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Silicon Valley Housing – 2007 Year in Review

Alex Wang — Tue, 01 Jan 2008 05:12:58 +0000

I hope you all had a great holiday season and New Years! Looking back, it seems that 2007 was the year of the mortgage for real estate here in Northern California. A screenshot from the New York Times mortgage rate chart illustrates how buyers (and sellers) were impacted by the dynamics of the mortgage industry this year.

This chart shows the change in jumbo mortgage interest rates during 2007. Put in historical context, the jumbo interest rates over the summer didn’t approach the level of rates in, say, 1981, but since 2002, the housing market has benefited from mortgage rates that are historically low.

It wasn’t 2005 or 2006, though. In May and July, some buyers discovered the home they were interested in just became about 5% more expensive at the same price because of another interest rate bump. (A $1,000,000 P&I mortgage costs $5,996 per month at 6% and $6,321 at 6.5%.) All the more reason to better understand how rate locks work.

Some homeowners with adjustable rates found themselves in a similar situation and ended up attempting a short sale. Many neighborhoods were unaffected, others were peppered with short sales — where the available homes may or may not have real estate signs indicating a sale.

But many of the markets around Silicon Valley didn’t behave like one would expect from reading the news reports. It’s the sales transaction information that tells the best story.

Data Points Across the 44 Cities in the Database for Santa Clara County and San Mateo County

1. Of the 35 cities with a decrease in new listings year-over-year, all of the ones in Silicon Valley — there were 26, East Palo Alto and Milpitas were the exceptions — saw their median values increase. (The cities outside Silicon Valley seeing decreases included outlying cities Gilroy, Morgan Hill and Loma Mar.)

2. The were 9 cities that had an increase in new listings year-over-year. Not surprisingly, this acceleration of inventory usually means a decrease in the median. It is notable, though, that Santa Clara and Redwood City showed strength and bucked the trend.

3. There wasn’t any real correlation between medians and homes "sitting" on the market. San Mateo saw an 18% increase in CDOM (to 39 days) but had an increase of 8% in the median. San Jose’s CDOM skyrocketed 29% (to 58 days) but the city as a whole had a median increase of 3.6%. Mountain View and Palo Alto were on fire the entire year and saw their CDOM numbers decrease 29% and 9% respectively.

Silicon Valley’s Gains and Losses

Looking at the table, what stood out to me the most was where Menlo Park turned out. I’ve written previously about how Menlo Park can be a mixed bag and how low-income housing has affected the median — and while Menlo Park isn’t the only city in Silicon Valley to have overnight parking restrictions, I’ve talked with a number of people who cite it as a reason why they wouldn’t buy a home there.

For the city that’s part Atherton, part Redwood City, part Palo Alto and part East Palo Alto, Menlo Park was the only one of these five cities to have both an increase in single-family home listings year-over-year and a drop in their median. (Redwood City withstood its 9% increase in listings and still came away with a 4.12% gain.)

There was core strength in the 101 to 85 corridor of Palo Alto, Mountain View, Sunnyvale and Cupertino. High-paying jobs and the perception of a bottomless market ironically helped fuel growth for 2007.

The 30.6% drop in Palo Alto’s new listings cut supply rather dramatically. And while Mountain View’s drop of 15.5% seems less dramatic in comparison, the average home sold took 22 days to sell. The only number on my spreadsheet to come close to that speed is neighboring Sunnyvale, where the average is 28 days. Sunnyvale, Palo Alto, and Mountain View all recorded sales prices at above 103% of list.

Redwood Shores Housing Market Update – November 2007

Alex Wang — Wed, 07 Nov 2007 19:47:54 +0000

There’s an opportunity here for my clients looking for a good elementary school district. For single-family homes, the news is almost exactly the same as last year. There were six sales in 2006 and five this year in Redwood Shores. Small statistical sample.

The median number has dropped 7.8% year-over-year in October from $1,192,000 to $1,100,000; the average stayed almost the same going from $1,145,500 to $1,145,000, with eight new listings in both periods and an inventory of 14 and 13 in those respective years. The news, though, is in townhomes and condominiums.

In Redwood Shores, there were only three were closed in October 2007 (compared to 15 the year before) with inventory levels similar to 2005 and 2006. The percent of list received went from just above asking to 93.36% this year.

It’s sometimes difficult to be the first wave to adjust to a different landscape and changing market conditions, no matter how much data is available. In this case, the initial valuation of these three townhomes was unrealistic, so the percent of list received is lower than it might have been if information about the shifting landscape were already digested.

There are good elementary schools in Redwood Shores. Sandpiper Elementary, part of the Belmont-Redwood Shores Elementary School District, improved upon its elite test scores last year with a 17 point increase to 923. When I last called Sandpiper just after the start of the school year, they were on the border of being over-subscribed, but were still able to take new students.

Obviously, it’s important to confirm availability before making a purchasing decision. The Belmont-Redwood Shores district has two other schools over 900 API to choose from if there’s a wait list at Sandpiper (Central Elementary and Fox Elementary), and the others two come in at 875 (Cipriani Elementary) and 823 (Nesbit Elementary).

[ Median Home 2007, 2006 | Market Snapshot | How Much Home Can I Get? ]

Median Home 2007 – $1,100,000

The Median Home for October 2007 in Redwood Shores is 615 Island Pl., which was actually a bank-owned property. Its hallmark is a palacial master bathroom, which is the size of a bedroom in many older homes. The main living area is also spacious as well, with high ceilings that extend over the second level. The home comes in at 2310 square feet (on a 6053 square foot lot) with 3 bedrooms and 2.5 bathrooms. This single-family home is part of a gated-community with an HOA fee of $230.

Compared With Last Year – $1,192,500

The first Median Home last year was 702 Nature Ln. Located on a corner lot, this 2421 square foot home splits the main living level with the master bedroom and two other bedrooms upstairs but one bedroom and one of the three full bathrooms downstairs. This home was listed as having a "motivated seller", and (originally listed at $1,288,000) it was reduced to $1,265,800 before eventually selling for $1,210,000. The association fee for this home was $135.

1029 Rockport Ave., last year’s other Median Home, also has 4 bedrooms — two of which are master suites — along with one-and-a-half more bathrooms in the home. It’s slightly smaller than Nature, at about 2200 square feet, but also sold for less: $1,175,000. Rockport sold for 1.9% below list, but like Nature, it sits on the water. Some may prefer Rockport’s covered arbor, which allows more outside light than a patio that is covered by a second-floor accessible deck.

Market Snapshot – November 9, 2007

As of today, there are 29 townhomes and condos and 12 single-family homes on the market in Redwood Shores. Nine of the townhomes and condos, but none of the single-family homes, have had a published reduction. If you take out the two new homes listed today, the Active CDOM number is 44 days (37 with them included). The Active CDOM number for townhomes is 55 days.

One of these townhomes is an interesting illustration of over-improvement. The home was upgraded from soup-to-nuts: kitchens to bathrooms to floors and paint. And all with top-of-the-line materials. It was pretty clear that no expense was spared and it was decorated to the taste of the current owner. The challenge is that now the property is priced well over the comparables in the area because the seller expects the value of neighboring properties plus the upgrades and a premium for including them.

