once inventory starts declining, there will be pressure on prices to go up.  (It is supply and demand driven, of course.)

On the flip side, the foreclosure moratorium will be ending shortly and there may be an increase of inventory.  If that happens, it will stem the tide and it will revert into buyer territory.  Until and unless that happens, though, it looks like Silicon Valley real estate is generally turning back to the seller’s favor after three long, difficult years of buyer gains.