Demand for homes in Silicon Valley’s low-inventory housing market, along with easier credit is generating extreme dot-com-boom-like bidding wars.
Santa Clara County (Silicon Valley), home to 1.8 million people, yielded only 635 single-family homes on the local multiple listing service (MLS), MLS Listings, Inc. the second week in February.
Last year, there were 1,494 homes available, which was considered frustratingly low. The “normal” inventory ranges from 2,500 to 3,500 homes for sale.
A week earlier inventories were as low as they’ve been since February of 2000.
With extreme demand for homes, replenishing the inventory isn’t likely soon.
The competition in the low-inventory market has led to multiple offers becoming commonplace again for entry-level priced homes across most Silicon Valley markets.
Multiple-offers are also hitting mid-range priced homes in core markets, with premium schools and favorable commute locations.
Multiple offer bonanzas
Some examples of extreme multiple offers include:
• On Clipper Street in San Mateo, more than 90 offers on a home listed at $375,000, pushed the price up to $510,000.
• On Pecan Court in Sunnyvale, 62 offers turned a $925,000 list price into a $1.2 million sales prices.
• On Dennison Ave, Cupertino, 19 offers turned a $1.4 lising into a $1.59 million sale.
More and more buyers are fortunate enough to have sufficient cash to buy without the need for financing, even in one of the planet’s priciest housing markets.
Fortunately, for those who do need financing, loans are getting easier to obtain. Underwriting guidelines have eased noticeably. That includes both jumbo loans and home equity lines of credit.
Don’t expect the current market to become as overheated as the dot-com market of 2000. The local economy is strong, unemployment is on the wane, and interest rates are down, but personal liquidity and overall confidence have yet to reach the levels of that exuberant era.
Home values, prices
Obviously, competition at such levels results in increasing property values. Entry-level and mid-range properties have surpassed pre-downturn values in core markets such as Palo Alto, Los Altos, Mountain View, Sunnyvale, Cupertino and Saratoga.
Non-core markets (such as Santa Clara, Campbell, and most of San Jose) are performing well too, but values in these areas for the most part are still below the peaks seen prior to the downturn. Still, throughout the entire Bay Area, the market is hot.
DataQuick pegged the December median price for the entire San Francisco Bay Area at $442,750, a stunning 32 percent above December of 2011 and the single largest jump in 25 years of DataQuick record keeping.
Silicon Valley, of course, is no exception. Year-over-year comparisons for the fourth quarter reveal substantial increases in median prices in nearly ever major and sub market.
The largest home price increases include 30 percent in Palo Alto; 28.41 percent in Sunnyvale; 23.54 percent in Woodside; 22.4 percent in Mountain View; 21.42 percent in Los Gatos/Monte Sereno and 19.84 percent in San Jose’s Alum Rock area.
The extreme jumps in median prices is partially due to increasing values, but also because of the changing mix of homes sold.
A year ago, distressed property sales (short sales and bank-owned REOs) were roughly half of Silicon Valley’s overall market, and a majority of sales in lower-end sub-markets such as North and East San Jose.
There are currently only 56 distressed properties available in all of Santa Clara County, 28 each of short sales and REOs. That has drastically reduced the availability of low-priced homes for sale.
At the same time, upper-end home sales are booming. Sales of $5 million-and-above homes set an all-time record in 2012, and figures for $1 million-and-above sales were the best posted since 2007.
‘Pocket listings’ surge
Median prices actually dropped in Menlo Park, Atherton, and Woodside, three of Silicon Valley’s most affluent and strongest sub-markets.
Those areas have seen a surge in private listings, also known as “pocket listings,” sales that don’t show up on the MLS and, as such, aren’t included in the official median price.
The phenomenon has spread across all of Silicon Valley’s luxury markets, but is especially common in ultra-luxury enclaves.
With numerous high-end pocket listings not listed on the MLS (such as a recent $117.5 million sale in Woodside), the median prices in these high end areas are artificially low.