Silicon Valley News

Median Home Prices and Sales in the Peninsula

The San Jose Mercury News has a nice breakdown (below) of the median sales price and number of sales for each zip code in the Peninsula (Santa Clara County, San Mateo County, and Santa Cruz County). You can also see the percent change comparing this January to the same period in 2010. In the Silicon Valley (Santa Clara County) the median sales price for all homes was $460,000, a 2% drop from the same period last year. But looking at resale homes, we saw a 1.9% increase to $529,000. Looking at number of home sales in the area, there were 1,424 sales for all homes, a drop of 10.9% from last year; in resales, 987 sold, which was 5.6% less than last year. We'll soon see in the spring and summer months of 2011 if it picks back up, when the majority of sellers and buyers are on the market.

Overall, Los Gatos Los Altos zip code 94024 had the highest median sales price of $1,569,000, but Palo Alto/East Palo Alto zip code 94303 had the highest $/SqFt at $883. On the other side of the scale, San Jose zip code 95133 had the lowest median sales price at $230,000, and Gilroy zip code 95020 had the lowest $/SqFt at $195.

Silicon Valley Housing Market Trends – Fourth Quarter 2010 Update

Since the crash, the Silicon Valley has recovered faster than the nation on average. Narrowing the range to our four comparison cities - Los Altos, Mountain View, Palo Alto, and Sunnyvale - we have an above average group even against Santa Clara County (see graph below). Experts at DataQuick, an independent real estate analysis company, report that the median sales price and home sales have fallen in the Bay Area from a year ago. The same is true in our example cities. But in a post-crash economy the most important factor real estate professionals, buyers, and sellers are looking for is a stable market.

Prices in our four cities have remained stable, yet deprecated, for the past two years. What will really excite the housing market is a return of high-cost homes and increased buyer confidence found in areas such as gains in employment and relaxed credit standards from banks. While some have seen this as an opportunity to find a house for less, most of the market is collectively holding its breath.

So with anticipation of what 2011 brings, lets review how 2010 was for our four real estate cities.

Median Selling Price Q4 2010
Median Selling Price Q4 2010

We've also talked about the median selling price over the years here and here, and we're getting further away from the dump in housing prices that occurred late 2008. Like we mentioned in the opening, what people are looking for is stabilization, but also, at what price will that occur.

This quarter, Palo Alto nearly dropped to its lowest price since the bust, unusual for a strong market, but is expected when top-tier homes are not being put up for sale until the market improves. There is obvious demand in this city as it has the lowest average days on market of our comparison cities (see third graph). Currently, Palo Alto is around 2005-2006 levels, which is about 4% lower than the fourth quarter in 2006 compared to the same quarter in 2010.

But where Palo Alto struggled in the past two quarters, Los Altos has risen two straight quarters. Although the news is tempered by its current fourth quarter median sales price, which is about equivalent to its first quarter in 2006.

At a price point $500,000 or so lower are Mountain View and Sunnyvale. Continuing to be the most stable city of the group, Mountain View has reliably hovered at a median price of $900,000 for single-family homes -- equal to the first half of 2006.

Sunnyvale reflects the current movement of Santa Clara County, and moved back to levels found near the end of 2004.

Sales Price to Listing Price Ratio
Sales Price to Listing Price Ratio

The sales price to listing price ratio gauges buyer and seller expectations. (Consider that a 1% difference here on a million dollar home is equal to $10,000.) The first thing that jumps out is Palo Alto is the only city in our comparison where homes are selling higher than their listing price, a ratio above 100%.

With Palo Alto and Los Altos trends reversed from our last graph, Los Altos increased its median price but the majority of the home sales in the city have made pricing adjustments to fit the mood of the conservative buyer. Mountain View, which also saw a bump in the median price, faced a dramatic drop of about two percent to 98%, down from 100%. This could be a correlation with more aggressive sellers entering these markets, but they are not getting the bites they saw in 2008.

Sunnyvale remained similar to the previous quarter, nearing a balanced market between buyer and seller.