There is nothing inherently wrong with upgrading to increase the value of a home, but that strategy works particular complexes or neighborhoods can support the number the seller is asking for. (I used the analogy of "lobster on the McDonald’s value menu" in my book. Would you pay $13 for anything at McDonald’s?)

This complex is a very nice neighborhood but it’s difficult to justify a price $200,000 (21%) more expensive than a comparable sale one month ago when many of the upgrades are "six-of-one and half-a-dozen of the other" (i.e. pricey, but low value-add) choices.

The fact is that the list is higher than any number any property has sold for in that complex. The market is sending a clear message. This home has been on the market for almost three months (without a reduction) and it risks joining the five other townhomes that have been on the market for 100 days or longer.

How Much Home Can I Get in Redwood Shores?

This is an overview of representative properties in Redwood Shores which closed in October 2007.

	$585,800 – 457 Cork Harbour Cir. #F 2br/2ba; 1136 sqft; HOA $405 2 master suites
	$604,500 – 405 Cork Harbour #D 2br/2ba; 1136 sqft; HOA $405 Granite counters; new laminate floors
	$620,000 – 1112 Camerota Way 2br/2ba; 1125 sqft; 11 years old; HOA $200 Corner unit
	$925,000 – 582 Osprey Dr. 3br/2.5ba; 1550 sqft on 3234 sqft lot Corner lot; separate family room
	$1,100,000 – 615 Island Pl. (Median Home) 3br/2.5ba; 2310 sqft on 6053 sqft lot; HOA $230 Gated community
	$1,150,000 – 22 Lido Ci. 4br/2.5ba; 2490 sqft on 4000 sqft lot; 29 years old; HOA $72 Newly remodeled kitchen
	$1,450,000 – 810 Sun Blossom Ln. 4br/3ba; 2710 sqft on 3998 sqft lot; HOA $108 Newly remodeled kitchen; custom paint

Recommended Reading:

Menlo Park Housing Market Update – October 2007

Alex Wang — Sun, 14 Oct 2007 08:20:49 +0000

There’s an interesting opportunity in Menlo Park when you take into account that the city has multiple personalities. I want to illustrate this using the median home chart below and a couple facts. First, if you look at the homes that are available, there are just as many single-family houses available between $400K and $800K as there are between $1.5M and $2.5M.

Second, the ones at the low end of the range are closer to Redwood City and East Palo Alto, and use Redwood City and Ravenswood Elementary School Districts, respectively. The more expensive ones are closer to Atherton and Palo Alto and are part of the Menlo Park Elementary School District — and its 907 district API score — or the Las Lomitas Elementary School District — and its two schools with a 948 district API score.

So, with that in mind, the median value of homes in Menlo Park can be somewhat of a tug-of-war. For September 2007, there were two transactions for low-income housing which closed at about $330,000 each. If you threw those two out, the median single-family home in Menlo Park was $1,220,000. That’s a realistic 6% decrease year-over-year.

It’s important to look beyond what the numbers are and understand the story behind them. In this case, there’s been some softness in Menlo Park given increasing CDOM numbers, from 19 to 38 year-over-year. (The average CDOM over 10 years is 34.) But, from on the ground experience, there wasn’t anything to indicate a decrease as dramatic as the median value chart would indicate.

[ Median Home 2007, 2006 | Market Snapshot | How Much Home Can I Get? ]

Median Home 2007 – $1,220,000 ($1,000,000)

As the median value chart shows, $1,000,000 was the actual median in Menlo Park. That Median Home was 208 Oakhurst Place, a 57-year old, 3 bedroom, 2 bathroom home in Menlo’s Flood Park region that measures 1,800 square feet on a 6,421 square foot lot.

The more representative properties are the two $1.22M homes. The first is 596 Hopkins St., which is a revised Craftsman-style home that takes considerable advantage of natural light. This 3 bedroom, 2.5 bathroom home measures in at 1,493 square feet (on a 4,195 square foot lot) according to the subdivision reports, and its location just feet away from Burgess Park puts it near a number of outdoor activities — from swimming to softball and skating — as well as Kepler’s and downtown.

From many, that proximity makes the smaller yard an acceptable trade-off. The interior is modern and its kitchen relatively spacious considering the limited square footage.

This property was originally listed at $1,350,000 on July 30 and underwent a reduction to $1,275,000 before selling after 40 days-on-market. Hopkins is in a strong location in Menlo Park and the sellers understandably wanted to maximize their revenue given a comparable close by that sold off-market for $1,450,000.

But assuming the homes were the same (the off-market one is actually larger by a couple hundred squares), the market in the spring and the one in August are two very different stories — especially this year with a nationwide mortgage crisis.

The other "almost" Median Home, 2108 Manzanita Ave., fared better. Originally listed August 20 for $1,265,000, it sold in 9 days for $1,220,000. That’s a 3.6% reduction. At 1,150 square feet, this home at Manzanita is smaller than the other "almost" Median Home at Hopkins but its 6,500 square foot lot is considerably larger. This 52-year old home was recently refreshed with new double-pane windows, a gas fireplace, and a new furnace.

Students split their early years between the exceptional Las Lomitas Elementary School then La Entrada Middle for elementary school, after which they go to Hillview Middle and Menlo-Atherton High.

Compared With Last Year – $1,297,500

Last year’s first Median Home at 1077 Tehama Ave. is comparatively large at 2,310 square feet and has a 5,928 square foot lot. It’s in the Menlo Park Elementary School District and is close to Flood Park which has everything from baseball, softball, volleyball, tennis, horseshoes and petanque — which I had to look up — to a vast picnic area. The trade-off is that this home is also relatively close to 101.

Listed at 99-years old, Tehama is completely redone with a new roof, custom driveway, and modern interior. The modernized kitchen has all of the stainless steel touches that buyers looking for a plug-and-play home would expect and the unheralded essentials like furnace and water heater are new as well. This home 4 bedroom, 2.5 bathroom home sold in 12 days at $1,325,000, slightly over the asking of $1,299,000.

The second Median Home was 874 Cambridge Ave. in the downtown region of Menlo Park between Santa Cruz Ave. and the Stanford Shopping Center, and walking distance to both.

This 47-year old home is also completely remodeled on the inside but the exterior still has the feel of ranches of that period, complete with an aerial antenna. Among the additions were French doors, skylights, a new granite kitchen and hardwood floors. 3 bedrooms with 3 bathrooms, this home sits 1,750 square feet on a 4,800 square foot lot and sold in 36 days for $1,270,000, just under the asking of $1,295,000.

Market Snapshot – October 16, 2007

There are 82 single-family homes and 17 townhomes and condos available today. 22, or 27%, of these homes have undergone a published reduction, which isn’t too high, but something to watch moving forward. The reduced homes have an Active CDOM average of 116 days: one of the homes has been on the market for a whopping 407 days, which outpaces the second highest CDOM number at 209.

