With the election just weeks away and renewed focus on the national economy, the national housing market is one of the economy’s few bright spots.
Silicon Valley is one of the national housing market’s bright spots.
Rick Turley, Coldwell Banker’s president of the San Francisco Bay Area region recently summarized the CoreLogic report’s findings:
• The CoreLogic Home Price Index showed a 4.6 percent year-over-year increase and, more importantly, prices increased in all but six states.
• New home sales are up 24 percent over a year ago and existing home sales are up 11 percent over a year ago.
• Given the solid performance of home prices in the spring of 2012, even a stronger-than-projected decline in the fourth quarter of this year is unlikely to diminish the gains made.
• Demand is fundamentally driven by institutional investor interest in single-family residential properties as an asset class, pent up demand returning to the market, and increasing consumer confidence in housing.
Silicon Valley recovery
The Silicon Valley market was one of the first to rebound, and all indicators point to a continued recovery.
Consumer confidence is up and the local jobs picture is getting better by the day.
Last month, the Federal Reserve’s third round of “quantitative easing” (QE3) has driven interest rates down to historic lows yet again.
The residential rental market is fantastic for landlords, horrible for renters.
With all these positive signs, the biggest hindrance to our local market remains a frustrating lack of quality inventory.
Compared with last year, inventory is down by 25 percent to 50 percent due to heavy buyer demand, a sharp drop-off in foreclosure sales, and some remaining reluctance on the part of homeowners to sell.
Yet despite the massive inventory shortage, sales figures are unbelievably strong, with double-digit sales increases in most of the core markets with top schools and easy commuter access.
Strong demand on the limited supply has created stiff competition, especially for quality homes. Multiple offers are common. As many as 10 to 20 offers per property is not unusual in prime locations and that’s driving prices up.
At the same time, the upper-end markets have continued to strengthen, and the drop-off in distressed properties means that sales at the lower end have diminished substantially.
Not surprisingly, Palo Alto and Menlo Park saw the most significant median price jumps at 28.78 percent and 25.72 percent respectively, compared to last year.
The shocker though was the sole sub-market with a drop in median price: Woodside, where the median price dropped 23.38 percent. Demand in Woodside has waned considerably, especially on the upper end $2 million-plus market.
The most significant median price gains in the condo and townhome markets came on the lower end – up 41.53 percent in Central San Jose, 37.45 percent in the Cambrian area, 32 percent in Berryessa, and 30.08 percent in Evergreen.
The dominating factor in these markets is the huge drop in distressed sales leading to a drastic drop-off in low-end sales. As an example, in the third quarter of 2011, 28 condos and townhomes in Central San Jose sold at $200,000 or less, with a low sale of $79,850. In the third quarter this year, there were only six such sales, with a low of $140,000.
The Silicon Valley market is amazingly strong, with all indicators pointing to a continued recovery. Of course, there are potential clouds on the horizon – the European debt crisis and our own looming fiscal cliff.
It will be tough for Silicon Valley to sustain a recovery if we don’t get more homes to sell soon. As motivated as many buyers are, they simply can’t buy what isn’t for sale.
More data is available from Stefan Walker’s “Silicon Valley’s Third Quarter State of the Housing Market” report.