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Silicon Valley home sales bounced back in June, as lockdown restrictions eased, bringing sellers and buyers back to the marketplace. The San Francisco Bay Area saw a moderate 3.6 percent increase in home prices and a 69.2 percent sales increase from May. Santa Clara County made a major comeback in sales volume, price, and new listings.
“The housing market is making a good recovery which will hopefully continue,” said Mary Kay Groth, president of the Silicon Valley Association of REALTORS®. “The pandemic hasn’t stopped buyers.”
Santa Clara County saw June packed with a higher sales volume and strong prices, according to data from MLSListings presented in the Aculist Monthly Market Minute report by Aculist senior product marketing manager Michelle Ronco. Ronco noted the change in sales volume illustrates the market’s recovery. Santa Clara County sales volume in May was barely half (49 percent) of the sales volume in May 2019, then rose steadily in April to 62 percent. By June, sales volume increased to about 98 percent of sales volume in June 2019.
Santa Clara County’s median home price reached $1,382,000 in June, up 1.2 percent from May’s median of $1,365,000, and up 2.4 percent from the June 2019 median of $1,350,000. Although inventory is down 33 percent year-over year, new listings have increased for two straight months, from 732 in April, to 1,045 in May, and 1,066 in June – a clear sign that sellers are returning to the market. The county’s sales-to-list price ratio in June was 101 percent, just one percent lower than a year ago.
Further highlighting the market’s rebound are places that experienced month-over-month increased median home prices. These include cities in the local REALTOR® association’s service area, like Saratoga, Los Gatos, Los Altos, Los Altos Hills, Cupertino, Santa Clara, Palo Alto, Sunnyvale, Mountain View. The cities of Los Altos Hills, Mountain View, Sunnyvale, Los Gatos, Cupertino, Saratoga, Santa Clara, San Jose also saw new listings increase from May to June.
Ronco added average days on market dropped in June – in some cases by nearly half of the previous month. In hot markets, like Cupertino, the average DOM fell from 22 days in May to 12 in June, Monte Sereno, from 75 days to 44; and Sunnyvale, 27 days to 18. This means buyers have less time to decided on a purchase due to heightened competition.
“The virtual tours and virtual open houses have appealed to buyers. Traditional open houses are still not allowed, but in-person showings by appointment and limited to just three persons at one time, including the agent, have helped clinch many deals,” said Groth. “At our association’s REALTOR® district virtual meetings, our members are reporting multiple offers are taking place on properties that are priced competitively.”
It is expensive to live in the heart of Silicon Valley, but buyer demand for homes, including million-dollar homes, continues to be strong. Real estate information service DataQuick lists the following Silicon Valley communities among the highest ranked areas for million-dollar homes sales in California in the second quarter.
- Hillsborough topped the list with 134 sales in 2012 Q2, up from 118 in 2011 Q2, with the most expensive home purchased for $5.28 million.
- Saratoga ranked second with 126 million-dollar homes purchased in 2012 Q2, up from 93 in 2011 Q2, with the most expensive of purchased at $5.35 million.
- Cupertino ranked fifth (after Manhattan Beach and Newport Beach in Southern California) with 105 million-dollar homes sold in 2012 Q2, up from 88 in 2011 Q2, with the most expensive home purchased for $2.45 million.
- Los Altos ranked sixth after Cupertino with 102 million-dollar home sales in 2012 Q2. The most expensive home was purchased for $6 million. Los Altos had 81 million-dollar home sales in 2011 Q2.
- In Los Gatos, the most expensive home purchased cost $4.66 million. There were 67 million-dollar homes purchased in the zip code of 95032, up from 44 in 2011 Q2. In the Los Gatos zip code of 95030, 62 million-dollar homes were purchased last quarter, up from 31 in the second-quarter last year.
Despite the hype over Facebook’s IPO, Menlo Park and Palo Alto made the list, but had fewer million-dollar home sales in second-quarter 2012 than the same time last year, according to DataQuick. Menlo Park had 100 million-dollar homes sold in second-quarter 2012, down from 124 last year, with the most expensive home purchased for $4.8 million. Palo Alto had 62 million-dollar homes sold, down from 69 in 2011 Q2, with the most expensive home purchased for $3.15 million.