It’s interesting that at a couple points over the past decade, the medians for homes and townhomes in Menlo Park have either come close or overlapped. There are a number of townhomes with large footprints, particularly around Sharon Heights and the Stanford Hills (towards Silicon Valley’s famous Sand Hill Road) which are well over $1 million.

The Active CDOM for all Menlo Park single-family homes is 70. One home (not on the reduction list) has a CDOM of 465 days and 17 over 100 days. A number of sellers subscribe to a wait strategy where they believe they can get the number they want if they leave their property on the market long enough.

If the sellers don’t have a pressing need to move, this may be the route they decide to take. Otherwise, maintenance and ownership costs (including taxes) make this strategy more costly each month and there’s a balance between getting a target number and maximizing gains (or minimizing losses) in a transaction. Sometimes getting the number is an expensive proposition.

How Much Home Can I Get in Menlo Park?

This is an overview of representative properties in Menlo Park which closed in September 2007.

	$519,900 – 466 7th Ave. 2br/1ba; 790 sqft w/ 3000 sqft lot Updated kitchen
	$690,000 – 451 Oak Grove Ave. #4 2br/2ba; 1296 sqft; HOA $394 Close to downtown Menlo Park, Caltrain
	$700,125 – 192 Oak Ct. 1br/1ba; 920 sqft on 5900 sqft lot; 66 years old Cul-de-sac
	$830,000 – 3606 Fair Oaks Ave. 3br/1ba; 1270 sqft on 7125 sqft lot; 70 years old Updated kitchen; new plumbing and electrical
	$945,000 – 198 Elliott Dr. 3br/2ba; 1330 sqft on 7600 sqft lot; 52 years old Near Palo Alto
	$949,000 – 600 Willow Rd. #22 3br/2.5ba; 1637 sqft; 11 years old; HOA $295 Vaulted ceilings; new kitchen
	$1,220,000 – 2108 Manzanita Ave. (Median Home) 3br/2.5ba; 1150 sqft on 6500 sqft lot; 52 years old
	$1,220,000 – 596 Hopkins St. (Median Home) 3br/2.5ba; 1493 sqft on 4195 sqft lot
	$1,500,000 – 1665 Valparaiso Ave. 3br/2ba; 2230 sqft on 10000 sqft lot; 54 years old Large bedrooms
	$1,617,000 – 451 Claremont Way 3br/2ba; 1500 sqft on 0.25 acre lot; 51 years old Pool; short walk to downtown Palo Alto, Burgess Park; large lot
	$2,310,000 – 355 Santa Rita Ave. 4br/3ba; 2400 sqft on 14181 sqft lot; 67 years old Large lot
	$2,595,000 – 174 Seminary Dr. 4br/3ba; 2960 sqft on 11131 sqft lot Large floor plan; custom kitchen; 3-car garage

Recommended Reading:

Los Altos Housing Market Update – September 2007

Alex Wang — Thu, 20 Sep 2007 08:41:14 +0000

Available supply in the Los Altos market hasn’t been as low since 2000, when the median number for single-family homes jumped an astronomical 48.9% year-over-year. That year, the number of closed transactions to new listings was almost 2-to-1 (48 closed to 25 new). The headline number this year is that closed sales are the lowest in a decade, but so was the available inventory. Relative demand for what’s available has been strong enough to draw notable increases in two key statistics.

Only one condo in Los Altos was sold this August and only a handful more in each of the previous years, so their trends and statistics may have a high variance. In single-family homes, though, it wasn’t just the fact that the percent of list received jumped from just under full value to 104.31%. The median listing value also increased 4% year-over-year, meaning homes weren’t just selling for more, they were starting higher too. The median transaction increased year-over-year as well, from $1,650,000 to $1,782,000 (8%).

For July and August numbers in particular, schools play a large role in housing demand and Los Altos schools are some of the best in Silicon Valley. I’ve worked with people who’ve made the argument that, assuming that schools are the critical factor in their home-buying decision, paying a premium on a home is preferable to sending their kids to lesser schools, or private schools. To them, private schools may not be as good socially: the kids who they go to school with may not always live nearby or have as varied backgrounds. Premiums aren’t necessarily the most financially-conservative route, but choices involving children don’t always need to be.

[ Median Home 2007, 2006 | Market Snapshot | How Much Home Can I Get? ]

Median Home 2007 – $1,782,500

Los Altos’ first Median Home was the 3,249 square foot family home at 1109 Covington Road in the area known more descriptively than artistically as "South of El Monte". This home is about space with its 4 bedrooms, two family rooms and a 9,583 square foot lot. The master suite is on the ground floor, separated from the guest and family bedrooms. With 3.5 bathrooms, there’s no waiting.

This 32 year-old home is clean and efficiently laid-out and has hardwood floors in many of the rooms, plus a bonus room upstairs and a separate laundry room. And while the house has a room to fit every need and sometimes more, the amenities within the house are fairly average. Tile countertops and standard period cabinetry in the kitchen match the level of the slightly dated bathrooms.

For buyers looking for investment value in Silicon Valley’s real estate market (on top of the area) those are very good things. The fact that the kitchens and bathrooms have many years of useful life left, but haven’t been upgraded yet (to granite, marble, stainless and all the other requisite trappings for the neighborhood) means that you can wear them out and still have a lot of upside potential for this home.

This is in contrast to the other Median Home in Los Altos, 839 Hierra Court, which, at 14 years-old, has all the upgrades and sold in only 8 days for an even $1,800,000. Located near the Los Altos Golf and Country Club, this home features a brightly-lit interior with a design that might have come straight out of Architectural Digest. Considerably smaller than Covington, this 3 bedroom, 2.5 bathroom house measures 2,117 square feet with an 8,200 square foot lot.

But this is a home more about prestige and design than space, and given the quick turnaround, the new buyers were not only more than willing to make that trade-off. They also added $152,000, or 9.2%, on top of asking.

Compared With Last Year – $1,650,000

You’d never know this home was 51 years-old. In the same "South of El Monte" area of Los Altos, but physically closer to Hierra than Covington, this 1,909 square foot home at 1697 Middleton Ave. boasts not just a pool and spa on its 10,454 square foot lot. Its completely-remodeled interior features consistent use of black granite in both the kitchens and bathrooms and a design that evokes classic New England, even with the LCD TV mounted above the centerpiece fireplace separating the living and dining rooms.

Middleton’s part of Los Altos is actually served by the Cupertino Union School District, which is also renowned in and outside of Silicon Valley. This home went in 13 days at $52,000 over the asking number of $1,598,000.

Market Snapshot – September 19, 2007

54 single-family homes and 12 townhomes and condos are currently available as of today. Out of the 54 single-family homes, one dozen have had a published reduction. That number isn’t news in either direction.

One home is a tear-down that has some potential. Two of those homes are new construction. When a small or inexperienced developer has locked in on a number in their minds — sometimes they understandably overvalue "newness" or build pride into the value — they’re often reluctant to negotiate early on, or scare prospects away with a valuation that isn’t market-driven.

The Active CDOM for single-family homes in Los Altos is 64. If you throw out the properties that have been on the market for 318 and 407 days, the Active CDOM number drops to 53. The average CDOM for properties that sold is 38, which is a pretty good indicator for when owners should be seriously considering more latitude in their pricing.

