Benford Real Estate, Silicon Valley, Santa Clara County

At the end of 2011, the inventory of homes for sale in Santa Clara County reached its lowest since March of 2005, at 2,018 units for sale. What does that mean? It means that with sales at a steady 1,100 per month clip at mortgage interest rates below 4%, real estate values in the San Jose/Silicon Valley area are ripe to strengthen. And who wouldn’t want that?

Don’t expect a wild run-up in prices this year as was seen in the early 2000s. Don’t even hope for that. What we’d like to see is values rising at least 4% in 2012. Based on 2011′s numbers and the current conditions, that’s a reasonable expectation and one that will put us well on our way to a better overall economy.

The Valley Breakdown – median prices and months of inventory for various parts of Santa Clara County – click image to enlarge

Santa Clara County Listings, Pended Sales, and Closed Sales: Houses, Townhouses, and Condominiums Combined

Vital Signs: (Santa Clara County houses, townhouses, and condos, as of December 2011)

Total Active Listings: 2,018
Average asking price of unsold homes: $876,000 (remember, luxury homes in higher price ranges take longer to sell and skew this number higher)
Average sales price of sold homes: $620,000
Median sales price of sold homes: $475,000
Average percentage of original asking price obtained by successful sellers: 94%
Average number of cumulative days on market: 79
Closed sales, year-to-date: 15,322
Listings expired during December 2011: 144
Average 1-year appreciation: 3.5%
Months of supply by the end of December, based on closed sales: 1.7 (sellers’ market: competing bids are not unusual)
Average 30-year fixed interest rate as of January 19, 2012: 3.88%, 0.8 points

Conventional wisdom among homeowners is that the holiday season is a bad time to put one’s home on the market. But if 99% of potential home sellers took that advice to heart, the remaining 1% would have a lot to gain: less competition for the same pool of buyers, potentially making for a quick sale.

Let’s look at the facts: at the end of November, in Santa Clara County, there were 2,535 homes, including condominiums, on the market. That’s the lowest total at any time of year in nearly two years! And there are buyers out there: Year-to-date through November 2011, there were 13,575 sales. The same time period in 2010 there were 13,224; in 2009, 13,591. Clearly the demand has not diminished this year – it is there, and we can personally vouch for it. We currently have multiple buyer clients who have been looking for homes for months and yet remain on the hunt, even now between Christmas and New Year’s! Many of them have more time this week due to days off from work.

So are the holidays really a bad time to put a home on the market? Lay it to rest – it’s a myth. Some years are better, some are worse, but it has nothing to do with the holidays. You can sell your home whenever it suits you best, and we’ll be there to help.

The Valley Breakdown – median prices and months of inventory for various parts of Santa Clara County – click image to enlarge

Santa Clara County Listings, Pended Sales, and Closed Sales: Houses, Townhouses, and Condominiums Combined

Vital Signs: (Santa Clara County houses, townhouses, and condos, as of November 2011)
Total Active Listings: 2,535
Average asking price of unsold homes: $895,000 (remember, luxury homes in higher price ranges take longer to sell and skew this number higher)
Average sales price of sold homes: $636,000
Median sales price of sold homes: $478,000
Average percentage of original asking price obtained by successful sellers: 95%
Average number of cumulative days on market: 73
Closed sales, year-to-date: 13,575
Listings expired during November 2011: 144
Average 1-year appreciation: 1.3%
Months of supply by the end of November, based on closed sales: 2.3 (sellers’ market – not a typo)
Average 30-year fixed interest rate as of December 22, 2011: 3.91%, 0.7 points

The average sales price for Santa Clara County homes dropped nearly 10% from October 2010 to October 2011. That sounds bad but only part of the market is taking the hit. Among homes priced $500,000 or higher, 626 sold last month, down from 678 in October 2010. The average price went down from $978,000 to $939,000. But among homes below $500,000, the number of sales went up from 534 to 604, and the price went from $330,000 to $331,000, virtually the same.

So what’s going on? Well part of it is just that affordable homes sell better than expensive ones. But that’s true all the time – and we haven’t seen such large year-to-year fluctuations in price in previous months this year. Another factor could be that the conforming loan limit (that is, the maximum loan amount that can be re-sold by banks to Fannie Mae and Freddie Mac on the secondary market) expired at the end of September, automatically dropping from $729,750 to $625,500. And in a high-cost area like Silicon Valley, that’s bound to have an impact. The National Association of REALTORS®, meanwhile, is lobbying Congress to renew the higher limit.

