The question I am asked all the time ... can you guess what it is?
"How's the market doing?"
This is a tough question because everyone comes to it with a different perspective. Home owners want to know if they are under water. Renters want to know if this is the right time to make their move. Some people are worried that they are too late to take advantage of a great market. Some people are thinking about their children and wondering if they will ever be able to buy a home in the area. Some people are trying to determine whether they can move back into the area or not. Everyone has a different perspective.
What's below is a general, bullet point report on the housing market in Santa Clara County. Give me a shout if you would like to chat about what this information means in YOUR personal context.
The State of Santa Clara County
I have been telling anyone who would listen that the bottom of the market (based on price) was in early 2010. And, as it turns out, I was right as it relates to most of Santa Clara County (yeah, I feel pretty good about that). That said, just this past week, Merrill Lynch published a report that said the national real estate market just hit bottom (Housing Market Just Hit Bottom: Bank of America Merrill).
So let's look at Santa Clara County:
- Single family inventory (home for sale) is below 1,350 units (less than 1/2 of what was for sale last year).
- Condo inventory (condos for sale) is now 370 units (less than 1/3 of what was for sale last year).
- Housing inventory is lower than it has been in nearly 11 years (and there are 1,000s more homes than there were 11 years ago).
- Most properties are selling with multiple offers and for over asking price (everything from the $175K condo to the $1.8 million Saratoga home are selling with multiple offers -- sometimes more than 20).
- Mortgage rates are hovering between 3.75% and 4.25% for 30 year fixed conforming loans (there is no historical comparison for this).
- In 2009, foreclosures made up 50-60% of all listings on MLS. Today foreclosures make up about 25% of the market.
- While there does appear to be a significant (and shrinking) "shadow inventory" of foreclosure properties, lending institutions have stopped flooding the market with bank owned properties.
- Average rent prices grew 20% in 2011.
Some macro economic issues at play:
- The EU debt crisis (one of the primary factors in U.S. mortgage rates being crazy low) appears to be nearing resolution (or is beginning to take on the appearence of reslution).
- The Chinese real estate market is nearing the brink of a significant correction. We are starting to see Chinese investment pools forming with an eye toward the healing U.S. real estate market.
- The U.S. has built nearly ZERO homes in the past 5 years (compared to previous years). In 2009, Forbes reported a coming housing shortage as the population grew. We are there now.
The psychology of the market:
- Nervous potential home sellers who do not have to move are staying put (seen in the VERY low inventory for sale).
- First time home buyers in the sub $500,000 market are experiencing hyper intense competition as there is very little for sale at this end of the market.
- Many people still feel you can get away with submitting lowball offers and walk away with a GREAT DEAL. Sorry, you're three years too late for that to work.
So what does this all mean?
- The heavy downward pressure on the Silicon Valley Market is gone (cheap mortgage rates, lifting foreclosure pressure and money poised to flood in from abroad).
- Prices are trending upward -- ignore median price numbers as they are too general and filled with statistical noise. When we look at neighborhood trends, prices have been trending up 2-5% in 2011.
- Mortgage interest rates WILL rise making housing less affordable.
- For MOST people, it is currently cheaper to buy than rent.
- Home owners who can get beyond their fears and make the move up to the next level are the folks who can win the most in this market.
- The combination of price and mortgage rates will never happen again in our life times.
Feel free to give me a call or shoot me an email if you would like to chat about any of this material.
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Keller Williams Realty Silicon Valley