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.

_{Photo Credit: James Sugar, National Geographic}

DataQuick released their December 2010 monthly report for the Bay Area recently hitting the headlines with “Bay Area Housing Ends Year With Many Looking but Not Buying.” But amongst the headline there were also bits of sun hinting of more to come for Bay Area real estate.

Here’s what John Walsh, DataQuick president, said:

“While the dicey economy and employment concerns are major factors, tight mortgage credit is also a big issue right now, especially for the upper half of the market. There’s a lot of pent-up supply and demand out there, which will start to meet when the lenders re-open their spigots a turn or two,” he said.

_{Data includes single-family homes and condos. Source: MDA DataQuick}

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.

_{(Single-family home data from MLS listings Inc.)}

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.

_{(Single-family home data from MLS listings Inc.)}

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.

_{(Single-family home data from MLS listings Inc.)}

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.

_{(Single-family home data from MLS listings Inc.)}

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.

_

Recommend reading

- Silicon Valley Housing Market Trends – Third Quarter 2010 Update
- Where Are We Now? 2000 to 2010 Silicon Valley Real Estate Report
- What to Expect When Buying or Selling During the Winter Months
- Market Updates
_

_{(single-family home data from MLS listings Inc.)}

Palo Alto, the feather in the cap of Silicon Valley real estate, struggled with its median sales price, falling two straight quarters after reaching its peak in second quarter of this year since the housing bust. The fourth quarter of 2010 was lower than the same period in 2008 ($1,350,000) and in 2009 ($1,370,000). This is due to two factors: the real estate market adjusting to pre-bubble prices, and fewer expensive properties being listed because of the deprecated values.

On the positive side, sales are up overall, beating all previous quarters this year and the fourth quarters of 2008 and 2009. The sales price to list price ratio is also one of the most balanced of our four city comparison, and with a ratio just above 100%, the only one favoring the seller.

_{(single-family home data from MLS listings Inc.)}

The high home prices of Los Altos influenced how it reacted to the 2007 bust, mainly a hold off of purchasing (only 38 homes sold in the fourth quarter of 2008) and a depreciation of the median sales price.

This past quarter, Los Altos is still struggling in its sales price to list price ratio, a result of many buyers unwilling to pay the full listing price. But this shouldn’t overshadow that this quarter the city put up the highest median sales price for the year. And compared to the same period in 2009, the median sales price is up 7% and days on market fell 8%, both good signs.

We can only anticipate what 2011 will be for real estate, but if Los Altos is any indication, higher-priced markets could be shaking off their frost a little sooner than the past few years.

_{(single-family home data from MLS listings Inc.)}

Mountain View has been an example of what many buyers and sellers would hope to see in their local market after the housing bust. The city fell, but not as hard as its neighbors, and recovered immediately into a slow rise that continued throughout 2010.

Its weak points this quarter were in average days on market (still better compared to 2009, with 61 days) and a sales price to list price ratio that favors buyers. The median price rose in the fourth quarter, and aligns with the more popular spring and summer months, including besting the same period in 2009 by more than $10,000.

_{(single-family home data from MLS listings Inc.)}

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.

_{Data from MLS listings, Inc.}

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.

Recommended reading

- The Yearly Cycles Behind the Silicon Valley Real Estate Market
- Where Are We Now? 2000 to 2010 Silicon Valley Real Estate Report
- Silicon Valley Housing Market Trends – Third Quarter 2010 Update

Homebuyers, along with real estate agents, tend to put a strong bias on high API scores, especially since good schools can translate into better priced homes. But in cities like Mountain View, where the majority of the school district is either at the state API goal of 800 or above, we can start to consider other factors in the makeup of a school to see if it is the best fit for a child.

Read on to find out what our agents discovered on the tour and some of their insights. At the end we have tables showing all the API scores from elementary to high school in Mountain View, including school ranking and subgroup scores.

Christine Ko on the tour and the Mountain View Education Foundation (MVEF)
Edmund Yue and James Yang on looking past API scores
Kristine Suh, a parent, on deciding which school was right for her children
2010 API scores for Mountain View elementary schools
2010 API scores for Mountain View middle and high schools

Christine Ko on the tour and the Mountain View Education Foundation (MVEF).