Regardless of what happens in Washington, our market will adjust. But for now, we’re happy to let you know what’s going on behind the scenes while continuing to provide great service and results for our clients.

The Valley Breakdown – median prices and months of inventory for various parts of Santa Clara County – click image to enlarge

Santa Clara County Listings, Pended Sales, and Closed Sales: Houses, Townhouses, and Condominiums Combined

Vital Signs: (Santa Clara County houses, townhouses, and condos, as of October 2011)
Total Active Listings: 2,973
Average asking price of unsold homes: $898,000 (remember, luxury homes in higher price ranges take longer to sell and skew this number higher)
Average sales price of sold homes: $613,000
Median sales price of sold homes: $472,000
Average percentage of original asking price obtained by successful sellers: 96%
Average number of cumulative days on market: 73
Closed sales, year-to-date: 12,939
Listings expired during October 2011: 148
Average 1-year appreciation: -9.9%
Months of supply by the end of October, based on closed sales: 2.6 (slight sellers’ market)
Average 30-year fixed interest rate as of November 17, 2011: 4.00%, 0.7 points

For the week ending October 7, Freddie Mac reported that the average 30-year fixed mortgage rate had dropped below 4%, a psychological threshold which perhaps spurred borrowing and refinancing judging by the fact that the number bounced back to 4.12% the following week. I’m no better a predictor of the future than anyone, but when my clients wonder out loud whether interest rates will continue to drop, I typically say that we can’t take a good opportunity for granted. Sure, another better one may come along, but how do we know that? We either give up on the chance to get a “better deal”, or miss out on a “good deal” all together because we were waiting for a “better deal” that did not come. Which is less regrettable?

It is also worth noting that the inventory of homes for sale in Santa Clara County seems to be going into the seasonal end-of-year decline, at 3169 as of the end of September, the third consecutive month of significant decline. This is not a bad thing because the number of closed sales remains proportional, giving us a healthy 2.8 months’ worth of inventory. Some sellers may even take advantage of the holiday season by putting their homes on the market when the competition from other sellers is likely to be at its lowest. If interest rates stay on the rebound this quarter while inventory is still dropping, some buyers will feel the urge to lock in the lowest rate possible, giving a boost to values in some markets.

The Valley Breakdown – median prices and months of inventory for various parts of Santa Clara County – click image to enlarge

Santa Clara County Listings, Pended Sales, and Closed Sales: Houses, Townhouses, and Condominiums Combined

Vital Signs: (Santa Clara County houses, townhouses, and condos, as of September 2011)
Total Active Listings: 3,169
Average asking price of unsold homes: $908,000 (remember, luxury homes in higher price ranges take longer to sell and skew this number)
Average sales price of sold homes: $624,000
Median sales price of sold homes: $492,000
Average percentage of original asking price obtained by successful sellers: 96%
Average number of cumulative days on market: 64
Closed sales, year-to-date: 11,651
Listings expired during September 2011: 167
Average 1-year appreciation: -4.9%
Months of supply by the end of September, based on closed sales: 2.8 (slight sellers’ market)
Average 30-year fixed interest rate as of October 14, 2011: 4.12%, 0.8 points

A shaving was taken off the total number of homes for sale in Santa Clara County for the second month in a row in August. After remaining steady at nearly 3,700 units in spring and early summer, we’re now at our lowest level this year at 3,355. Although this is typical of the annual cycle, this time last year the inventory was still growing. And while it may bring modest relief to sellers who are concerned about soft prices, it means the first-time home buyer market (which has remained vibrant despite broader economic challenges) must face tighter competition with investors and cash-buyers. What the numbers don’t show is that many of these first-time home buyers are unexpectedly finding themselves being outbid on their first-choice homes. With just 2.4 months of inventory it is indeed a Silicon Valley market that slightly favors sellers in terms of units if not in price. Oh, by the way… the average 30-year fixed-rate mortgage last week was 4.09%. We’re (almost) tired of saying how amazingly low the rates are, but there you have it!

