Los Altos Real Estate Blog

If you've been watching some of the markets in the area, you'll notice that stories of multiple offers, rising prices, and few choices are once again standard.  The luxury market took a beating in the 2008-2010 timeframe but bounced back last year.  I'm here to point out some market trends so you understand what's happening in the various markets.  My definition of the luxury market is for homes priced at $1,500,000 and above.

Overall, the trend for luxury homes prices in the primary luxury markets (Atherton, Menlo Park, Palo Alto, Los Altos, Los Altos Hills, Saratoga, and Los Gatos) is for prices to go up and inventory to be down. Palo Alto has the strongest luxury market in the last 12 months.  Los Altos has done very well but others are flat or trending up slightly (Saratoga, Los Gatos).  The trick on knowing which segments of the market are strongest can be summed up easily.  The entry-level luxury market is the strongest.  In fact, homes priced $1,000,000 to $1,500,000 are on fire!  I left those out of the analysis because they tend to skew the results.  It's not uncommon for a home priced in that range in the top school districts to sell at 10% or more above asking price.

A general lack of inventory is still an issue across the region.  The overall number of listings is lower than last year and the trend seems to be flat for the time being.  There are rumors that sellers are waiting for prices to rise even more but that's unconfirmed.

MARKET SEGMENT DETAILS

• Homes priced under $1.5M are selling immediately, sometimes with pre-emptive offers
• $1.5-2.5M - Very active market but stronger in Los Altos and Palo Alto than other places
• $2.5-3.5M - Moving nicely in Atherton, Los Altos, Los Altos Hills.  Moderate activity in other luxury markets
• $3.5-5.0M - Lots of active buyers and deals coming together both on and off the MLS.  Fairly not market.
• $5.0-9.9M - Quite a few buyers but few seem to be making buying decisions.  This segment will heat up.
• $10M+ - Several buyers in this range as well and more listings coming on recently.

Most home buyers have read somewhere that buying in the Fall or Winter months gives them an advantage.  That's true.  There are two major advantages buyers have at this time of year; fewer buyers out looking and decent inventory to choose from.

Fewer overall buyers means that there will be less competition to drive up prices.  In Palo Alto and Los Altos, for example, many homes in the entry-level price ranges of $1-1.5 million had 10-30 offers driving prices up 10-20%.  This still happens during Fall and Winter but to much less a degree.  If you're flexible on your criteria, you should be able to find a very nice home at a reasonable price while being either the only bidder or maybe going against 1-2 other buyers.  In Los Altos just recently, there were several homes with multiple offers but not as many offers as we saw in the spring.

Decent inventory means you will have a selection on homes in various neighborhoods but not as many as you would during the Spring selling season. Right now, inventory in Silicon Valley is moderate but recent new listings have been very good, priced well, and kept the number of options quite open.  My recommendation is to narrow down the price and areas you want to be in and be prepared to write an offer quickly.  While most agents won't  allow pre-emptive offers, you can write a solid offer and not be too pressured to overbid.

This is an excellent time to buy a home in Silicon Valley.  Just remember to watch the market, know where you want to buy, and be prepared to write an offer quickly.

For the last three years I've run into many buyers who tell me the same thing, "We want to buy but we're waiting to see if the market falls more."  Inside, I'm laughing at that.  Anyone who has ever tried to buy property, stocks, or other investments knows the one rule to them all is "If you can see the bottom of the market, you missed it."  Here's what is working against buyers right now - the pundits and media continually say "The market is falling!" or "We project markets to continue to fall." because bad news sells and nobody wants the honor of calling the actual bottom.  As a buyer, the proof is in the numbers.  Silicon Valley home prices are doing very well and in most markets they're rising - a lot.

To put thing into perspective, here are the numbers for select Silicon Valley towns for the first 9 months of 2011 compared to all of 2010:

• Palo Alto - $1,722,706 up 10.9%
• Los Altos - $1,732,235 up 2.6%
• Mountain View - $1,018,653 up 6.8%
• Sunnyvale - $769,327 up 1.7%
• Cupertino - $1,159,119 up 4.3%
• Los Gatos - $1,343,260 up 1.8%

The sales numbers for Q4 2010 were very weak in many markets and they're doing very well in Q4 2011 (so far) so I expect the end of year numbers to show much better stats.