How Much Home Can I Get in Los Altos?

This is an overview of representative properties in Los Altos which closed in August 2007.

	$741,000 – 101 2nd St. #3 (only condo closed) 2br/2ba; 1150 sqft w/ 871 sqft lot owned; 34 years old; HOA $495 Downtown Los Altos
	$1,134,000 – 441 Mundel Way (least expensive single-family) 2br/1ba; 854 sqft on 6970 sqft lot; 69 years old Situated among homes with much larger lots
	$1,445,000 – 50 Chester Cir. 4br/3ba; 1935 sqft on 3485 sqft lot; 12 years old Vaulted ceilings in living and dining areas
	$1,610,000 – 1741 Lantis Lane 3br/2.5ba; 1900 sqft on 13000 sqft lot; 54 years old Cupertino schools; remodeled interior w/ large kitchen
	$1,860,000 – 185 Sunkist Lane 3br/2.5ba; 2170 sqft on 10454 sqft lot; 48 years old Linoleum floors
	$2,100,000 – 1897 Granger Ave. 5br/4.5ba; 4500 sqft on 10080 sqft lot; 6 years old Large finished basement w/ wet bar, wine cellar
	$2,650,000 – 561 Orange Ave. 4br/4ba; 4000 sqft on 10019 sqft lot; 21 years old Pool; large wine cellar; understated kitchen fixtures
	$3,300,000 – 716 Linden Ave. (most expensive home closed) 5br/4ba; 3872 sqft on 17860 sqft lot; 5 years old Separate guest quarters / au-pair residence

Recommended Reading:

Sunnyvale Housing Market Update – September 2007

Alex Wang — Fri, 07 Sep 2007 11:14:02 +0000

It was a case of home owners sitting out the market. New listings of single-family homes in Sunnyvale were at a 10-year low in August, dropping from 107 in August 2006, to 79 this year. In fact, total inventory levels also dropped slightly, from 130 single-family homes to 127 over the same period.

Sunnyvale’s average number of new listings during the month over the last ten years is 105 and it’s an illustration of why real estate is local. National news headlines from around the country correctly talk about aggregate numbers that are lower because of deflating markets — and many Silicon Valley home owners here who might have considered listing their homes, but could afford to wait, sat out.

But ultimately, real estate is about location, supply, and demand. And while supplies were down, demand was actually both "normal" and "up". The ratio of closed transactions to new listings in August 2007 was 73%. The 10-year average is 74% and it was 58% last year. How did that increase manifest itself? Besides a fourth consecutive year of over-asking closing prices in single-family homes, have a look at the difference in the cost of Median Homes year-over-year.

[ Median Home 2007, 2006 | Market Snapshot | How Much Home Can I Get? ]

Median Home 2007 – $930,000

The umbrella wasn’t included in the number, which was $41,000 over the asking. The Median Home in Sunnyvale is the 3 bedroom, 2 bathroom ranch at 956 Kintyre Way, a 51 year-old home.

And while it shows in the plain styling of its exterior, the inside was completely remodeled to today’s expectations, with a new appliances in a completely renovated kitchen, hardwood floors, a pair of redone bathrooms, new paint inside and outside, and energy-saving double pane windows. The lot is 6,572 square feet and comes with underground sprinklers and new landscaping. All the work and upgrades paid off because the home took 6 days to go.

Compared With Last Year – $865,500

Kintyre’s styling is in complete contrast to one of last year’s Median Homes, the ultra-modern, 20 year-old, 1465 Yukon Drive, which sold for $870,000, 16 days after being re-listed (45-day CDOM). The listing describes the home as "charming", which I always interpreted as a real estate code-word for "small", but this home is 2,068 square feet on the inside.

"Charming" might more accurately describe the lot for a home this size, which is 3,920 square feet. Ratios aside, the claim to fame for this 3 bedroom, 2.5 bathroom — I think you could call it a chalet bungalow — is the Cupertino schools, Nimitz Elementary and Cupertino Middle, plus Fremont Union’s highly-rated Homestead High School.

999 Glenbar Ave. is the other Median Home in Sunnyvale for August 2006. As a 47 year-old home, Glenbar has a more traditional exterior but a completely modernized interior, with recessed ceiling lights, granite and stainless steel in the updated kitchen, new bathrooms, refinished hardwood floors, and maple vanities.

Its 1,524 square feet contain 3 bedrooms and 2 bathrooms, but it has a more traditional lot size at 6,098 square feet. Unlike its fellow Median Home, Glenbar sold for above its $844,888 asking, for a rounder $861,000. It went in 13 days.

Market Snapshot – September 7, 2007

There are 114 single-family homes and 72 townhomes and condos listed, for a total of 186 available residential listings. It’s been generally good news for Sunnyvale, so let’s focus on the homes where things aren’t so good.

Of the common interest developments, 19 have undergone a reduction and 6 have had their asking price increased. Here’s a map plotting where the homes that have been reduced are. As you can see, there’s no single area, but they do share some characteristics.

First, they’re smaller condos, many in the sub-1000 square foot range. They have an average list price of $484,540 for an average of 1036 square feet. The smaller condos are sitting because the ability of buyers in this range was largely hurt by the sub-prime implosion, the trend towards requiring higher down payments, and now by jumbo rate increases.

Second — with the exception of the cluster around #10 which is that complex of lower-end condominiums that I mention in the Threats section of my notes on the Expressions of Sunnyvale and Belmont Terrace — the small condos are either on or one block over from a major road east of Mathilda (and further from Mountain View). Buying near a major road isn’t ideal but it’s really a combination of these two factors that has hurt this set of properties.

Of the 114 available single-family homes, 47 have undergone a reduction, with those 47 having an Active CDOM number of 84.7 days on average. I was surprised until I pulled up a map. You can’t tell every person’s situation from there. Some people might have been too aggressive with their original mark. Others might be in a bad financial situation. But there are clusters in Sunnyvale towards and north of the 101.

Same issues here as with condos. Homes at the lower-end have a shrinking set of buyers; home owners in more affordable portions of the city have a higher probability of being in financial distress.

Net-net, the amount of "really good" inventory has been relatively low and those sellers have reaped the benefits. But higher jumbo interest rates are pushing the effective cost of homes higher, so home owners should keep that in mind when listing a home towards or below the median — the minimum bar buyers have to jump over is getting higher.

Conversely, buyers need to keep in mind there might be less inventory than it seems, particularly above the median. Buyers will get some relief because of the publicity of the loan implosion and the time of year, but only certain sellers will need to entertain lowball offers.

How Much Home Can I Get in Sunnyvale?

This is an overview of representative properties in Sunnyvale which closed in August 2007.

