by Mary Pope-Handy, Clair Handy | Sep 9, 2022 | Buying Tips, FAQs
One of the simplest ways of assessing the real estate market is to check the absorption rate, often called the months of inventory.
In short, it tells you the pace of home sales (beyond the simpler days on market). It informs you:
- if you’re buying, whether or not you need to hurry or if you can take your time!
- if you’re selling, this figure tells you what the odds are of your success in the next month. That could impact your selling strategy.
What is the months of inventory, or the absorption rate?
The absorption rate tells us how quickly the current inventory will be absorbed, or sold off, if sales continue at the same pace and no new inventory were to be added.
The absorption rate could be measured in days, weeks, months, years, or decades – but the most common is the months of inventory. It’s really two data points in one: the available inventory and the number of sales in a particular period of time.
If this is hard to picture, consider a bathtub. If the tub is draining, how long will it take until the water is gone if the faucet is left off and if water continues to exit the tub at the same rate? That is the pace we are considering for homes for sale.
When homes are selling fast, in 30 days or less, often the data is described as days of inventory rather than weeks or months.
What is a fast absorption rate, and what does that mean for home sellers and buyers?
A balanced rate of sales suggests that neither home sellers or home buyers have a real advantage over the other. In the United States, anywhere from 4 – 6 months is considered balanced. Less than that is a seller’s market, and more than that is a buyer’s market. The lower the number, the hotter the market.
In Silicon Valley, though, it’s almost never as high as 4 months – though it can and does happen sometimes.
For us, anything under 2 months is a hot market, and anything under 1 month is a super hot seller’s market.
Here’s a graph displaying the absorption rate for houses in Santa Clara County between January 2005 and now. The highest absorption rate was 14.2 in January 2008. It fell quickly from there with the next month at 12.4, then 10.1 in March, and eventually settling in at around 6-7 months of inventory for a period.
by Mary Pope-Handy | Aug 30, 2022 | Natural hazards
What are the natural hazards in the San Francisco Bay Area and Silicon Valley?
The main natural hazards to consider are:
- 100 or 500 year flood plains
- floods from dam failure or levee failure (includes rising sea and bay water levels)
- liquefaction zones (and compressible soils areas)
- landslide zones
- fire risk areas, such as the Very High Fire Hazard Severity Zone
- for those with basements (few homes), radon
There are zones associated with these potential risks and those areas are delineated by the state, county, and local jurisdictions. The state level earthquake faults are those which are considered active in relatively recent years. The county mapped fault zones may not have been active in over 10,000 years and the town or city labelled areas have been dormant for much longer than that.
Where to learn about natural hazards and natural hazard zones in Santa Clara or San Mateo Counties:
by Mary Pope-Handy | Jul 29, 2022 | Market trends & statistics
Here’s a quick look at home prices by high school district and further below, also by elementary school district. This is a great way to get a broad sense of where it’s more affordable or more costly to buy a home in Silicon Valley! The numbers were for sales in June 2022.
First, the median home prices by high school district for single family homes (houses and duet homes) in Santa Clara County. (Click on the images to view a larger version of each).
The SP/LP figure refers to the sale price to list price ratio. When it says 109%, that means the home sold on average 9% over list price. Med DOM is the median Days on Market.
PLEASE CLICK THE IMAGE BELOW TO VIEW LARGER VERSION
Within each of these high school districts, there are more and less expensive areas. In the Los Gatos-Saratoga Joint Union HSD, for instance, some homes are in Los Gatos, some in Monte Sereno, and some in Saratoga – some have views and acreage, some are more modest. The figures are very broad.
Next, the same data but for condominiums and townhouses in Santa Clara County. These are far more affordable, but still very costly.
PLEASE CLICK THE IMAGE BELOW TO VIEW LARGER VERSION
The condominium and townhouse market has been strong also.
Home prices by Elementary School District
Single family homes (nearly all houses, some duet homes)
Condos and townhouse by elementary school district for June 2022:
Need similar data for San Mateo County or Santa Cruz County? Please let me know and we can get it to you.
by Mary Pope-Handy | Apr 1, 2022 | Finances, Real Estate
Every so often I am asked how the San Jose – Silicon Valley area is different from other parts of the US for home buyers. What did they need to be concerned about here versus in the midwest or east coast? They knew about earthquakes, and having to strap water heaters for earthquake safety, but what about earthquake insurance? Are termites a problem here? What things should home buyers worry about here that perhaps are not issues elsewhere?
Silicon Valley Differences
This is a great question, and the answer to it could fill a book! But here are some of the major differences that most relocating buyers, especially those from out-of-state, should be aware of.
- Earthquakes (of course) and everything related: selling requirements, insurance questions, related natural hazard zones (liquifaction zones, landslide areas, etc.), where fault lines are located, etc. People moving to California generally know that they need to be concerned about seismic occurrences, but perhaps not all the related areas.
- Expansive clay soils: when you read your history, you may have heard that in early California, homes were made of adobe bricks. What may not have been clear is how strong that soil is. I have a couple of blog posts on my Valley of Hearts Delight blog on this topic:
Cracked Foundations, Adobe Clay Soils and Water in Silicon Valley
What To Consider When Buying a Hillside Home in Silicon Valley
- Termites: in general, there are 2 types of these pests active on the valley floor: drywood termites and subterranean termites. (In the Los Gatos Mountains and closer to the Pacific Ocean you may also encounter dampwood termites.) It may be possible to try to prevent subterranean termites with bait stakes placed underground, but there is no way to prevent drywood termites. You can fumigate your home and within a few days they could be back (but won’t be visible for a year or two at the earliest in most cases). Termites do better here than in many places of the country simply because it’s warmer here. They may swarm twice a year rather than once. Please also read this post for more info:
How Often Should You Get A Termite Inspection?
