The cooling Silicon Valley real estate market

The cooling Silicon Valley real estate market is less of a question and more of an acknowledged fact (we wondered about it in June, we are sure now). If so, how can you tell? We need to begin by talking about “the market”.

First, Silicon Valley doesn’t have ONE market. The real estate market in Palo Alto or Cupertino is going to be very different from the realty market in Los Gatos, or the various parts of San Jose, such as Almaden, Willow Glen, Cambrian, or Blossom Valley. Ditto that with price points. It’s a very different “market” for entry level houses than for luxury homes.

But if we’re going to speak in broad, sweeping terms about cooling trends, what do we SEE? What do we HEAR? What’s happening with offers and open houses? These are the ways we measure the real estate climate. Often we in the industry hear the anecdotal evidence long before it’s reported in the paper. If we hear one Realtor friend after the next report quiet open houses, or few or no offers, we know there’s a climate change afoot.

I will tell you that I am hearing these things, which hint to a softer market for home buyers:

  • Houses taking longer to sell in much of Silicon Valley / Santa Clara County
  • Homes selling with fewer offers than 6 or 12 months ago
  • Contingencies for loan, appraisal and inspection becoming more common
  • More price reductions being necessary for than a few months ago
  • Fewer ALL CASH offers
  • Sale price to list price coming down a little

All of these suggest a mellowing of the housing market. Do the numbers line up?

The cooling Silicon Valley real estate market: seasonal fluctuations…

Historically, we do know that the busiest time for home sales is usually February – April. Some years it’s shorter or longer. (One particularly bad year, we had exactly 3 good weeks for selling in March and nothing more.) But what do the numbers tell us?

If we view the sale price to list price ratio, we expect there to be “seasonal fluctuations”. We don’t expect a hot seller’s market in December. Therefore, what’s often most helpful is comparing the same statistics year over year. Let’s do that.  The image below provides the sale price to list price ratio for houses sold in Santa Clara County from Jan 1 2012 through Aug  24, 2016 (the day I grabbed this data). This was taken from the MLSListings.com site for agents (the private MLS).

I love this kind of presentation because it’s so easy to see both month over month and year over year statistics. Take a look at August (so far) for this year compared to the prior months in 2016.  At 101.5% that seems like a fantastic ratio (they would go nuts for this in most of the U.S.). Now compare it to the prior months this year and you can see it’s been coming down since March.  OK, now consider prior years…it’s mostly a very similar pattern. That tells us that “spring is hotter”. We already knew that, but seeing it for most of the last few years pretty much drives the point home.

But let’s compare August 2016 to August 2012- Aug 2015.  That’s a better “apples to apples” comparison. And here it’s very clear that the real estate market in Silicon Valley really IS COOLER than it was in prior years for the same month. Any doubts? Check the same info for July – yes, all hotter until you get to July 2012.  Now June – same as for July. May? Yes, again, hotter for that month in 2013, 2014, and 2015 but not 2012. In retrospect, we now know that 2012 was the year the market ratcheted up for a big, long run.

 

The cooling Silicon Valley real estate market: Santa Clara County sale price to list price ratio Jan 2011 to Aug 24 2016

 

Before anyone begins screaming that the sky is falling, let me stop and remind you that we are talking about a sale price to list price ratio for the entire county that is at more than 101%. This is not a buyer’s market – at least not as a county. There are hotter and cooler pockets, yes, for sure.

What we are experiencing is a return to normalcy, a flattening out, less appreciation. We are not seeing price drops at this time.

And you know what? We’ve been expecting it.

You cannot sustain double digit appreciation forever.

The reality of the cooling Silicon Valley real estate market has implications for home buyers and home sellers:

Buyers, GET OFF THE FENCE. Interest rates are good. Buying conditions are reasonable again. Yes, inventory is low, but if you know what you want, you should be able to find it in 2-3 months tops. If you can’t, then you are not being realistic with what you think you can buy for your budget.

Sellers, it’s time to be more aggressive on pricing and adjust your expectations. Yes, your neighbor got 15 offers in February, but it’s not February any more. If you get 1-3 offers, that means you did a great job of staging, pricing, and getting your home marketed. Position your home to sell, and then get it done.