	$400,000 – 1081 Reed Ave. #A 2br/1ba; 858 sqft; 35 years old; HOA $280 Custom bookcases
	$490,000 – 1271 Poplar Ave. #403 2br/2ba; 1040 sqft; 23 years old; HOA fee unknown 2 master suites
	$531,000 – 880 E. Fremont Ave. #611 2br/2ba; 930 sqft; 2 years old; HOA fee unknown Cupertino schools
	$575,000 – 163 Beemer Ave. (least expensive single-family this month) 1br/1ba; 688 sqft on lot under 4500 sqft; 99 years old Detached garage converted to office; 2nd bed separate from main house
	$589,000 – 983 Belmont Terrace #3 2br/2.5ba; 1483 sqft w/ 720 sqft lot owned; 21 years old; HOA $395 Skylights, new paint See Realtor Notes on Belmont Terrace
	$629,000 – 740 Borregas Ave. 4br/3ba; 1675 sqft on 7200 sqft lot; 50 years old Family room has bathroom and separate entrance; one block from 101
	$695,000 – 998 La Mesa Terrace, Unit E 2br/2.5ba; 2120 sqft; 22 years old; HOA $310 Large bonus room; updated appliances; 2 car garage
	$700,000 – 618 E. McKinley Ave. 3br/1ba; 1391 sqft on 5000 sqft lot; 55 years old Fireplace, kitchen updated to tile, skylights
	$726,000 – 1152 La Rochelle Terrace, Unit B 3br/2.5ba; 1923 sqft w/ 2450 sqft lot owned; 12 years old; HOA $337 Large bonus room, hardwood floors, 2 patios
	$785,000 – 1039 Grape Ave. 3br/1ba; 1066 sqft on 6000 sqft lot; 53 years old Cherry Chase Elementary, converted garage not included in sqft
	$785,000 – 977 Asilomar Terrace #6 3br/2ba; 1895 sqft w/ 2613 sqft lot owned; 15 years old; HOA $384 End unit, large loft; gated community See Realtor Notes on Expressions of Sunnyvale
	$847,000 – 512 S. Sunnyvale Ave. 4br/2ba; 1582 sqft on 6050 sqft lot; 69 years old Remodeled, new carpet, fresh paint; close to downtown
	$859,000 – 400 Ives Terrace (most expensive townhome sold this month) 2br/2.5ba; 1960 sqft w/ 2700 sqft lot owned; 26 years old; HOA $335 End unit; gated community; large deck
	$945,100 – 1336 Flicker Way 3br/2ba; 1407 sqft on 6138 sqft lot; 43 years old Cupertino schools; hardwood floors, granite counters, pool
	$1,050,000 – 1694 Kamsack Dr. 3br/3ba; 1544 sqft on 7405 sqft lot; 46 years old Cupertino schools; refinished hardwood, new paint and landscaping
	$1,190,000 – 838 Trenton Dr. 4br/2ba; 1752 sqft on 8276 sqft lot; 47 years old Cherry Chase, Homestead High; laminate flooring; Eichler
	$1,275,000 – 761 Inverness Way 4br/3ba; 2573 sqft on 6098 sqft lot; 15 years old Cupertino schools; curved staircase, 3 fireplaces
	$1,405,000 – 598 Fort Laramie Dr. 6br/3.5ba; 2855 sqft on 8550 sqft lot; 40 years old Cupertino schools; large pool, wetbar

Mountain View Housing Market Update – August 2007

Alex Wang — Wed, 29 Aug 2007 10:39:10 +0000

Higher interest rates for jumbo mortgages is a story for another day, but it does color how home owners should read what I’m about to write. In July, Mountain View experienced a 14% jump in the median for single-family homes from 2006 to 2007. There was also the fact that the percent of list received went from almost full value (99.28%) to 104.4%.

Like many other places in Silicon Valley, like Sunnyvale and Cupertino with their Eichlers and San Mateo with its older homes near downtown, among others, Mountain View has its share of older homes. Many of these homes come on larger lots that give ambitious owners room for expansion. One of this month’s Median Homes illustrates that potential.

Mountain View is a unique environment because of the money from one local company in particular and it was a competitive summer season — as you’ll see, though, not every property experienced the same level of interest.

[ Median Home 2007, 2006 | Market Snapshot | How Much Home Can I Get? ]

Median Home 2007 – $1,058,500

This July, the two Median Homes in Mountain View were 1700 Fordham Way and 1303 Cuernavaca Circulo. Both were desirable homes: Fordham was gone in 6 days and Cuernavaca was gone in 8, each for 100% of asking. And they went at about the same amount: $1,050,000 and $1,065,000, respectively. But they are very different properties and what’s interesting about these two homes is the trade-off.

Fordham was the older veteran, a 53-year young ranch with a couple minor but unspectacular upgrades done over the past few decades. At 1280 sqft with 3 bedrooms and 2 baths — but a lot of 7405 sqft and just a mile from Downtown Mountain View (across El Camino) — there was room to grow.

Cuernavaca is 19 years old with its Northern California blend of Spanish and Mediterranean styling: 3 bedrooms, 2.5 bathrooms, but with 2261 in square footage on a 4792 square sqft lot. And it had a complex with amenities like a pool, spa, tennis courts, and clubhouse which is $190 per month HOA fee covered. This home was ready for a family to upgrade into.

The former was a project with strong upside potential and an elite school district. According to the California Department of Education, every school in Los Altos Elementary has a 10 out of 10 statewide rating. (Huff and Bubb at 10 and 9, respectively, are the strongest schools in Cuernavaca’s Mountain View-Whisman School District.) With remodeling and additions, Fordham will easily exceed its fellow Median Home in value.

Compared With Last Year – $928,000

Last July, the Median Home was 1953 Sorrento Court at $928,000, off in 13 days at 100% of asking. This home is a 3 bedroom, 2 bathroom, 1977 square foot, two-story building that was constructed in 1979 as part of a planned unit development. It was rezoned into a single-family home in 2004 but still carries HOA dues (at the time $300 per month). The lot size is unknown but less than 4,500 sqft.

By car, this house is one mile southeast from Fordham (but far enough to be in the Mountain View-Whisman School District) and 2.8 miles from Cuernavaca. Sorrento, in the Miramonte Area of Mountain View, is arguably in a more prestigious part of Mountain View than the latter, in Sylvan Dale.

Market Snapshot – August 29, 2007

There are 91 active listings, 31 for single-family homes. Of those, only 4 have had a published reduction.

(One is a bright yellow house whose reduction might have funded a new set of paint if it didn’t sound so much like the owners needed to unload. One was a flyer a real estate agent slash owner took on getting a high number: a $393,000 drop might generate some needed attention.)

The Active CDOM for homes in Mountain View right now is 51 but the CDOM for homes closed in July 2007 came in at only 26. That means in this area, roughly, it takes half as long for desirable properties to sell than the "average" ones.

Sellers are confident because of this disparity, but we’re moving into a slower part of the Silicon Valley market cycle in a period of uncertainty with mortgages.

By the way, the Active DOM is 35 if that gives you an impression of some of the games that go on with that number.

How Much Home Can I Get in Mountain View?

This is an overview of representative properties in Mountain View which closed in July 2007.

