Weather, mother nature and home sales

Without stop signSo many variables impact the real estate market, both here in Silicon Valley but across the country.  Employment, interest rates, the stock market, the availability of real estate inventory, the confidence of the buying public (say, in the wake of a terroristic attack, announced layoffs, or global conflicts like the invasion of Ukraine) all can move the housing market one way or the other. But they’re not the only forces that do.

Weather and natural disasters can likewise have a pronounced effect on a local housing market too.

My Experience: The ’89 Quake

Anyone in the San Jose area in September of 1989 will vividly recall the Loma Prieta Earthquake, which occurred in the Santa Cruz Mountain Range between Los Gatos and Aptos. Jim and I were buying our first home at that time, in San Jose’s Cambrian district, and in fact did our “final walk through” just two hours before the quake hit.

Our closing got delayed as the lender refused to fund the loan until the home was professionally checked out by an appraiser. They’d seen images of the Bay Bridge, homes off their foundations, fallen chimneys and other disastrous structural failures and weren’t taking a chance on any home!

Luckily for us, the property we were in contract for was essentially unscathed. It was not a young home, but built by a respectable builder, and more importantly it was on solid ground. Thankfully the house was fully vacant since we were close to the planned close of escrow, so there was no fallen furniture or broken glass in the carpeting and most everything was visible and easy to check later for damages. We did close, though it was about 10 days later than expected.

For listings not yet sale pending, it was already a slowing market and the beginning of a correction, but the earthquake plunged the market more deeply into the doldrums. At least for awhile.

Weather Forecasting the Market Activity

There are similar stories with markets all across the state, country, and globe after similar disasters. More recently here in California we’ve seen major impacts on various markets after fiercly destructive wildfires. But mother nature can effect the housing market in much more subtle ways as well, no disaster necessary.

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San Jose sale price to list price ratio – seasonal patterns

How is the San Jose sale price to list price ratio now? Is the Silicon Valley real estate market falling into seasonal patterns which may be somewhat predictable? When is it usually the best time to sell or buy in San Jose, Santa Clara County, or Silicon Valley?

Silicon Valley  home buyers and sellers all want to know what is the best timing for maximizing the profit when selling or when maximizing how much home you can get when buying. The sale price to list price ratio is an important data point as it indicates market heat generally. Most years, a hot market means overbids (but not always, I’ve seen years when multiple offers came in below the offer price – but that is rare). San Jose makes up about half of Santa Clara County, and that makes it a good place to get a pulse on this seasonal trends.

San Jose sale price to list price ratio graph by month, 2014 – present

Here’s an image of the sale price to list price ratio in San Jose from January 2014 to present. (Adding more years makes it difficult to see where the dips and rises are in the seasons.)

 

San Jose sale price to list price ratio for single family homes 2014 to present

 

In the above image, the vertical lines represent January 1st of each year (half of the years had markers indicating where that was, and on the other half I made my best attempt at identifying it).  It’s pretty clear that in many of those years, the low point is at the end of a calendar year – somewhere around November or December. But not always. It’s also pretty obvious that the peak is not terribly long after the new year in most cases: spring.

San Jose sale price to list price ratio: table from January 2010 to May 2021

I created a table for the San Jose sale price to list price ratio and was able to take it back to 2010 (best seen on a tablet, laptop, or desktop, not a cell phone) and pulled the patterns out by the high and low months for the sale price to list price ratio.

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