If you are considering buying or selling a home in Silicon Valley, you are likely trying to take the pulse of the housing market to determine if this is the right time to make a move.
Even the most savvy investor can find the timing aspect of buying or selling daunting and timing can be a stressful ordeal after watching so many friends and family members stuck with mortgages that are larger than their homes are worth.
Here’s a quick formula to help you zero on the right time to buy, sell or stay put.
The calculations can be used in any sized market, by ZIP Code, by city or by county.
Calculating market conditions
• Buyer’s Market – There is more than a six-month supply of homes for sale. The market is loose. This puts the buyer in a better negotiating position, making it a great time to buy.
• Seller’s Market – There is less than a three-month supply of homes for sale. The market is tight. This puts the seller in a better negotiating position, making it a great time to sell.
• Neutral Market – There is a three- to six-month supply of homes for sale. This puts the buyer and seller on a relatively equal negotiating footing. The seller has an edge as supplies move nearer to three-month supply. The buyer calls more of the shots when supplies tip toward the six-month supply level.
In your area, calculate the supply of homes for sale by dividing the number of homes for sale by the number of homes sold in a given month.
Additional factors also can tip the scales one way or the other, including economic distress or growth, levels of appreciation, falling or rising prices and an imbalance between buyers and sellers.
• It’s a solid seller’s market. Absolutely. All-cash buyers have snatched up a large chunk of lower priced properties. Distressed properties are down. And many equity-poor homeowners are waiting, hoping that prices will come up more so they can squeeze another $50,000 or so out before they list.
• It’s not a buyer’s market. Record low interest rates along isn’t enough to give them an edge in terms of a stronger negotiating edge. Inventories are also near record lows so buyers face stiff competition from multiple offers as they struggle to find the right property.
• Affordability is being offset by low inventories and that’s keeping the market out of neutral territory.
Still a good time to buy
As is often the case, Silicon Valley’s market experienced a swift transition from the buyer’s market of last year to the current seller’s market. That’s because home buyers and sellers typically move in unison – on or off the market – as soon as they see the market moving in and against their favor. That makes the neutral market the most fleeting of the three.
In a seller’s market as tough as this one, even well-trained professionals are left scratching their heads trying to get an offer accepted.
Prices are rising, record-low interest rates are sending buyers to market. It’s a great time to sell compared to a year ago.
With prices still affordable, it’s also an amazing time for existing homeowners to buy up and move to a bigger and better home.