I'd present San Jose as a whole but San Jose, like many parts of Silicon Valley, is made up of micro-markets such as Willow Glen where prices are doing well.  Market strength comes down to ZIP codes and neighborhoods.  That said, the nicer neighborhoods are doing well and the not-so-nice areas are still having some issues.  That said, Silicon Valley real estate markets are no longer dropping.  If you're waiting for prices to fall, keep waiting.

My best advice is to buy while rates are low and prices are only rising a little.  2011 was, in many markets, a hot year.  The high-end towns such as Palo Alto and Los Altos say big increases in prices during the spring months.  You can expect to see that again next year.  By 2012, the current limited inventory will not be enough to satisfy demand and prices are likely to increase quite a bit.  Buying now, during the fall and winter months, is your best bet.

I'm a news junkie. However it seems, for whatever reason, that no matter what real estate news article I read the bias is ALMOST ALWAYS negative.  It's as if the reporters out there can't find a bright spot anywhere.  If I were a consumer, it would be really hard to justify buying or selling a home when, based on the news, it appears that prices all across the country continue to drop and there's no hope in sight.  Foreclosures subsiding?  No!  Short sales easier?  No!  Prices rising?  No, no, no!!!  But here's the thing - that's not true.  In many places foreclosures are subsiding, prices are rising, and short sales are easier.

We need a Crusade of Truth.  The truth is that in the San Francisco Bay Area (it's own little real estate world) and Silicon Valley in particular, we have many markets up this year.  Somes of these micro-markets are up substantially in both sales and prices.  So, why is it that when I read about real estate sales in the local paper or on the TV all I hear is "Silicon Valley prices continue to drop"?  The truth is obscured by the reporters who only focus on sensationalizing what's happening.  Plus, I think they all can't seem to be happy.  It's not in their blood.  Are you on board with my Crusade of Truth?  I hope so.  The recent contest on Activerain asked members to talk about the "Real Estate Recovery".  In those articles were plenty of signs that markets all over the country are actually doing fine.

There was a report by NAR that presented recent dip in July sales and prices but put it in perspective by showing that year-over-year sales and prices were up and that overall in 2011 these figures are up.  WOW!!  A news report that is actually, sort of, positive.  They put the short term, minor bad news into perspective and showed that, in fact, the real estate market is doing better.  Did that news get coverage from all the TV stations and other media outlets?  No.  It got drowned out by more bad news.

Here's what I propose we do with the media:

• Find the bright spots in the local market
• Call the reporter(s) who write for your local paper or TV news
• Tell the reporters about the bright spots and back them up with facts (MLS data)
• Make sure you get quoted

We have a million members in NAR and over 200,000 people here on Activerain.  It's time we got the truth out there.  The public needs to know about the bright spots.  If they do, the sentiment on buying and selling will change.  Consumers need something good to pull them out of the funk the media has put them in.  Let's do it!

UPDATE:  I sent messages to 4 local TV stations and several local reporters asking them to do a report or series on the bright side of the local real estate markets.  More news to follow!

The San Jose Mercury News is, once again, telling only part of the story about local real estate.  Their latest article states that the sales and prices of homes dropped in July about 5.5%.  That's true and it was due to a number of factors.  However, the factors were external and not a cause of the local market.  The reality is that the median selling price of homes for the year-to-date is up compared to the same figures for last year.

By this time in 2010, the YTD median selling price in Silicon Valley was $530,000.  So far this year, the median selling price is $553,000 (with steady improvements each month all year).  To me, that says that the market is truly making a recovery and that the trend is UP.  That's the news they should be reporting.  Instead of telling everyone each month the market is up or down, they should be reporting what the trend is.  That sends a better message and is more accurate of what the market is actually doing.

