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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Is the Silicon Valley market cooling?

Silicon Valley market cooling - aerial view from over Los Gatos, CA to the rest of Santa Clara CountySilicon Valley market cooling is underway, as we have been reporting here for a few weeks. Sometimes the shared real estate agent experiences foretell the shift before the data does; now is one of those times. In fact, we don’t actually have data for all of the hallmarks at play in a transitional market.

For a few weeks, there have been rumblings within the Realtor community of a change in the real estate market. The observations and comments include these:

  • fewer buyers at open houses (not a tracked data point)
  • fewer offers being submitted on the offer due dates (not tracked)
  • fewer offer due dates (not tracked)
  • increasing number of offers with contingencies being accepted
  • longer days on market, or longer than expected
  • homes not selling quite as high as anticipated or hoped (not tracked)

 

Silicon Valley market cooling – what does the data say?

The information on closed home sales is only a partial reflection of what’s happening, but it’s important as it does provide much needed perspective.

One of the most useful charts we can pull from MLS Listings is the combined Days on Market and Sale Price to List Price Ratio graph. It’s a good way to get a quick take on things.

Here’s a look at the last year, including the first part of June 2022 showing the Silicon Valley market cooling with longer days on market and smaller sale to list price ratios than we had a few months ago.

 

SCC Sale Price to List Price Ratio and DOM July 2021 - June 10 2022 - Silicon Valley market cooling

 

So far, this doesn’t look like much – we do have seasonal changes, which is why we like the year over year view for an anchor. Yes, June is continuing the cooling trend seen in May and in April. Is that alarming? Somewhat, yes, because May is often the peak of the market – not March.

What about the Days on Market?

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