	$317,000 – 2025 California St. 1br/1ba; 668 sqft; 42 years old; HOA $300
	$450,000 – 505 Cypress Point Dr. #174 2br/1ba; 843 sqft; 33 years old; HOA $329
	$495,000 – 500 W. Middlefield Rd. #2 2br/2ba; 1136 sqft; 36 years old; HOA $338
	$548,000 – 147 Margo Dr. #4 2br/2ba; 1139 sqft; 11 years old; HOA $250 Gated complex, A/C
	$567,000 – 853 Sierra Vista Av. (lowest cost single-family home) 2br/1ba; 704 sqft on 4792 sqft lot; 54 years old Double pane windows, white picket fence; upgraded kitchen
	$611,000 – 2255 Showers Dr. #342 2br/2ba; 1213 sqft w/ 1306 sqft lot owned; 7 years old; HOA $292 Top floor unit, granite kitchen counters, near train tracks and CalTrain
	$660,000 – 733 Emily Dr. 3br/1ba; 871 sqft on 4791 sqft lot; 53 years old 1 car garage
	$695,500 – 349 Whisman Station Dr. 2br/2.5ba; 1173 sqft; 9 years old; HOA $224 2 master suites, close to train tracks and CalTrain
	$738,000 – 410 Chiquita Av. 2br/1ba; 988 sqft on 5200 sqft lot; 66 years old Walk to downtown
	$751,000 – 131 Pacchetti Way 3br/3.5ba; 1421 sqft; 10 years old; HOA $156 2 car garage, loft as 3rd bedroom
	$810,000 – 1842 Hackett Av. 3br/2ba; 1462 sqft on 5227 sqft lot; 57 years old Completely remodeled; size includes 312 square foot garage
	$923,000 – 2076 Jardin Dr. 4br/2ba; 1548 sqft on 7405 sqft lot; 56 years old Vaulted ceilings, breakfast bar, garden shet, fruit trees
	$933,000 – 10 Towne Ci. 4br/3ba; 2128 sqft; 5 years old; HOA $237 End unit townhome
	$1,067,000 – 1390 Latham St. 4br/3ba; 1699 sqft on 10450 sqft lot; 92 years old Fixer in Downtown Mountain View
	$1,115,000 – 1307 Cuernavaca Circulo 4br/2.5ba; 2493 sqft w/ 4792 sqft lot; 20 years old; HOA $190 Duplex
	$1,250,000 – 305 Woodland Park Ln. 4br/3ba; 2264 sqft on 4356 sqft lot; 19 years old Vaulted ceilings; hardwood, travertine, granite, stainless steel appliances
	$1,405,000 – 1174 Bonita Av. 4br/3ba; 2000 sqft on ~4000 sqft lot; new construction Hardwood; upgraded kitchens and bathrooms; custom design
	$1,850,000 – 1883 Orangetree Ln. (most expensive close in July) 4br/4ba; 3562 sqft on 7928 sqft lot; 27 years old 3 masters; cathedral living room; upgraded kitchen

New Format for Market Updates

Alex Wang — Wed, 29 Aug 2007 10:35:56 +0000

My previous market updates have focused on analysis of year-over-year statistics, particularly with respect to medians around Silicon Valley cities. The numbers are useful, but what I really want to provide my clients with is an intuition of how far that money goes and what the snapshot of today’s market looks like.

With that goal in mind, I’ve added some information to my market updates. I think, as of today at least, that this site is the only place you’ll find this information.

The first addition I call "The Median Home", literally the home that is the statistical median for that period in that area. (Sometimes there will be more than one.) I’ll also add representative homes and multi-family interests that cover the spectrum of completed sales in that city. Condominium complexes and many communities have their own micro-climates which I also cover individually in my Neighborhood Notes.

The second addition I call the "Active CDOM". DOM is days-on-market and I have some opinions about its usefulness. The CDOM, or continuious days-on-market, is an improvement which takes into account "rolling back the odometer". The Active CDOM is a snapshot of how long the properties currently for sale have been on the market (as opposed to the ones that sold). When compared to the CDOM, it gives a rough indication of the quality of the properties on the market.

Cupertino Housing Market Update – July 2007

Alex Wang — Thu, 26 Jul 2007 09:27:22 +0000

It's not world famous for it's homes or real estate. Folks outside Silicon Valley know it as the birthplace of the iPhone. Apple, Symantec, and a very large portion of HP — to name a few — call it home. To locals, Cupertino is synonymous with the school system. The Cupertino Union School District has 24 elementary and middle schools, 19 of which are ranked by the California Department of Education as 10 out of 10 statewide.

And that doesn't account for the elite Monta Vista High School, as well as Lynbrook High School or Homestead High School (as part of the Fremont Union High School District shared with Sunnyvale and other cities) which all rate 10 out of 10 statewide as well.

The real estate in the Cupertino part of Silicon Valley commands a premium over other cities in the area. The darker lines on the chart show what the median price of condos and townhomes, and single-family homes in Cupertino. The faded lines show what the median home prices are in Santa Clara County as a whole.

The difference between the two types of lines is the premium you pay in housing prices to live in Cupertino. How much is that premium and how has it changed over the last decade?

Cupertino Home Prices Commanding Consistent Premiums

Steady state. Or at least as steady as real estate gets in June. Over the month of June in past five years, Cupertino home prices have remained above Santa Clara County prices, to the point where the premium has been consistent between 35% and 39%. This is lower than the premiums commanded between 1998 and 2002 when single-family homes were over 50% — as high as 71% — more expensive than the median across Silicon Valley.

Too much of a premium and the local micro-climate bubbles relative to the area. Cupertino was itself ahead of the curve in 1998 and again in 2000 with a local peak of $880,000 for a median home that year. Since its last price decline in 2003, single-family homes in Cupertino have been tracking the aggregate median without much fluctuation.

Given the talk in the news about home market collapses around the country, many home buyers are risk averse, preferring to minimize the amount of their potential loss rather than maximize their potential gain. A vast majority of people in this part of the Silicon Valley market cycle fall into this category.

Demand for high-quality townhomes, condominiums and houses in Cupertino has not been completely met because of a strong decrease of 23% in homes available between June 2007 and last year. Inventory is at levels not seen as low since June 2000, when it was at 72, and multiple offers on good properties are still common.

For my clients who want the strongest schools for their children, Cupertino makes an equally strong case. For my clients who want a solid foundation for their next home, Cupertino has steady indicators and foundation in education. If these are factors you value, then it represents a comparatively safe decision in Silicon Valley. There are places that aren't like that, and you can find one example at the end of this article about a neighborhood in San Mateo.

[The raw data about area home prices is supplied by the local MLS, RE InfoLink. The analysis is my proprietary work.]

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Silicon Valley Housing Market Update – July 2007

Alex Wang — Mon, 23 Jul 2007 07:05:23 +0000

It's all about proximity. This month, I took a look at the semi-annual statistics aggregated for the first-half of the year so that my clients can get a good look at the overall trends, as opposed to the bumps in the road.

The story isn't about the median prices, which are charted further down in this article; what's interesting is the consolidation of pricing power around the center of Silicon Valley. I alluded to this increase last month, but the half-year figures distinctly highlight this strength, with the epicenter squarely in Mountain View.