For another comparison, the average selling price YTD last year was $673,361 which was a slight dip from June and July 2010.  However this year, the average selling price YTD is $691,936.  While this improvement, long with the median, are relatively small, the point is that the market is trending up.  That's what people need to hear.  I have people ask me all the time, "How's the market?" and I tell them it's up while the media reports it down.  The media is living on sound bites and an incomplete truth while I've got all the facts.

There have been 11,650 home sales so far this year in Silicon Valley compared to 10,453 in the same period last year.  There have been substantially fewer listings this year.  So, a lower inventory, more sales, and rising prices seems like a healthy real estate market in my book.  I don't know what the san Jose Mercury News is trying to do but if they want to report biased news that casts the local real estate market in a bad light, they're doing a good job.

Yes, you read that right, I want a lot more homes for sale in my market.  You see, the media and others who like to skew reality in favor of bad news can't seem to admit that some markets are on fire.  The Silicon Valley market happens to be one of those markets where sales are dominated by multiple offers and increasing prices.  Homes are selling and buyers are left wondering how long they'll have to wait to find the "perfect home".  In some cases, buyers who are trying to be patient are going to get priced out of the market. 

In Los Altos right now, we have just over 1 month of inventory.  This includes a lone bargain home priced just over $1 million up to the high-end priced just under $5 million.  The sweet spot for homes, priced in the $1.4-1.8 million range has so few homes to choose from that all my buyers are considering other towns.  Those towns, such as Palo Alto, are in even worse shape.  They have even less inventory.  Other towns have a bit more inventory, such as Saratoga, but not much more.  Without inventory, I can't sell my clients a home.  Just to put it into perspective, Santa Clara County is down to 2 months inventory.  This means that even in a market with condos as low as $150K and a median price just over $500K, there is very little to choose from. 

You want to know the really bad news for home buyers?

Prices are rising.  Not just 1% or some other little number.  They're rising 5, 6, 8, 10% and more in some sub-markets.  In the first 6 months of 2011 the Los Altos market rose 6.4%.  The market in Los Altos Hills rose 13.3% and this is considered the #4 most expensive market in the country.  Other markets are up as well.  So, while my poor buyers are stuck wondering when they'll find a home, the price of homes is rising so they'll end up spending more when they do.  This certainly isn't a problem in all segments of the market, as there are plenty of condos in a wide range of prices but in most markets the limited selection means paying more down the line.  The recovery is going so well that many towns are within a small percentage of their peak prices before the housing crash.

So, I hope that all the agents in Silicon Valley, including myself, will get more listings on the market soon.  If we don't many buyers who had been hoping to upgrade will once again be priced out of the market and they'll be stuck where they are.

This is a quick update on the performance of several local markets around Silicon Valley.  As the statistics below clearly show, most markets showed nice price gains in 2010 including most of the luxury markets.  These figures indicate that the trend down has stopped and the trend up is beginning again. While the markets are improving, this doesn't mean we've entered a seller's market where prices will spiral upward in the hot spring market.

I expect that this year we'll see most markets improve in the 1-6% range again (depending on the market).  The hottest markets from last year will likely cool down a little this year and the softer markets will likely see larger gains this year.  What will drive these price increases includes corporate spending, job growth, and low interest rates.  As the high-tech industry continues to recover, move-up buyers from the lower end of the market will start entering upgraded markets such as Sunnyvale, Mountain View, and Cupertino.  Sellers from those markets will continue moving to Los Altos and Palo Alto further driving demand.

                                        2010 Market Summary Statistics

                                                  Average Selling Price

                                 2009                   2010                  Change

Los Altos                $1,654,914          $1,688,322              +2.0%

Los Altos Hills         $2,614,368           $2,590,416              -0.9%

Mountain View        $946,438              $956,709                 +1.1%

Sunnyvale              $714,442              $760,772                +6.5%

Cupertino               $1,121,641           $1,112,847              -0.8%

Saratoga                $1,557,682           $1,646,386              +5.7%

Palo Alto                $1,516,480            $1,557,004             +2.7%

Menlo Park             $1,239,814            $1,309,892             +5.7%

Atherton                 $3,317,045            $3,510,434             +5.8%