Where will we be in 6 or 9 months? I don’t know. It could be better or worse after the election. My advise is to get on with your life and not try to time it too carefully, because things can happen which none of us could anticipate. If you want or need to buy or sell, make it happen.There will always be political things going on, world events taking place. There is never a perfect time to buy or sell – but there is the time you want to do it. Go ahead.

And please let me know how I can help.

Mary Pope-handy
408 204-7673

 

 

 

The Silicon Valley real estate market is slowing

The Silicon Valley Real Estate Market is SofteningThe real estate market in Silicon Valley remains overheated, but it’s cooling a notch now that we are in summer. This is good news to market-weary home buyers, and scary to home sellers.  What to do?

First, it’s important to remember that we don’t have just one market in Santa Clara County, San Jose or even Los Gatos.  We have a patchwork quilt of markets that are moved by price point, home condition, school districts and school scores, and many more things.  An entry level house is always going to be a different market than a luxury estate – but all the shades of gray in between are equally distinct, too.

Once you can look at your particular segment of the market and identify it as such, you can then run the numbers. But beware, it’s too easy to miss a step here.  If you’ve got a house worth $1.5 million in Almaden valley with Pioneer high school, please don’t compare it to a $1.5 million home in Almaden Valley with Leland High School.  The price point and zip code may be the same, but after that you are in a different land.  So drill down to your home (or your desired home’s market).

Next, realize that while there is a softening or cooling of the market, this isn’t a 180 reversal.  Sellers, if you thought you’d get 5-8 offers, you may find that your house gets 2 or 3 or 4.  That’s still good!   Buyers, things are better, but don’t get too cocky – you are still unlikely to be the only bidder, so go in with your strongest package and your best foot forward. And always analyze the market before you bid.  Some homes are priced unrealistically high, some unrealistically low, and some on target.

Contingent offers are back!  I have done a few sales subject to the sale of another home this year.  As long as the home that needs to be sold is priced well and marketed well, this can work.  Sellers still want top dollar, so if that means waiting an extra 2-3 weeks for your home to sell, they’ll do it.  I’ve seen contingent offers beat out regular offers because the whole package was just stronger.

Lastly, what I’m seeing is seasonally normal.  This is not a market crash, only a slight softening.

Some sellers will think that they should wait until next spring to sell.

Some buyers will think that if they wait a year, prices will be far lower.

But for many, trying to “time the market” with real estate is as hard, or maybe harder, than trying to time the stock market. I tell my clients who are looking to buy to keep looking and if the right home comes along, go for it.  If a seller needs or wants to sell, do it now.  We don’t know when we’ll have the next earthquake, next terrorist attack, next economic crisis.   None of us has a crystal ball, and we cannot ever guarantee that tomorrow will be better than today. I’ve been selling homes long enough to know better than to tell people to wait if they are ready now.  There are always things out of our control, just around the corner, that we don’t know about.

Please call or email me if you’d like to chat about selling or buying a home in Santa Clara County.

 

 

 

Is the Silicon Valley real estate market cooling down?

Over the last few days, Realtors from around Silicon Valley keep asking me, “Do you see a change in the market?” I’ve heard it several times. The answer is yes. But then again, it’s late October. This is seasonally normal!

We have become so used to the hyper inflated market of the last 2 years that the smallest moderation of that market seems to make people nervous. But what is seasonally typical? Usually we see a big run-up in the first half of the year, followed by either a leveling off or even a lowering of values in the late part of the year. That’s the pattern that we see most often.

Realtors like to say that you can buy or sell any time of the year in the San Jose area – and it’s true. We don’t have the weather that they have in places like Buffalo to keep us indoors for 1/3 of the year!  Even so, spring is hotter than fall. There are advantages to selling late in the year to be sure: for one, usually there’s less inventory (competition) so the odds of selling and closing are better. But in terms of pricing, spring is usually king.

Just not always.