The real estate agent tour was held by the MVEF, hosted by the new Superintendent, Craig Goldman, along with a tour of Crittenden Middle School by Principal Karen Robinson. Following a walk around Crittenden, the agents took a bus tour of all the elementary and middle schools in Mountain View.

A notable aspect of the MVEF is that they work with parents and the community to raise money for school programs that are no longer funded by the state. This includes funding in the arts, music, and sciences at the elementary level, and electives and after-school sports for middle school.

Christine mentioned that a highlight of the tour was finding out what unique programs each school had. We have a handout (the images below) that shows enrollment boundaries for the elementary schools, a quick description of special programs, and each school’s 2010 API scores. Included are Benjamin Bubb, Mariano Castro, Edith Landels, Frank L. Huff, Stevenson, Monta Loma, and Theuerkauf elementary schools, and Graham and Crittenden middle schools.

Edmund Yue and James Yang on looking past API scores

The biggest point James took from the tour was that API scores should never be the only determining factor parents consider when choosing a school for their child.

API scores are restricted to academic performance, and does not do a complete job of comparing overall school quality. Some areas that parents should also look at are the school’s administration, community involvement, and existing programs that encourage both struggling and promising students.

Edmund added that Superintendent Craig Goldman mentioned one way parents could pull additional information about a school’s API score is to look at the subgroup scores and demographic information. (We have more about this in the API graphs below.) If you combine that information along with staff involvement with students and take into account unique schools programs, such as at Mariano Castro Elementary School, where the students go through a Spanish-English dual immersion program, parents can really get a good idea of what a school is about.

Kristine Suh, a parent, on deciding which school was right for her children

As a parent, Kristine experienced the process of deciding what school would be right for her children 10 years ago, and now has advice for parents in the same situation.

Her family had the opportunity to choose between Los Altos, Palo Alto, and Mountain View school districts, ultimately ending up in Los Altos.

She said that API scores were an important part of her initial search, but she has found that scores play only a small role in the child’s day-to-day education. On top of school research, if the parent has time, is why not meet with the potential school’s teachers and sit in a class. You may find that scores are not as important as what is the actual children’s relationship is with the teacher.

At the high school level, she said it is important to also consider the number of advanced placement classes available. One school might have a high API score but few options for AP classes. But, on the other hand, a school might have a medium API score, perhaps because of a large demographic and socioeconomic spread, but a breadth of AP classes.

Lastly, a good resource online to look at an endless stream of information on school, find parent reviews, and more is available at greatschools.org. If you are interested in talking with a representative in the Mountain View Whisman School District that can put you in contact with involved teachers and parents, feel free to contact us.

2010 API scores for Mountain View elementary schools

_{(For explanation of terms and a more in-depth analysis please visit the CDE API website)}

2010 API scores for Mountain View middle and high schools

_{(For explanation of terms and more in-depth analysis please visit the CDE API website)}

Recommend reading

- Silicon Valley School System: Best Bang-for-the-Buck
- 2009 Santa Clara and San Mateo County API School Scores
- API Scores: Base vs. Growth

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:

• Zillow.com breaks down the 20 best cities for trick or treating, and best places to trick-or-treat in San Jose.
• San Jose Mercury News Halloween holiday headlines
• Los Altos events, via the Town Crier.
• Mountain View events, via the Voice.
• Palo Alto events, via the Weekly.

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.

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.

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%).

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 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.

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.

Recommended reading:

- Silicon Valley: Second Quarter 2010 Update
- Silicon Valley: First Quarter 2010 update
- Bay Area Real Estate Shifting to a Seller’s Market, U.S. Still Slipping
- Where Are We Now? 2000 to 2010 Silicon Valley Real Estate Report

_{(single-family home data from MLS listings Inc.)}

Palo Alto really established itself this quarter as a market leader. Compared to the third quarter in 2009, Palo Alto has improved in all five measures. This quarter Palo Alto jumped its selling price to listing price ratio ahead of the other three cities in our comparison to 101.26%, turning it into a seller’s market. Though, what this means for future home prices or the market is anybody’s guess as we enter the winter quarter.

The average days on market in Palo Alto remains the lowest of our four cities at 35 days, a drop from 57 days for the same period last year. Palo Alto also has the highest total sales volume, even though it has the second smallest population in our comparison. This is due to the wide range of property values available in Palo Alto, from just under a million to the many millions.