While the national real estate market is picking up steam, the Silicon Valley market seems to have attained a plateau – at least for the time being.
Across the Valley, sales and inventory figures have been relatively stable for a little over a month now, but don’t confuse “stable” with “balanced”.
Also see Stefan Walker’s early take on the “Facebook Factor.”
Demand, fueled by record-low interest rates and surging consumer confidence, remains exceptionally strong, while inventory of homes available for sale is lower than it has been in more than seven years. In most Silicon Valley communities the market is tipped substantially in the seller’s favor.
Silicon Valley ‘core’ neighborhoods
As an example, consider the figures for single-family homes in selected ZIP Codes of Silicon Valley’s core: upper-middle income tract neighborhoods, centrally located, with excellent schools. They include neighborhoods in West San Jose and Cupertino and southern neighborhoods in Sunnyvale, Mountain View and Los Altos.
More homes have gone pending in the last three weeks in these areas than are currently available for sale. Bear in mind that a good amount of the inventory still available represents undesirable properties, those that have languished unsold due to location, pricing or condition. If more quality inventory existed, sales surely would be higher.
These neighborhoods represent conditions in most of the Valley’s core markets, where supply far exceeds demand – Almaden Valley, Campbell, Willow Glen, Cupertino, Sunnyvale, Mountain View, Los Altos, Palo Alto, Menlo Park, and even Portola Valley. Competitive bids are commonplace in these markets, as are over-asking offers (substantially so in many cases).
What’s more quarterly comparisons illustrate the magnitude of inventory depletion in the various submarkets, compared to last year. Especially noteworthy, sales are surging where there’s a lack of available supply.
Silicon Valley’s luxury market
Luxury markets, with relatively better inventories, are also strong.
Atherton, Woodside, Los Altos Hills, Saratoga and Los Gatos have several times the number of units available as they do pending on the multiple listing service (MLS).
However, luxury buyers complain finding quality property is difficult and sellers are marketing many luxury properties without MLS support. The “off market” trend is especially pronounced in San Francisco Peninsula markets, where the higher the property value the more likely the property will be sold off market.
With many Peninsula luxury sales going unreported on the MLS, the vast majority of luxury sales reported on MLS are concentrated in Peninsula markets – of the 94 closed sales in excess of $3 million reported on the MLS in Santa Clara and San Mateo counties since the first of the year, only nine were South Bay sales – one in Monte Sereno, three in Saratoga, and five in Los Gatos.
Some luxury spillover demand is heading south, however, as 13 of the 47 such pending high-dollar sales are South Bay properties.
Maligned ‘Facebook Factor’ figures in
Keep in mind that many Peninsula luxury sales are going unreported, and despite the media’s hand-rubbing glee in its post-apocalyptic style reporting of the Facebook IPO cratering the Nasdaq trading floor, the Facebook IPO did create a wealth effect for sufficient numbers of fortunate Valley residents to impact the local real estate market.
It’s a safe bet that the majority of the new wealthy, who decide to buy property will focus on Peninsula and San Francisco) neighborhoods, which will obviously further tighten these already constrained markets.