The Valley Breakdown – median prices and months of inventory for various parts of Santa Clara County – click image to enlarge

Santa Clara County Listings, Pended Sales, and Closed Sales: Houses, Townhouses, and Condominiums Combined

Vital Signs: (Santa Clara County houses, townhouses, and condos, as of August 2011)
Total Active Listings: 3,355
Average asking price of unsold homes: $895,000 (remember, luxury homes in higher price ranges take longer to sell and skew this number)
Average sales price of sold homes: $654,000
Median sales price of sold homes: $520,000
Average percentage of original asking price obtained by successful sellers: 97%
Average number of cumulative days on market: 66
Closed sales, year-to-date: 10,445
Listings expired during August 2011: 105
Average 1-year appreciation: -3.0%
Months of supply by the end of August, based on closed sales: 2.4 (slight sellers’ market)
Average 30-year fixed interest rate as of September 16, 2011: 4.09%, 0.7 points

We really ought to stop being surprised every time interest rates reach a new low – it seems like just about every month we’re talking about it! As of last Friday (August 19, 2011), the average 30-year fixed-rate mortgage, according to the California Association of REALTORS®, was 4.15% with 0.7% in fees.

If you were born in the ’70s or ’80s, do us one favor – for some jarring perspective, ask your parents what their interest rate was when you were born.

With U.S. credit having been downgraded earlier this month, some predicted rates were on their way back up, but soon thereafter the Federal Reserve vowed to keep interest rates steady for two years. This is akin to putting up a giant billboard saying, “Banks, you might want to make some loans now, and consumers… wouldn’t you love to own a home?” If you’re financially solvent, chances are you can.

The Valley Breakdown – median prices and months of inventory for various parts of Santa Clara County – click image to enlarge

Santa Clara County Listings, Pended Sales, and Closed Sales: Houses, Townhouses, and Condominiums Combined

Vital Signs: (Santa Clara County houses, townhouses, and condos, as of June 2011)
Total Active Listings: 3,521
Average asking price of unsold homes: $896,000 (remember, luxury homes in higher price ranges take longer to sell and skew this number)
Average sales price of sold homes: $677,000
Median sales price of sold homes: $530,000
Average percentage of original asking price obtained by successful sellers: 97%
Average number of cumulative days on market: 68
Closed sales, year-to-date: 8,996
Listings expired during July 2011: 157
Average 1-year appreciation: -3.6%
Months of supply by the end of July, based on closed sales: 2.9 (slight sellers’ market)
Average 30-year fixed interest rate as of August 19, 2011: 4.15%, 0.7 points

Nothing remarkable happened last month! Nope, no changes, no drama. And that’s a good thing, because we’re not in the business of selling our articles or advertising space, but the business of protecting our clients’ real estate interests. We’re not here to hype, but to deliver the facts. And this month, the facts are pretty boring. That’s a good thing, because it means the market in Silicon Valley is stable: look at the chart below and you’ll see a consistent level of both inventory and sales over the last several months.

Yes, foreclosures are still lingering, and there is also talk in legislature about changes to lending guidelines, including requiring a 20% down payment for federally backed mortgages; restructuring Fannie Mae and Freddie Mac; and reducing the conforming loan limit for federally backed loans (which will happen automatically unless Congress acts to extend the current limits). These are all things which could shake up the already delicate real estate market. So maybe something remarkable happened after all: our local market remained stable despite the economic uncertainty. That’s the power of the Silicon Valley economy. Things aren’t perfect here, but they’re sure better than most anywhere else.

The Valley Breakdown – Click image to enlarge

Santa Clara County Listings, Pended Sales, and Closed Sales: Houses, Townhouses, and Condominiums Combined

Vital Signs: (Santa Clara County houses, townhouses, and condos, as of June 2011)
Total Active Listings: 3,672
Average asking price of unsold homes: $885,000 (remember, luxury homes in higher price ranges take longer to sell and skew this number)
Average sales price of sold homes: $701,000
Median sales price of sold homes: $537,000
Average percentage of original asking price obtained by successful sellers: 96%
Average number of cumulative days on market: 66
Closed sales, year-to-date: 7,681
Listings expired during June 2011: 114
Average 1-year appreciation: 1.2%
Months of supply by the end of June, based on closed sales: 2.4 (slight sellers’ market)
Average 30-year fixed interest rate as of July 15, 2011: 4.51%, 0.7 points

Bucking the usual annual trend of an increase in homes for sale heading into summer, the Santa Clara County housing inventory remained virtually unchanged from April to May. Some media outlets are reporting that foreclosure proceedings have slowed as banks and institutional lenders adjust their procedures following the robo-signing scandal. This may be having an impact on the local inventory, whereas a decrease in the percentage of mortgages in default, (meaning fewer homes are going into foreclosure in the first place) also is a factor.