In the first-half of 2006, an average single-family home sale would command 101.98% of the list price — about 2% over the asking price — but in the first-half of 2007, that percentage jumped to 104.56%. The increase in Mountain View's neighbors Palo Alto, Los Altos and Sunnyvale, is less drastic, but still pronounced, as illustrated below.

In fact, inventory of single-family homes in Mountain View and Los Altos is at its lowest point in ten years, with Mountain View equaling the low it reached in 2005 (lower than any other point since 1998).

What's Happening Further Out?

Cupertino has seen a similar increase in pricing power the first-half of 2007, but cities further out like Saratoga, Santa Clara, San Jose, Milpitas and — to a lesser extent — Campbell all experienced some erosion in pricing power, as measured by the percent of list price homes received. But prices have remained relatively strong: the median home prices in all of those cities except Milpitas have increased since 2006.

Silicon Valley as a whole remains strong with a 6% increase in the median price of townhomes and condominiums plus a 6.9% increase in the median price of single-family homes.

New inventory entering the market is down 12% year-over-year between the first-half of 2006 and 2007, helping to balance out the 17% increase in available inventory during the same period. The number of new home listings is actually at its lowest point since 2000, which in addition to Silicon Valley job growth (.pdf), helps explain why prices have risen steadily in the midst of less optimistic news from around the country.

[The raw data about area home prices is supplied by the local MLS, RE InfoLink. The analysis is my proprietary work.]

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Saratoga Housing Market Update – June 2007

Alex Wang — Fri, 29 Jun 2007 08:14:39 +0000

It was as if they were made of gold. You know a school district cares when they track every registration form that leaves their office for planning and budgeting purposes. The result? Saratoga Unified School District's API score of 952 out of 1000 is second in Silicon Valley only to Los Altos, which edges out its southeastern cousin at 960.

And it's that time of year, when parents who want or have to make a move are packing their kids into the trusty family automobile and hauling them to find Silicon Valley real estate in the right school districts. Saratoga is seeing no shortage of activity with 40 closed sales in May 2007 compared with similar numbers of 37 and 35 in the two preceding years.

That doesn't seem like news until you combine the slight increase in sales with the dramatic decline in new listings year-over-year. With only 48 new listings in May 2007 — a 10-year low where the average is 80.6 over that period — there's been a 16.6% increase in Saratoga median home prices from May 2006 to 2007. But the market isn't completely stacked towards the seller in all market segments.

Some Evidence of Seller Overconfidence

There aren't that many condos or townhomes in Saratoga to speak of so the median price line is easily affected by small groups of sales.

Of the 102 single-family homes in Saratoga currently for sale, 35 have been on the market for longer than 100 days. 16 of those are in the price range above $3.5 million. Sellers are signaling for help in this range with 6 listings having undergone published price reductions (along with two others that have been on the market less than 100 days). My buyers in this range can feel comfortable bringing out the red pen.

24 total are in the price range $2.5 million and above. Of the 8 homes between $2.5 and 3.5 million that have been on the market over 100 days, 5 have had published price reductions.

The average DOM for homes currently for sale is 105.9. The "official" DOM stat, which is based on the DOM of all the homes sold during that period is much lower, at 32.

You can see from the disparity that some homes are selling very quickly. Saratoga is showing some signs of seller overconfidence evidenced by the drop in the percent of list price received: down from last year's 100.17% to 99.38% this year.

The fact is that, over the last ten years, Saratoga is traditionally an area where you negotiate down from the list price. Sellers were pricing in too many percentage points above the over-asking sales prices. The lack of new inventory is probably going to soften the landing for a few sellers, but it won't make an undesirable home sell faster — especially with comparable areas like Los Gatos, Monta Vista, and Los Altos nearby.

[The raw data about area home prices is supplied by the local MLS, RE InfoLink. The analysis is my proprietary work.]

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Santa Clara County Housing Market Update – June 2007

Alex Wang — Sat, 09 Jun 2007 10:26:14 +0000

The stratification of the Silicon Valley residential real estate market continues. On one end, the average townhome in the city of San Jose is just harder to sell than it was last year and, not surprisingly, it's much harder to sell than the year before. In fact, San Jose accounts for half of all closed townhome and condo sales in Silicon Valley's Santa Clara County but for three-quarters of the drop in closed sales between May 2006 and 2007.

That decrease in San Jose, from 288 to 204 closed townhome and condominium sales year-over-year, represents the lion's share of the Santa Clara County drop from 481 to 363. The reason for the drop in San Jose, however, is different than the reason closed sales are dropping or holding steady in other cities around Silicon Valley.

On the other end of the spectrum is what's happening with single-family homes. Silicon Valley market cycles being what they are, the half of a percent dip ($4,000) in the median price of single-family homes in Santa Clara County from April to May this year was expected, particularly after the large run-up over the past few months. On average, there's been a one percent dip in single-family home prices in Silicon Valley between April and May over the last ten years.

But what isn't obvious in home prices is the drop in new single-family home listings from May 2006 to May 2007. New listings are down across-the-board in every city in Santa Clara County except for Campbell. Across the entire county, new listings dropped 13.6%, from 2466 to 2130.

The single-family home and multi-interest development markets are behaving very differently. One stratum presents an opportunity for investors and first-time home buyers who are willing to compromise. The other is a good indicator of the hot markets in Silicon Valley.

Compromising Without Losing

It's almost a tradition in Silicon Valley real estate: look at the asking price, gauge the desirability of the area, do a quick once through of the home, then figure out how much more than the list price to offer.

Fortunately, it's not like that in every city or for many townhomes: the percentage of list price received for condo and townhome sales has decreased from 104.54% in May 2005 to 100.15% this year.

There's also a statistical subtlety. Has the decrease in closed sales of townhomes hurt median prices? Nope, even though the year-over-year median price of townhomes and condominiums increased from $500,000 to $537,500, homes that don't sell can't close — only closed sales impact the median sale price.

So the median price of homes in Silicon Valley can still be going up while the amount of latent inventory rises, as it did between May 2006 and 2007, from 1182 to 1573 multi-interest development units. The cream rises. The rocks don't.

There Are Rocks, and There Are Rocks

I tell my clients that one way to get a great deal is to find one with a flaw that you can fix more easily than someone else can, or one that you're willing to live with when most other people won't. You can have a diamond in the rough or a diamond in the trough, which isn't as good. Either way, you still have a diamond.

Diamonds in the rough might have a bad paint job; poor landscaping; worn carpet; old appliances; outdated styling; an odd but usable layout; or a house that you expect to level or expand. They're generally "ugly" in some ungainly way, but are fixable with some money and effort.

Rocks in the rough have outdated electrical systems or wiring; unstable or tilted foundations; rotting pipes; or bad HOAs. These items are very difficult to see and even harder to fix.

Diamonds in the trough might have a school system that needs improvement; noise from train tracks or traffic; a flightpath overhead; or a school directly across the street. The home's location has one major "flaw" that you can live with either as a home or as an investment. They are usually priced into the value of the home when you purchase it.