Back to now: real estate agents in the San Jose area and the Peninsula are reporting smaller numbers of offers on properties and lower overbids. Homes selling over list price are still the norm in many areas, but where there used to be 10% overbids, perhaps there are 5% overbids. This is the general trend.

In some areas, and some price points, we continue to see enormous overbids in the 10% region, even while the area generally is averaging smaller ratios. The homes most likely to outperform the market are those which are super clean, remodeled, worry free, and on the lower end of pricing for the best schools or commute location. While everything else shows cooling, these homes do not. At least not yet.

 

 

 

Is the San Jose, CA, residential real estate market cooling?

Yesterday on my way home from a final walk through on a property in Blossom Valley, I stopped by some open houses – following signs, just like a lot of consumers do.  At one of the homes I spoke with a Realtor who’s starting to see a slowing in the real estate market.  That hasn’t been my own experience, so I asked him about his take on things and he mentioned the rising inventory in areas where he’s active in Silicon Valley.

There are many ways to get a pulse on the market, but perhaps one of the easiest ways to check it is to see the sale price to list price ratio and the days on market.  MLSListings, my local multiple listing service (of which I am a member), does some wonderful things with interactive graphs and charts, so I made use of that tool to see how San Jose is faring as a whole and also in some of the zip codes where I sometimes sell homes.  The charts below are for single family homes (not condos, townhomes, duplexes, etc.) and are by zip code for all price ranges.  Remember, stats are easily skewed one way or the other, and we might have seen different results if we teased it out by home size, lot size, school district, price point, presence of an in-ground pool, or any other factors.  This is the “big picture”.  First, then, San Jose as a whole.

 

San Jose AV DOM and SP to LP ratio all prices

 

What we see here is that homes are selling faster (shorter and shorter DOM or Days on Market) and a rising sales price to list price ratio.  Both of these indicate a strong seller’s market for the city of San Jose as a whole. Next, we’ll list a sampling of zip codes in San Jose, primarily along the west side (where I tend to be more active in my sales) but not exclusively so.  I’m putting these in numerical order.

 

Real estate market trends in San Jose 95112 - Downtown San Jose

 

In San Jose’s 95112 zip code, which is Downtown San Jose, it’s a mixed bag.  The sale price to list price ratio is rising (seller’s market) but the days on market are also rising (softening market).  This area would require more information – it could be that a few homes have been on the market for a very long time and skewing the stats, or homes in certain price points are just not selling.  From this vantage, though, it looks like 95112 is mixed.

Next: 95117, 95118, 95120, 95123, 95125, 95126, 15129, 95136, 95148

(more…)

What is that thing on the ceiling? It’s a whole house fan!

When I show homes in and around San Jose, often I will see things that my buyers don’t recognize and I will take that as an opportunity to educate them on some of the components of a house, townhouse or condo.  (The strangest question along these lines I ever got was when a Silicon Valley first time home buyer had never noticed or recognized antennae on houses before and wondered what they were!)

whole house fanA whole house fan is a more affordable way to cool down a residence. How does it work?  In the evening, when the outside air temperature is lower than the indoors temps, windows are opened and the whole house fan is turned on for about 15 minutes.  The fan sucks all of the hot air out of the house and discharges it outside.  Since the windows, and maybe doors, are open, this vacuum sucks in the cooler night air.

This is a lot cheaper than air conditioning to install and also to run. According to one whole house fan installation website “installing a Whole House Fan is approximately 25% the cost of installing an air conditioning system and approximately 10% the cost to run.”

Alternatively, of course, if you do not want to have A/C, or if you don’t want to run the air conditioning every time it’s a little too warm, you can pull out fans for the windows and doors in your home and run them in the evenings to pull in the cooler night air.  But the whole house fan is easy and convenient – you simply turn a switch on and off – and is considered a very nice home improvement.

Whole house fans have been gaining in popularity across all types of markets, even among luxury homes, since they are more energy efficient and eco-friendly than air conditioning.  The only thing you might not know that’s important to understand upfront is that when it’s running, the noise is very loud.  Luckily it only goes for a few minutes – a perfect opportunity to step out onto your back porch and enjoy the cool evening air while it runs.