Interestingly, Santa Clara County has not realized a ratio above 100% for some time, unlike our four comparison cities. Going back to our 2000 to 2010 report, the county broke 100% in the beginning of 2004, peaked above 104% for single-family homes in spring 2005 and fell under again mid-2006. As a comparison, the average ratio for our four cities remained above 100% from 2004 until late 2008.

Average Days on Market Q4 2010
Average Days on Market Q4 2010

Average days on market is another good indicator of market health. So much so that sometimes buyers and sellers put unreasonable weight into days on market of a house listing. But in markets where emotions can play a large role in a purchase, it is not unexpected and something to be dealt with.

This graph mostly looks like a mess of weaving colored lines, with no consideration to housing prices. Signs of a bubble popping through a climbing average days on market were felt in Santa Clara County as a whole late 2005, whereas most of our four comparison cities kept an average days on market below 40 until 2009. The days on market of the county and our cities are more closely aligned now that the market has cooled, as we can see they are following a similar trend since late 2009.

Number of Closed Sales Q4 2010
Number of Closed Sales Q4 2010

In the number of closed sales graph we were able to put our four comparison cities on the left vertical axis and also include Santa Clara County homes sales using the right vertical axis. While county sales are not comparable in number to city sales, displaying both can help compare overall trends to the individual cities.

Traditionally, home sales dip during winter and peak during spring and summer. But looking at 2010, Palo Alto pushed up, Los Altos dipped, Mountain went up, and Sunnyvale followed the winter plunge. Buyers are out there combing for good deals, especially in valued markets such as Palo Alto. Though previous years have shown that the biggest dip happens during the first quarter of year, so we'll have to wait and see if these cities continue to break the trend.

One positive emerging trend occurring for all our four comparison cities and county alike, is a steady increase of sales, most clearly seen when you compare first quarters.

 

Sunnyvale Housing Market – Fourth Quarter 2010 Update

sunnyvale real estate market fourth quarter 2010

The winter months are rolling through the fourth quarter of 2010, and home sales have sunk along with the median sales price and average days on market. This is no surprise and remains a truth that there are seasons in real estate, and we can expect it to stiffen as we enter the first quarter of 2011.

Comparing the fourth quarter of 2010 to the same period in 2008 (closed sales, 90; average days on market, 47; median sales price, $656,500) and in 2009 (closed sales, 141; average days on market, 52; median sales price, $760,000), Sunnyvale is wavering but not falling into a double dip market that bearish experts are predicting.

What to Expect When Buying or Selling During the Winter Months

winter sales comparison
winter sales comparison

From the graph above, even though the real estate market has been a mess these few past years, it’s easy to see new listing and buying trends: lots of new listings in March followed by peak selling a couple months later, then a dramatic drop in everything around November. (Check out our prior post going more in-depth on market cycles.) Off hand there’s a couple good reasons for this. Though it may not be as pronounced here in the Silicon Valley, cold and rainy weather play a role in how attractive a property looks and keeping it presentable for potential buyers. Also it’s the holidays, when many people are with families or travelling. Lastly, it’s harder for families to move once school starts for their children.

So what do those remaining buyers and sellers see in the winter months?

As a homebuyer in the spring and summer months, you are approached with a large selection of new listings but an equally large group of competing buyers. These months are to the sellers’ advantage. The market turns in favor to buyers once the temperature drops and competing buyers thin out. During this period, sellers are usually more motivated to sell the house over getting the best price. For the buyer it is a great time to push for a deal, albeit you are looking at 50% less listings than there are in spring and summer.

The main reason against listing a home in the winter time is that the chance to get a high selling price on a home is reduced because buyer competition is reduced -- expect to make some compromises with buyers who already understand the importance of timing. Though this is not the case for every new listing during winter, since a desirable house will always draw attention.

But the tradition of only selling in the summer months is being influenced by the wake of the real estate crisis that started around 2007. With a depreciated housing market and mortgage rates at record lows, many buyers are aware that no matter the season this is an opportunity to buy a house they might not have been able to afford five years ago.

Reasons to sell near the end of year can be tax related, examples include 1031 exchange, which defer capital gain taxes, or inheritance taxes. And there is always personal reasons, including relocation for a job or divorce.