Rocks in the trough have a reputation for crime; neighbors that don't maintain their homes; a large number of rental units nearby; or a large number of diamonds in the rough clumped together in the same neighborhood. These items are virtually unchangeable and are not only priced into the value of the home when you purchase it, they also continually erode property values over time as their effects become greater.

Renewed Strength in Silicon Valley Markets

2006 brought a necessary civility to the Silicon Valley real estate market after the activity in 2005. Even though inventories in Santa Clara County are as high as they've been since 2003, pricing strength has rebounded since 2006, with five cities showing marked increases in the percentage of list price received.

The most significant change is in Los Altos, which dipped below 100% in 2006, meaning the average sale was for below the asking price. Given a median price of $1,864,000 in May 2007 vs. $1,555,000 in 2006, there are indications of some increasing strength in the higher-end markets in Silicon Valley.

[Source for data: RE InfoLink. Please note that there is a slight discrepancy of a few thousand dollars between the median home prices for March, April, and May of 2007 reported here and in previous articles. RE InfoLink recently changed the way they report statistics and unincorporated regions in Santa Clara County are no longer being included in the aggregated numbers. These regions account for the difference.]

[The raw data about area home prices is supplied by the local MLS, RE InfoLink. The analysis is my proprietary work.]

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The Yearly Cycles Behind the Silicon Valley Real Estate Market

Alex Wang — Mon, 14 May 2007 11:39:27 +0000

My clients often ask, "What time of year is the best time to buy a house?" because they know that I won’t reflexively say, "Now." To me, buying real estate is a very personal, individual decision based solely and specifically on your own needs and wants.

I believe it’s best to answer with more questions. What they are depends on the people. A question about their family. About their timeframes. About their job and how much they like it. About their credit. About their perfect world and what they envision in it. This investment on my part in understanding what makes my clients tick is essential to the way I ensure clients are deliriously happy. Anyone can look up properties.

The question becomes, how do your needs and wants fit in with what the market has traditionally done since 1998? And does that mean it’s the right time for you to buy a house?

Silicon Valley Inventory and New Listings Cycle

Any mutual fund commercial worth its salt has the disclaimer that past performance doesn’t predict or guarantee future results. The same goes double for real estate trends and statistics, even using data back to 1998.

Inventory is one half of the balance between supply and demand. After segmenting and normalizing the inventory figures for each month from 1998 to 2006, I came up with this chart of how inventory builds up in the Silicon Valley real estate market. Historically, December has the smallest inventory, so it serves as the baseline. July traditionally has the highest inventory build up with 82% more single-family homes and 70% more townhomes and condominiums than in December.

The single-family home curve isn’t a huge surprise, particularly to real estate agents, but it’s interesting to note that the peak inventory for townhomes and condominiums actually happens in September (after a slight dip in August when most schools start), not July. This works out well (and sometimes best) because new competing listings drop from their peaks and prices generally hold, as you’ll see in the upcoming charts.

New listings each month feed into inventory. December is the baseline month and it’s not surprising that people wouldn’t put their homes on the market then, given so much holiday time to work around towards the end of that month and the beginning of the new year. Listing your home in December is an easy way to make it look stale with an artificially high days-on-market number.

There’s no surprise that Silicon Valley real estate (and around the country) wakes up in the spring season beginning in March with almost three times the number of new listings as in December. The seasonal peak for listing single-family homes on the market hits in May, June for townhomes and condominiums.

The Market Cycle in Number of Homes Sold in Silicon Valley

Transactions are relatively sparse in January, which acts as our baseline for comparison. Only 6% more single-family home sales and 14% more condo and townhome sales happen in February than in January, which are both traditionally very slow months in real estate, Silicon Valley and the Bay Area included.

Home sales peak in June and most condo and townhome sales peak in August. But while the drop-off in volume between August (again, when school starts) and September is particularly dramatic for townhouses and condominiums, there isn’t a corresponding drop off in the average price.

Price Cycles in the Silicon Valley Real Estate Market

In fact, buying a townhome or condo in Silicon Valley and the Bay Area tends to be a more expensive proposition in December than in any other month. This doesn’t mean that the price of the same home is going to be higher. It means that the ones that sell tend to have higher price trends.

January, again, acts as our baseline and common interest developments tend to be 16% more expensive in December than in January. That doesn’t mean the townhome you’re looking at in November will all of a sudden jump in price come Christmas: it means that there needs to be enough incentive to complete a deal during the December holiday period — you’re not looking at a lot of inventory or new listings then. It’s similar, but less dramatic for single-family homes.

To create the pricing cycle graphs, I used the average sale price instead of the median which I use in the market updates. Median numbers are good for housing price updates because they don’t allow one large sale to skew the data set. But averages make more sense in this large data set which incorporates 9 years of data. Please also note that the scale is 2% per unit.

When Is the Best Time to Buy a Home?

Again, I believe it’s best to answer the question about when the right time is to buy a home with more questions that let me optimize for your situation. But there are a few general patterns that you can follow in the meantime depending on your overriding need or want. In planning timeframes, remember that it usually takes clients a few weeks, sometimes months, to identify the right home.

1) Schools. Schools are an overriding factor many of my clients’ decisions to buy a home. For those with school age children, the best time to buy a home is after their current school year is finished, leaving enough time to get settled in before the school year starts up again. I have experience as a youngster moving during the school year and I heartily recommend to parents that they avoid it if at all possible. Generally, this means the best time is June or July.

2) Making a deal. For people who value a generally lower price over getting exactly what they want, there are the first two months of the year, particularly for homes that have been languishing since October or November. Some may be good real estate priced incorrectly. Homes generally don’t sell in January and February because of a dearth of qualified and active buyers, so there will be less competition for properties. (The most desirable real estate in Silicon Valley will always have some — and sometimes fierce — competition. If these were the most desirable properties, and were priced correctly, they would have sold already.) The trade-off is that there will be less inventory to choose from, almost half of what’s available in July.

3) Selection. People who are selective or looking for specific characteristics in their new home will have the best chance in May through August because of the inventory available. The shelves are stocked with a wide variety of goods and you’ll stand a greater chance of getting exactly what you want. The trade-off is that you need to start early and be prepared to act since you’re shopping during a peak period.

4) Balance. You won’t run into families who absolutely have to make a move between school years and you won’t have the inventory issues of deep winter (whatever that means in Northern California) and the holidays. The period of September to November, before Thanksgiving, works well for people without kids who want a good selection to choose from. There are also opportunities during March and April, particularly if it rains a lot and people aren’t in the mood to see properties. An umbrella and a little extra leg work could mean a good deal in the right situation.

Averages Are What They Are

Here are the month-to-month numbers for Santa Clara County from January last year to April this year. I prefer to use year-over-year numbers in comparisons because it eliminates some of the noise caused by natural market cycles. Apples to apples.

You can see the traditional June peaks but there are lulls in December where a bump might have been expected given the averages. Just like every person is different, every year is different. That’s why it’s so important to make the right decision for your own needs, choose the best time for you to buy, and plan ahead so that you can weather out and benefit from whatever the market decides to do. You can’t change the market, but you and I can ensure you have every possible advantage.

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