Silicon Valley real estate market softens again

2018-11-25 Av DOM and SP to LP RatioIt is not at all unusual for the housing market to go flat or even decline a little in the second half of the year. In October, the local Silicon Valley real estate market got an uptick as prices rose from the month before, homes sold a little faster, and basically things inched back into the seller’s favor. Sometimes homes that sell between Labor Day and Halloween seem to be in a second spring of sorts. In November so far, though, the Silicon Valley real estate market softens again – slightly. It’s all slightly more depressed than in October: prices are a little lower, days on market a little longer, etc. It is still a seller’s market, but not nearly to the degree it was in spring.

In other words, it’s a good time to buy (at least compared to 6 months ago).

Home buyers are funny, as a rule. They tend to buy when it’s a frenzy and prices are skyrocketing and multiple offers are in the crazy zone with buyers going in without any contingencies. Once the foot comes off the gas and they can buy with some rights to contingencies and can purchase closer to list price, many buyers freak out and won’t buy at all. It’s like the market has to be against them if they are at all interested.

Let’s look at the numbers for Santa Clara County. I pulled these tonight from MLS Listings and the data reflects single family homes in Santa Clara County. (Remember, closed sales were usually ratified about 30 days prior.)

First – inventory – I think it’s very important to not just view the month-over-month changes, but the year over year. How does it usually look for this month in the past? 2017 was a weird year, so going back a little further in time provides helpful perspective.

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An uptick in the market

The Silicon Valley market recently seemed to be on the skids from late spring through summer. The question was whether the decline in average and median sales prices was “seasonally normal” or if it was the beginning of a correction. Depending on which way you look at the data (or which data you used), you might come up with a different conclusion. What I did not expect at this point was an uptick in the market.

Today I did a quick study of pricing in Santa Clara County and San Mateo County. To my surprise, it appears that the closed sale prices so far in October are noticeably higher than in August – perhaps the sliding prices are sliding no more? Do we have an uptick in the market? We’ll have to watch and see. There are obviously very few sales so early in the month, but no matter which angle I tried, I did keep getting the same result: higher median and average sale prices in Santa Clara County and San Mateo County for single family homes. It was also strong for the condo / townhome market in Santa Clara County, but there’s a little dip for San Mateo County so far this month.

Here are some charts that I created from MLSListings, using the stats tools, today.

First, Santa Clara County single family homes, average sale price and median sale price. The uptick in sale prices is clear.

 

Santa Clara County - Average and Median Sale Prices over time - single family homes only

Santa Clara County – Average and Median Sale Prices over time – single family homes only

 

Next, the same criteria, but for San Mateo County, which also shows rising average and median sale prices :

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Silicon Valley’s Apartment Rental Market

keyWhether you’re a long-term renter, temporary renter looking for a furnished rental, or a landlord, you’re probably wondering how the Silicon Valley’s apartment rental market is today and where it’s heading. Most real estate agents in this area do not deal with rentals, so rental housing is not typically something we track super closely. That being said, the same things that affect the residential resale market frequently effect the apartment rental market as well. So, without the help from my usual sources, such as the MLS (Multiple Listing Services), let’s look at what people are saying about the current trends.

Silicon Valley’s cooling apartment rental market

There are a few good sources for rental home information. One of them is RentCafe, which provides info  on many cities and towns in Santa Clara County. The RentCafe page on Mountain View, for instance, provided the average apartment rental for all apartments, for studios, 1 bedrooms, 2 bedrooms, and 3 bedrooms. The overall averages seem to be somewhere between the 1 and 2 bedroom price points. It also shared today’s softened prices relative to last year’s. (I find this curious since buying a home is now more expensive than a year ago.)

Rent Cafe: Mountain View rental apartment prices

RentCafe has similar info for a few cities nearby. You can find Santa Clara here, but change the last part of the URL to get a different city:

https://www.rentcafe.com/average-rent-market-trends/us/ca/santa-clara-county/santa-clara/

Sunnyvale

San Jose

Campbell

 

Another excellent source of information is Apartment List.

Apartment List does not analyze every city and town, nor do they study the difference between neighborhoods, such as comparing South San Jose with Willow Glen, but where they do give insight helps to show the major trends happening around the bay area. Check out Apartment List for more detailed analysis, and the most up-to-date information on the market. Also check out their Rentonomics page with more articles on renting.

https://www.apartmentlist.com/ca/san-jose#guide

https://www.apartmentlist.com/ca/sunnyvale#guide

https://www.apartmentlist.com/ca/santa-clara#guide

https://www.apartmentlist.com/ca/campbell#guide

https://www.apartmentlist.com/ca/mountain-view#guide

https://www.apartmentlist.com/rentonomics/national-rent-data

https://www.apartmentlist.com/rentonomics/

Is there a solution to the lack of low-cost apartment rentals?

Analysts all believe there will be some market turnaround in the not too far future, but there are a few answers to where it may come from. CNBC published an article on the housing shortage dealing with high tech companies. Large industry leaders such as Google, Facebook, and Twitter continue to hire, bringing people into the area more quickly than developers are building, and forcing up the prices in both housing and rental markets. Employees have asked these companies to help, and some are responding. Google and Facebook have both come up with plans to construct affordable housing.

https://www.cnbc.com/2017/06/14/google-spending-30-million-on-housing-for-silicon-valley-employees.html

For years, California law has stated that a certain amount of affordable housing must be available in each community. Unfortunately, many communities are ignoring both the law and the need for such developments. If every community were to develop what the law required, the market would be much more balanced. Yet again, it’s the investors that are controlling the development, and it will not likely happen soon.