Whatever the reasons for selling in the winter, the biggest worry is having a high days on market (DOM), which makes an otherwise fine property look stale. One way to avoid this is to drop the listing price and excite interest. And if a seller can afford to have patience, they can take the home off the market until an allocated number of days before putting it back on the market with a restarted DOM. And then you are back to the excited spring market.

Real Estate News Roundup: October 29th

Giants in the World Series

A shout out to The Orange and Black, living up to the name and making Texas look small. Good luck this Saturday and Sunday:

And in other orange news, your Halloween community event list:

Bay Area Real Estate News:

  • Palo Alto Weekly article talks about local "premium" housing developments.
  • SF Gate: On The Block says Bay Area real estate is walking on tight rope -- inventory is thin and demand is fickle.
  • Another one for On The Block, five red flags for renters.
  • Real estate monitoring company DataQuick reports that "Bay Area September Home Sales Second-Lowest in 19 years." On the other side of the coin, the median sale price is 8% higher than a year ago.
  • The Chronicle reports that Bay Area foreclosures are down 32.5% from last year; statewide they were down 25.5%.
  • San Jose mercury reports on a job market study done by Beacon Economics. In the third quarter of 2010, the Bay Area brought in 4,500 payroll jobs. But, construction, retail, and government remain the weakest industries.

National Real Estate News:

  • We all appreciate politics that call it as it is: presenting Jimmy McMillan of the Rent is Too Damn High Party, via Wall Street Journal.
  • Fresh Air with Terry Gross untangles the mortgage foreclosure crisis with guest Gretchen Morgenson, from the New York Times. A good summary of how we got here and how banks aren't helping solve foreclosures through the use of "robo-signers."
  • The Associated Press: New home sales rise 6.6% after dismal summer

To Fill Your Inner Real Estate Gossip:

  • Among other news, Chelsea Handler needs to talk to Mr. McMillan. She is renting for $35,000 a month in Brentwood, CA, via NBC Bay Area.
  • Couldn't help but one last Giants mention. Online tickets for the games at AT&T Park sell into the thousands, via Oakland Tribune.

 

Silicon Valley Housing Market Trends – Third Quarter 2010 Update

For the 2010 third quarter housing market report we are going to look at quarterly graphs back to 2006, which should help us better understand where we are today in the Silicon Valley. After the crash in 2007, the best thing we can do is look how are we doing compared to the year before. Putting a long view on it spins it for the worst: Bay Area sales: a region on a tight rope; Bay Area September Home Sales Second-Lowest in 19 years. Our four comparison cities -- Sunnyvale, Mountain View, Palo Alto, and Los Altos -- have performed well in the last year. Here are some highlights that compare this quarter from the same period in 2009:

- Sunnyvale, Mountain View, and Palo Alto have improved their median sales price - Average days on market dropped 30% or more in all four cities - Palo Alto bumped above 100% in the sales price to listing price ratio for the first time since 2008 - Number of closed sales are up in Palo Alto and Los Altos, and down in Mountain View and Sunnyvale; Concurrently, the same is true for total sales volume.

So read on to get more information about the number of homes sold, median sales price, average days on market, and selling price to listing price ratio. All of our data comes from MLS listings inc. measuring single-family homes.

closed sales - 2010 Q3
closed sales - 2010 Q3

The homes sold graph clearly shows the natural market cycle that dips in the fall and peaks in the spring and summer. What we are looking for in the following graphs is how each individual city performed before the housing bubble crash (pre-2007), during, and in the recovery period (after 2009).

All cities began to slide in 2007 and dropped to their lowest levels at the end of 2008. This also meant more homes on the market and an increased inventory, including foreclosed and short-sale properties.

If we compare the first quarter of 2009 to the first in 2010, all four cities jumped in number of homes sold: Los Altos (+133%), Mountain View (+130%), Palo Alto (+44%), and Sunnyvale (+13%).

median - 2010 Q3
median - 2010 Q3

In median sales price we can see the obvious spike in home prices that occurred because of the housing bubble. Mountain View peaked mid-2008, about a year before the other three cities did. Mountain View also suffered less of a downturn when the bubble popped. You can see the other three cities sliding at the end of 2008, while Mountain View prices increased.