Silicon Valley Association of REALTORS® (SILVAR) president Suzanne Yost, who is an associate broker with Alain Pinel Realtors in Los Gatos, is not surprised that many of the communities located within SILVAR’s five districts made the list. “Silicon Valley’s economy is healthy compared with other parts of the state because it is the heart of innovation, with many successful tech companies,” said Yost.
Yost added, “Our members have reported a surge of foreign buyers. They are attracted to the region’s weather, diversity, excellent schools, good mix and proximity to shopping, entertainment, the arts and services. We’re not that far from San Francisco, close to the freeways and airports. Buyers know they can’t go wrong and they are willing to pay the price for these amenities.”
SILVAR has five member districts, allowing members to work closely with their communities. They are the Menlo Park/Atherton District (including Portola Valley, Woodside and East Palo Alto), Palo Alto District, Los Altos/Mountain View District (including Los Altos Hills), Cupertino/Sunnyvale District and the Los Gatos/Saratoga District (including Monte Sereno).
At this month’s Palo Alto District tour meeting, Palo Alto brokers said the market environment has greatly improved from a year ago. While inventory is still low, it has been slowly rising.
Keller Williams managing broker Bob Stelzer indicated demand is coming back strong, and there has been a significant rise in listings since April. His data showed Menlo Park with 52 current active listings compared with 26 in April; Palo Alto 51, compared with 29 in April; and Los Altos 45 compared with 24 in April. High-end property sales increased substantially in the first half of this year in comparison to the same time last year.
Sellers are becoming realistic, according to the brokers. Many sellers caught up in the hype of Facebook’s IPO and thinking they would strike gold by waiting for prices to skyrocket, now realize the phenomenon did not create the “super market” they thought it would. These sellers are now ready to sell.
Broker Tim Foy of Midtown Realty, however, believes inventory is low because people are still looking for stability. Despite the uptick, he expects low inventory for a while. “It won’t change overnight. It’s a market reality,” commented Foy.
According to Alain Pinel Realtors broker Bob Gerlach, it’s not the Facebook IPO phenomenon that is driving the market, but rather, it’s interest from Chinese and other foreign buyers. He said majority of transactions through his office are with Chinese cash buyers. Foreign interest in property in the area has created a “dramatic effect” in the market, said Gerlach.
Gerlach indicated an obstacle to the market rebound is a pocket of sellers who can’t sell because they don’t have better places to go. Buyers these days are more selective. “It is a discretionary market,” he noted.
The brokers said listing agents need to make their sellers aware that despite the high demand, not all houses are “entitled” to top market prices because today’s buyers are more informative. There is more discretion now regarding “housing with a blemish,” added Foy.
“Housing affordability has never been better, but the high unemployment rate, slow job growth and difficulty in obtaining credit, especially for high-cost homes, continue to be stumbling blocks to a complete housing recovery,” according to Jeff Bell, president of the Silicon Valley Association of REALTORS®.
Uneven Recovery, but Sales Clearly “Off Bottom”
The National Association of REALTORS® reports today that sales of existing homes in October declined 2.2 percent to a 4.43 million annual rate from 4.53 million in September. The national median existing-home price for all housing types was $170,500, down 0.9 percent from October 2009.
NAR chief economist Lawrence Yun said the recent sales pattern can be expected to continue, but he believes sales will steadily improve to healthier levels of above 5 million by spring of next year. “The housing market is experiencing an uneven recovery, and a temporary foreclosure stoppage in some states is likely to have held back a number of completed sales. Still, sales activity is clearly off the bottom and is attempting to settle into normal sustainable levels,” he said.
Overly tight credit is making it difficult for some creditworthy borrowers to qualify for a mortgage. “A return to common sense loan underwriting standards would go a long way toward achieving responsible, sustainable homeownership,” said NAR President Ron Phipps.
