Silicon Valley Housing Market Trends - Second Quarter 2010 Update

In the second quarter of this year (April to June) we can really see which areas of the housing market have bounced back from the crisis and which areas are still struggling. To visualize those details, and to complement our second quarter 2010 analyses of Los Altos, Mountain View, Palo Alto, and Sunnyvale, we have created some city comparison graphs. We’ll cover total sales volume, sale price to listing price ratio, days on market, median selling price, and number of homes sold, using data on single-family homes off of MLS listings Inc.

First, let’s have a look at: 

Total sales volume clearly shows that over the past two-plus years the housing market dropped after peaking in 2008, then slowly bounded up and down, successively higher each quarter. The second quarter of this year really reflects a trend towards returned growth in the housing market of our local cities.

One additional interest to point out is that although most of the cities have not yet reached 2008 sales volumes, Mountain View has surpassed it.

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The sales price to list price ratio is one way to show buyer and seller perceptions: above 100% is a seller’s market, and buyers are paying above the listing price to win a house; below 100% is a buyer’s market, and sellers are having to reduce their listing price in order to sell a house. The closer a city is to 100% the more the market is balanced.

On a house that is listed for $1 million, a 1% change would amount to $10,000.

In both quarters this year, Mountain View and Sunnyvale have both been above 100%, a result of high demand for entry-level homes. Palo Alto and Los Altos, the more desirable and expensive of the cities, are still under 100% (Los Altos is at 98.21%, recovering from a glaring low of 93.56% in the beginning of 2009).

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The Average days on market is a good indicator of buyer demand and the overall health of the housing market. From the graph, we can see all four cities returning nearly to 2008 levels this quarter, with Palo Alto and Los Altos realizing the greatest second quarter drops. This is another signal that the market is shifting to a seller’s market, making it more difficult, once again, for buyers to get find a good deal.

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The median selling price can be used in conjunction to the earlier ratio graph. Palo Alto, Mountain View, and Sunnyvale, which are all near or above a 100% ratio, have median prices that are rising. Los Altos, however, is still far from a 100% ratio and its median sales price remains stagnate.

Currently all four cities are off second quarter results in 2008 by more than 5% -- Los Altos is even more at nearly 13% under -- so buyers can still expect to save money due to depreciated home values.

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The number of homes sold for each city has either nearly returned to 2008 levels, or surpassed it in the case of Mountain View, which is 50% higher this quarter than the same period in 2008. Part of the reasoning is traditionally more homes go on sale and are bought during the summer months. But this also a result of more sellers willing to sell their homes in a stronger market and a release of pent-up buyer demand.

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