Today, we notice that levels have smoothed out since 2009 and have worked their way towards 2006 levels, experiencing a small drop, with Los Altos the exception, this quarter.

Another thing to consider in the steep drop of home prices at the beginning of 2009 was in part of expensive homes coming off the market, such as in Los Altos, and low-valued foreclosures and short-sales coming onto the market, bring down the overall median sales price. Like mentioned earlier, Sunnyvale (+3.6%), Mountain View (+3.4%), and Palo Alto (+6.7%) increased their median sales price compared to last year, but realized a deprecation from last quarter; the reverse is true for Los Altos.

average days on market - 2010 Q3
average days on market - 2010 Q3

Average days on market is a good indicator of market health -- closer to 30 days means properties are coming onto the market at a good price and buyers are interested; above 60 days means properties are priced poorly or buyers are nervous about the market, or both.

Los Altos peaked in early 2007, quickly dropped, and followed the similar trend of the three other cities, but taking, until 2010, the longest to recover.

Sunnyvale is interesting because it has the largest population and is the city with the lowest median sales price. It is more likely that Sunnyvale had more distressed properties that pushed up its average days on market higher than the other cities from 2007 to 2009. But Sunnyvale also dropped the soonest once buyers became confident in the market again just after 2009.

Palo Alto, considered one of the strongest housing markets in the state, had the lowest days on market this quarter of our comparison cities. In the next graph we can see that it is also the only market that has turned into a seller’s market.

sales to listing ratio - 2010 Q3
sales to listing ratio - 2010 Q3

In the sales price to listing price graph we explore what makes a buyer’s market (below 100%) and what makes a seller’s market (above 100%).

As the housing bubble grew, buyers were willing to pay above listing prices to get the home they wanted. From our previous median sales price graph, home prices peaked in the third quarter of 2008, but then quickly fell in 2009 -- Los Altos being a major example of peaking in median sales price then falling the most in both the median sales price and the listing price to sales price ratio. Buyers weren’t taking anything for a period and sellers weren’t ready to adjust their home prices.

It has taken until 2010 and later for the market to really stabilize here in the valley. The ratios for Mountain View and Sunnyvale are hovering around 100%; Los Altos is still struggling at 97%, while Palo Alto has turned to a seller’s market at 101.26%.

Closing It’s always easy to look back and be able to see that the housing market was peaking, but at the time it is very difficult for an individual to judge if the market would sustain its levels or pop like it did. What we are realizing today is a much more conservative market that is looking for a sustained growth rather than the feeding frenzy that happened. One advantage of being in the Silicon Valley is that although we took a hit, we returned to levels that existed only four years ago and are seeing signs of stabilization or even growth (Palo Alto really standing out). We’ll be able to tell in the next couple quarters if that holds true (the upcoming winter quarter is slower for real estate), and we’ll try to do a larger comparison that shows the Silicon Valley compared to other parts of the nation, and lastly, how neighborhoods within cities are doing.

Los Altos Housing Market – Third Quarter 2010 Update

Los Altos real estate market third quarter 2010 chart

One thing to consider when looking at data from Los Altos is that its population of around 30,000 is less than half of the next smallest city in our quarterly comparison. But, on the other hand, the median price is the highest at $1,565,000 -- 13% higher than Palo Alto and almost double either Sunnyvale or Mountain View.

median_2010Q3
median_2010Q3

In the third quarter of 2010, the median price bumped up 4.3% from last quarter and is equivalent to 2006 levels. Another positive sign for Los Altos is that average days on market is in the 40s range, a significant improvement from the third quarter last year, where it was hanging out at 67 days.

The last item of note for Los Altos is the sales price to listing price ratio has fallen this quarter, 96.96% from 98.21% last quarter. Since 2008, Los Altos has been a buyer's market, while our three other comparison cities have been trending towards a seller's market. Buyers aren't necessarily hesitant but we are seeing a lot of price adjustments in the area.