Home Builder Confidence Up, but Obtaining Credit Is a Problem
Home builders are also complaining that tight credit is getting in their way. Nationwide housing starts declined 11.7 percent to an annual rate of 519,000 units in October. Despite the decline, the National Association of Home Builders reports builder confidence is up slightly, as builders are starting to report some improvement in buyer demand and quality of buyer traffic.
“The great concern is that this positive momentum will be stifled due to builders’ inability to obtain financing for new construction at a time when inventories of completed new homes are very thin,” NAHB Chief Economist David Crowe said in a press release.
In addition to tight credit, worry continues about the high unemployment rate, slow job growth and looming shadow inventory. Distressed homes accounted for 34 percent of sales in October, according to NAR. There’s also the threat of foreclosures mounting as a growing amount of homeowners remain out of work and those who have borrowed against their equity default on their mortgage.
GDP Growth Better Than Anticipated
On the upside, the Commerce Department reports the economy grew at a 2.5 percent annual rate in the third quarter, more than previously calculated, due to increased shipments abroad and business spending for equipment and software.
Santa Clara County October Median Up Slightly
Although October home sales fell, Santa Clara County saw a slight year-over-year gain in its October median home price. According to a California Association of REALTORS® report released today, the October median price for a single-family home in Santa Clara County was $637,750, was up 8 percent from the same time a year ago. October sales of single-family detached homes in the county were down 24 percent from October 2009, when the first-time home buyer credits was available.
C.A.R. reports DataQuick statistics, which are based on county records data rather than MLS information, ranked the Silicon Valley cities of Los Altos, Palo Alto, Cupertino and Los Gatos among the top 10 cities with the highest median home prices in California during October 2010. The October median home price in Los Altos was $1,700,000; Palo Alto, $1,050,000; Cupertino, $1,022,500; and Los Gatos, $1,000,000.
At a broker panel held at the Silicon Valley Association of REALTORS® Palo Alto District tour meeting last Friday, Tim Foy, a broker with Midtown Realty, refuted the popular sellers’ notion that spring is the best time to put their house on the market.
“It’s a myth, and it’s especially not true in this market. We need to bust the myth about waiting till spring. Now is an outstanding time to put your house on the market,” claims Foy.
Foy notes MLSListings data shows since September 1, 69 percent of homes have sold in Palo Alto in 14 days or less. “It says we have a lack of supply, which means it’s a great time to be a seller!” according to Foy.
Foy questions why a seller would wait till spring when that’s when competition from other sellers comes into the market. While people say it’s a phenomenal time for buyers, it is also a phenomenal time for sellers. Foy explains right now, competition among sellers is significantly lower. There are buyers out there, but inventory is low. In fact, the brokers report multiple offers are being made on million dollar properties.
In this market, for sellers, as well as buyers, “there is risk in waiting” because you never know how long the record low interest rates will last, according to panelist Michael Dreyfus, a broker with Dreyfus Properties in Palo Alto.
“It’s an outstanding time to buy, but it’s also an outstanding time to sell. Don’t wait for your competition. Don’t wait for interest rates to rise. Get your property out there now,” Foy tells sellers.
- The panel of local brokers included (left to right) Tim Foy of Midtown Realty, Bob Taylor of Taylor Properties, Robert Stelzer of Keller Williams Realty and Michael Dreyfus of Dreyfus Properties.
The panel discussed other important real estate-related issues too. Bob Taylor of Taylor Properties reminds REALTORS® that not all agents do business the same way. He says Silicon Valley agents need to continue to “be diligent in our business, and not casual as in other places.”
Bob Stelzer, a broker with Keller Williams Realty, focused on the importance of the MLS (multiple listing service) and stresses agents who are members of the MLS have a duty to their client to share their listings in the MLS.
Dreyfus says market expectations need to change. Market conditions are not normal today, but they weren’t “normal” a couple of years ago either. In the current market, homes are not going to experience quick, massive appreciation, and the challenge is “how to sell without saying the market is not going to go up by much.”
Dreyfus says the key is in reshaping market expectations away from appreciation and refocusing on the traditonal goals of home ownership – to buy a home because it is a great home, because Palo Alto is a great place to live, and not because you expect the home to appreciate quickly.
Silicon Valley Association of REALTORS® says ... 