- Fire / Water: more destructive fire seasons have brought about new, stronger safety regulations including mapped fire zones, higher insurance premiums, and construction limitations. On the other end of the spectrum, the Bay Area has tsunami hazard zones (you can spot the evacuation signs around the bayfront) in addition to the usual flood and dam inundation hazard zones. And expect drought to impact water prices plus restrictions on water useage.
Are Fire Seasons New?
Structural Differences (Houses)
- No basements – there are very few homes with basements here (the very old ones and those which are newer and extremely expensive). A very common question is “where do people store all their stuff if they don’t have a basement?” For most households, the storage center tends to be the garage. Built in cabinets and storage shelves are highly appreciated. When people purchase homes with 3 car garages, often that 3rd space is not for a car, but for “stuff” – luggage, holiday decor, momentos, old files, etc.
- Foundations – older homes are usually built on a “raised” foundation or perimeter foundation with support beams under the center part of the home. Some types of homes, such as Eichler designed houses (mid-century modern ranch style) were built with slab foundations and actually have radiant heating (heating coils built into the slab). Newer homes now tend to be built on slab also (10-15 years of age or less). Most of our valley has 40-60 year old ranch style homes, though, and these are mostly “raised” foundations with a crawl space.
- Houses are built to move in case of an earthquake – most of our homes are built with wood and are intended to move in the case of an earthquake. It is very rare to find a house made out of brick here because they don’t do well in case of severe shaking.
- Suburban sprawl – Silicon Valley was built for cars. While BART and VTA are expanding access to some public transit routes, it’s still a very car-dependant area. The median lot size for homes sold in San Jose over the last 2 weeks (as of this writing) was 6,310 SqFt, and the median home size was 1,568 SqFt. Depending on where in the world you are coming from that can sound quite small, but it’s a relatively typical suburban home in this area.
These are perhaps the most salient differences home buyers relocating to Silicon Valley might want to be aware of. Each of these topics could be a blog post of its own, and I have written about all of them! Our blogs offer information on the local market and home buyer, owner, and seller concerns, and we also provide insight into some of the resources and Tools You Can Use When Relocating to the San Jose Area, but an experienced professional Realtor will be your most useful resource for navigating real estate in Silicon Valley. If you’re ready to move to Silicon Valley, we would love to hear from you!
by Mary Pope-Handy | Jan 24, 2022 | Buying Tips, Finances, Lifestyle, Real Estate, Relocation
“Can I buy the same home in Silicon Valley?”
I am frequently contacted by extremely bright, successful engineers or high tech professionals who are in large homes on large lots with great schools in less expensive areas of the country, or ocasionally outsisde of the country. They want to move here because Silicon Valley is the hub of innovation, a center for jobs in high-tech, our weather’s great, crime’s low, and there’s so much to do in this region. The housing costs here are extraordinarily high here, but often these professionals hope that the salaries are commensurately high such that they can replicate the home and lifestyle they are accustom to elsewhere, but in Silicon Valley. It doesn’t work that way.
Unless you’re relocating here from New York, Tokyo, or Paris (or somewhere equally astronomically priced), don’t expect the salary offered in Silicon Valley will to go as far here as it would elsewhere in the world. I’m sorry.
Relocation & Silicon Valley: Downgrade to Upgrade
Downgrade the House, Upgrade the Price…
Most relocating homeowners can expect a home downgrade and a higher price compared to what they are leaving behind. Yes, incomes are a little higher but not nearly enough to match the discrepancy in real estate prices. This is even more true with the astronomical acceleration of the market that we’ve seen in 2021 and in early 2022. Even without a wild seller’s market I tell people, as a rule of thumb, that when you move here you will pay twice as much and get half as much. (While salaries might be a little higher, they are not usually double what you’d make elsewhere.)
Sometimes I get the comment: “I don’t want to move to Silicon Valley and have my family’s lifestyle negatively impacted by having to live in a smaller house. I want the quality of life to go up, not down!”
That is completely understandable. People who move here don’t do it because of the housing. They do it for the location and the style of living that this area offers.
… to Upgrade the Location and Lifestyle!
We have the Pacific Ocean an hour or less away, San Francisco an hour away, dozens of wineries, theatre, museums, professional sports (go Sharks!), and world-reknown parks and trails. Shoveling snow? Never! San Jose enjoys 300 sunny days a year on average. If you love to be outdoors, you can make the most of it all year long here where the weather is subtropical. Our population is highly diverse and highly educated, crime is low, not to mention it’s the center of the global tech industry! There are a thousand reasons why the South Bay is probably a major upgrade… but it’s not an upgrade if you equivocate your house with your lifestyle.
So if you are considering a move to Silicon Valley, expect to pay more, get less home, and move into an amazing community in a beautiful pocket of the world.
Related Reading from this and my other blogs:
Market Reports for Three Silicon Valley Counties
What can you buy for $1 million in Silicon Valley?
Comparing cost of housing in West Valley communities from Palo Alto to Los Gatos to Blossom Valley: what will a 4 bedroom home cost?