Bay Area Real Estate Shifting to a Seller's Market, U.S. Still Slipping

Bay Area home sales in August may have dropped to an 18-year low (an 11% decline from last year), but the median sales price rose 6.9% from August 2009, according to a report released by MDA DataQuick this September. And viewed with a wider lens, things have been steadily improving in the Bay Area:

Last month was the second in a row to post a month-to-month decline in the median, which so far this year has peaked at $410,000 in May and June. On a year-over-year basis, the Bay Area median has risen for 11 straight months, though before July those increases had been in the double digits – ranging from 10.6 percent to 31.0 percent – since last November.

The San Jose Mercury News posted two stories on the report, asking Are Silicon Valley homebuyers holding out for lower prices? and stating that although the market is falling, it's not falling as fast as it was.

While the real estate prognosis changes from county to county and even neighborhood to neighborhood, the big picture drawn by DataQuick's numbers shows things pretty much bouncing along, with the market neither going off a cliff nor shooting for the stars.

While on a national level, Bloomberg News took a gloomier viewpoint on the real estate outlook, reporting that home purchases in August were at their second-lowest level since 1963, when experts first started recording the data; and the median selling price of $204,700 was at its lowest level since December 2003.

The slide in U.S. home prices may have another three years to go as sellers add as many as 12 million more properties to the market. ... “Whether it’s the sidelined, shadow or current inventory, the issue is there’s more supply than demand,” said Oliver Chang, a U.S. housing strategist with Morgan Stanley in San Francisco. “Once you reach a bottom, it will take three or four years for prices to begin to rise 1 or 2 percent a year.”

Which is where currently the Bay Area differs from the rest of the nation. Stated at the end of the Mercury News article, the inventory of unsold homes is shrinking to the point where in the next couple of months Bay Area real estate could turn into a seller's market. _

Recommended Reading:

Actively Care About Energy Savings? Try a Passive House

photo credit: wikipedia

photo credit: wikipedia

The New York Times this weekend had an interesting article on passive houses, a building standard popular in Europe that reduces energy consumption for heating and cooling by 90% compared to a conventional home.

It has been a good deal more expensive to build, however, than the average home. That might partly explain why the passive-building standard is only now getting off the ground in the United States — despite years of data suggesting that America’s drafty building methods account for as much as 40 percent of its primary energy use, 70 percent of its electricity consumption and nearly 40 percent of its carbon-dioxide emissions.

Proponents of the standard, who note that passive homes often use up to 90 percent less heating and cooling energy than similar homes built to local code, say the Landaus embody the willingness of more homeowners to embrace passive building in the United States. Even Habitat for Humanity, the affordable-housing philanthropy, is now experimenting with the standard.

Yet the market remains minuscule, and the materials and expertise needed to build passive homes are often hard to find. While some 25,000 certified passive structures — from schools and commercial buildings to homes and apartment houses — have already been built in Europe, there are just 13 in the United States, with a few dozen more in the pipeline.

To achieve the passive house standard, homes are airtight and fitted with thick insulated walls and floors, triple-paned windows placed with extra care towards how much and what type of sun they receive, and a sophisticated ventilation system to maintain temperatures, all of which is calculated by a computer model.

The whole idea can start to seem a bit fussy though when the orientation for a pleasant view out the window cannot be had because it is not ideal for solar energy, or a fireplace is considered too inefficient, or the triple-paned windows had to be exported into the United States because an energy-efficient equivalent couldn't be found locally.

Like any other new technology that promises an energy-efficient future -- solar panels and electric cars -- the cost of early adoption can be prohibitively expensive now but payoff with time. The Times article estimated that it cost the builders an extra $50,000 to meet passive house standards, which would be earned back in energy savings within 10 years.

But with the median age of homes in the U.S. at 36 years, the basic concepts of a passive house can still be trickled down to currently inefficient homes by renovations such as reducing draft, better insulation, double-paned windows, or planting a tree outside to block summer sunlight.

Recommended Reading:

Where Are We Now? 2000 to 2010 Silicon Valley Real Estate Report

Real estate levels in 2010 appear to be either dropping or freezing nationwide during the usually active spring and summer months due to the wake of the 2007 housing crisis. But in Silicon Valley, where the characteristically warmer temperature seems to not only apply to the weather, the local real estate is making its way back from the extremes of a couple years ago. So from 2000 to the second quarter of 2010, where is the Silicon Valley housing market now? Pretty much where we started. Number of closed sales for single-family homes in Santa Clara County during the second quarter of 2010 are down 4% from the same period in 2000; and the average sales price is up 3%.