 

Santa Clara County median home pricing

Dollar signWhat can you get for your housing budget? What are you able to afford to buy in Silicon Valley?

Below, please find a simple chart which provides a pretty good sense of what homes actually cost – not what they are listed for, but where they sell, here in the Valley of Heart’s Delight.

Often when people relocate to the San Jose area, they are interested in communities with good schools, like Cupertino, Saratoga, Los Altos, and Los Gatos. It can be a real shock to the system to find out that buying power isn’t what was hoped.

Santa Clara County median home pricing

This data is courtesy of Sereno Group – thought it would be helpful to folks relocating here as a snapshot on the Silicon Valley real estate market Disclaimer: in many of these cities, there are different school districts within a city’s borders, and they are their own “markets”.   Consider this as general information only.

Silicon Valley real estate market

How is the Silicon Valley real estate market?  It’s more of the same this month, with too-low levels of available inventory of homes for sale in Silicon Valley.  At this point, the low inventory is a chronic problem for everyone. Inventory is up from the beginning of the year, but no where near “normal”, as you can see in the data below.

Home buyers in the county or on the Peninsula have little or nothing to purchase, and sellers feel trapped – they cannot sell their current home as there are bad odds that they would be able to purchase something else if they did sell. Unless they expect to leave the metro area, they are going to hold on tight in most cases.

Have a look at the inventory of houses on the market from 2001 (the earliest year I can pull from the MLS) to today in Santa Clara County – June is highlighted in a pale yellow to make it easy to find and compare the same month over the last 17 years.

The Silicon Valley real estate market – a look at inventory of available homes for sale:

Santa Clara County single family home inventory of available listings 2001 to present

The numbers really say it all. Even if you are new to the San Francisco Bay Area, you cannot help but notice the relative scarcity of homes for sale this month as opposed to last month or any other dating back to 2001. Therefore, it’s no surprise that solid homes here that are not in the luxury tier for their area (and are aggressively priced, beautifully staged, professionally photographed, and easy to view) are getting multiple offers, high overbids, and selling with no contingencies for inspection, loan, or appraisal. It’s more difficult, but not impossible, for anyone trying to purchase with less than 20% down in multiple offer situations. The key is to have extra money, beyond that 10%, for a potential appraisal deficit.

Here’s how the numbers look for various  Silicon Valley communities. You can see all the info for them at popehandy.rereport.com or view the PDF newsletter by clicking the link or the image below.

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Get weekly market reports by zip code and / or monthly newsletters for the area

One of the tools I use in my Silicon Valley real estate practice is Altos Research. My subscription, which generates reports on mls data of homes for sale weekly, covers all the zip codes of Santa Clara County. The market reports by zip code can be a real wealth of information for home buyers trying to figure out how much home they can get for their money as the report breaks down each zip code area listings by price quartiles and provides the average home and lot size, among other items, in each bracket.

Here’s one part of this week’s report for single family homes in 95032

Profile of homes for sale by price quartile inLos Gatos CA 95032

Profile of homes for sale by price quartile in 95032 (Los Gatos CA)

This is a really helpful way to grasp qucikly how much it will likely cost to get you into a certain sized home.  It also provides a sense whether your particular price point is near the bottom or top of the market – or if it’s possible at all.  Want to buy a home here but the budget is $1 million or less? The data above reveals that this is unlikely in a house.  But perhaps a condo or townhouse might work.

Next, please notice the days on market by pricing tier.  It’s a lot hotter of a market in the lowest priced houses than it is in the highest.

It also helps home sellers to understand what part of their local market is hot or cold (if any).

There are many other elements included in the report.  The main summary of “how’s the market?” is found in the upper right corner.  Below is the example from the same Los Gatos 95032 report cited above:

 

Altos Research Report for Los Gatos 95032

Altos Research Report for Los Gatos 95032

The Altos data is strictly by town or zip code, so school districts won’t be covered – and here they are a major driver on home values. Even so, this is a great starting point and a way to get the big picture painlessly.

Please sign up and get the monthly newsletter, too!

The report is free to you – please sign up below to get the market reports by zip code emailed to you automatically each week.   Yo

But wait, there’s MORE!  Two monthly newsletter options, too!!

I also offer a couple of monthly newsletter than you can sign up to receive.  The Silicon Valley RE Report comes out between the 5th and 10th of each month, and that site automatically generates an update for  particular addresses or areas, depending on what someone signs up for.  If interested, go to http://popehandy.rereport.com/market_reports and navigate to the report you want (by city, the county, or part of San Jose, for instance) and sign up to receive updates by clicking on the “Subscribe to report” button.

Additionally, once a month I send out a personalized newsletter via Mail Chimp that includes some data from the RE Report as well as other information, such as stats I’ve pulled directly from the MLS or what I’m hearing about market conditions at office meetings, or changes to the purchase contract or disclosure paperwork, etc. You can see a sample with my May 5, 2018 newsletter and also view the past mailings (upper left side “Past Issues”)  & sign up if you like to get these each month. The sign up button is on the upper left side and simply says “subscribe”.  There will be a little overlap with the RE Report, but it will provide info that isn’t available on that site.