Perhaps more remarkable though is the spike in pended sales in May, which went up to over 2000 for the first time in more than a year. If those deals stay together and close in June and July, without any inventory to replace the sales, there will be some upward pressure on prices, especially with continuously record-low interest rates.

The Valley Breakdown – Click image to enlarge

Santa Clara County Listings, Pended Sales, and Closed Sales: Houses, Townhouses, and Condominiums Combined

Vital Signs: (Santa Clara County houses, townhouses, and condos, as of May 2011)
Total Active Listings: 3,688
Average asking price of unsold homes: $885,000 (remember, luxury homes in higher price ranges take longer to sell and skew this number)
Average sales price of sold homes: $662,000
Median sales price of sold homes: $518,000
Average percentage of original asking price obtained by successful sellers: 96%
Average number of cumulative days on market: 71
Closed sales, year-to-date: 6,100
Listings expired during May 2011: 122
Average 1-year appreciation: -0.2%
Months of supply by the end of May, based on closed sales: 2.7 (slight sellers’ market)
Average 30-year fixed interest rate as of June 10, 2011: 4.49%, 0.7 points

It came a little later than in most years, but in April we finally saw an uptick in the inventory of homes for sale in Santa Clara County, a trend we usually see starting in February or March and carrying through June or July. But this is a market that hasn’t followed the typical trends this year, and as a result both buyers and sellers have had trouble reading it. Talk to several sellers, and many of them will lament having to reduce their prices just to compete with foreclosures and distressed properties. Clearly buyers have the advantage right? Not necessarily: many buyers are having their purchase offers either outbid by competing offers, or outright rejected by equity sellers who can afford to hold on. So to whom does this market belong? Right now it belongs to those who are putting their best foot forward in negotiations to consummate a deal: the buyers who are willing to pay the price, and the sellers who are willing to accept the price. It seems we’ve been spending more time lately working to get the two parties to agree, but at the end of the day, the numbers show a flow of transactions steadier than most people know.

The Valley Breakdown – click image to enlarge

Various regions of Silicon Valley. Monte Sereno included with Los Gatos; Los Altos Hills included with Los Altos

Santa Clara County Listings, Pended Sales, and Closed Sales: Houses, Townhouses, and Condominiums Combined

Vital Signs: (Santa Clara County houses, townhouses, and condos, as of April 2011)
Total Active Listings: 3,680
Average asking price of unsold homes: $882,000 (remember, luxury homes in higher price ranges take longer to sell and skew this number)
Average sales price of sold homes: $690,000
Median sales price of sold homes: $518,000
Average percentage of original asking price obtained by successful sellers: 97%
Average number of cumulative days on market: 80
Closed sales, year-to-date: 4,652
Listings expired during April 2011: 115
Average 1-year appreciation: 2.7%
Months of supply by the end of April, based on closed sales: 2.7 (slight sellers’ market)
Average 30-year fixed interest rate as of May 13, 2011: 4.63%, 0.7 points

In March we typically see the number of homes for sale begin to rise, continuing through April and May and leveling off around June. This March, the number of homes for sale in Santa Clara County remained nearly unchanged from February, although pending sales and closed sales both increased by nearly 40% (see graph below). It seems that sellers, wary of an uncertain market, are delaying their decisions to put homes on the market, whereas buyers, wary of the possibility of rising interest rates, are continuing to enter the market. As a result, we only had 2.5 months of inventory at the end of March, a clear sellers’ market, although it may not feel like it. Buyers, although aware of the opportunities, are being patient and prudent in order to get the most value for their purchase.

The Valley Breakdown – click image to enlarge

Various regions of Silicon Valley. Monte Sereno included with Los Gatos; Los Altos Hills included with Los Altos

Santa Clara County Listings, Pended Sales, and Closed Sales: Houses, Townhouses, and Condominiums Combined

Vital Signs: (Santa Clara County houses, townhouses, and condos, as of March 2011)
Total Active Listings: 3,426
Average asking price of unsold homes: $864,000
Average sales price of sold homes: $652,000
Median sales price of sold homes: $482,000
Average percentage of original asking price obtained by successful sellers: 95%
Average number of cumulative days on market: 83
Closed sales, year-to-date: 3231
Listings expired during March 2011: 136
Average 1-year appreciation: 1.2%
Months of supply by the end of March, based on closed sales: 2.5 (sellers’ market)
Average 30-year fixed interest rate as of April 8, 2011: 4.87%, 0.7 points