This post is an update of an earlier market analysis that we did in 2007. And in the graphs below we’ll be able to see the dot-com bubble burst, the effects of the 9/11 terrorist attacks, the housing bubble develop and pop, and the current signs of a housing recovery. The data is collected from 2000 to the second quarter of 2010 from all 15 cities of Santa Clara County off of MLS listings Inc., looking at single-family homes and condominiums/townhouses._

Number of closed sales in Silicon Valley

Santa Clara County, number of closed sales

The sales spikes we see every year are part of a natural market cycle that peaks in the spring and dips in the winter. Competition is greatest in the spring when the most inventory is available and the most prospective buyers are out looking.

Sales numbers were negatively affected by the dot-com bubble burst in 2001 but shot back up once the housing bubble formed. What’s closest to buyers and sellers minds alike is the housing crisis that bottomed out in 2008. Silicon Valley’s strong economy (that some reports say is losing its edge) has meant a swifter recovery than the rest of the nation.

If the economy continues its recovery, the housing market could return to a seller's market. But sales numbers are only one facet, where other areas of the market are still depressed.

Average days on market in Silicon Valley

Santa Clara County, average days on market

Average days on market (DOM) is less influenced quarter by quarter from natural market cycles compared to number of sales. Homes were being sold at record pace in 2000 and between 2004 to 2006. The two recessions in the last 10 years pushed DOM to above two months, even up to three. Though desirable homes in good neighborhoods will always sell quickly, the housing bubble inflated everything, which resulted in a flood of overpriced homes during the crisis and pushed DOM upward.

Since low DOM numbers are attractive to buyers, they are sometimes falsified to make a house appear more attractive on the market. Or poor sales strategies can make an otherwise good home sit on the market for an extended period of time. So don’t let DOM be the final judgement when deciding on a house. But overall a low DOM is a good indicator of market health.

Average sales price in Silicon Valley

Santa Clara County, average sales price

Here we can see how big the housing bubble really was. With the dot-com bubble, money was focused in the stock market. But when that crashed, homes became “hot,” lending requirements loosened, and real estate became the new investment trend.

The recession in 2001 dropped the average price for single-family homes 19% from its peak ($750,039) in the second quarter of 2000 to the low ($605,286) in the fourth quarter of 2001; compared to the 48% drop from the housing market bubble peak ($1,083,930) in the second quarter of 2007 to the low ($568,542) in the first quarter of 2009.

Currently, home prices in Santa Clara County are on the rebound and trending towards 2000 and 2004 numbers. Strong markets in smaller cities like Palo Alto and Los Altos faired much differently than the large city of San Jose because of a difference in demand and foreclosure rates.

Sale-to-list price ratio in Silicon Valley

Santa Clara County, sales-to-list price ratio

The ratio compares buyer and seller perceptions, where above 100% is a seller's market and below 100% is the opposite. The bubbles and crashes are clearly seen here but reflected in a much different way than what is seen in the average sales price graph. The boom in the early 2000s shows that buyers where much more willing to pay over listing price until the 2001 recession. The ratio later peaked again in 2005. Sellers priced their homes much higher during the real estate bubble but the ratio stayed near 100%, meaning buyers believed the inflated prices were worth the investment.

In recession periods buyers are hesitant and sellers have to adjust their listing price. Today, the average listing price is increasing again with the ratio near 100%.

Takeaway:

The graphs above give a bird’s-eye view of the real estate market in Santa Clara County beginning to settle. Although it may be a very different perspective from an individual home buyer or seller, who could have gotten caught in either the bubble or the crash. The view can also be very different city to city, reflecting hyper-local markets, as we have seen in our second quarter 2010 analyses of Los Altos, Mountain View, Palo Alto, and Sunnyvale. The main idea of these graphs is to show that real estate markets, while unpredictable, are cyclical.