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2010 REVIEW & 2011 MARKET FORECAST
2011 Local Real Estate Market Forecast
All market factors point to a sharp uptick occurring in local prices during the first half of 2011. Last year, the number of sales, median sales prices, and percentage of list price received were up in almost all areas. In addition, it took less time for a home to sell in most areas. All of these factors are good leading indicators that buyer competition for homes will continue to be strong (barring a major economic shock of some kind) and sales prices will continue to rise.
SINGLE FAMILY HOMES
South and Mid-Peninsula Market Snapshot
? 2009 vs. 2010 ?
An interesting side note to the increase in median sales prices during 2010 (see below) – we observed that the quality and location of a home purchased in a given area was usually not nearly as good (i.e. not as valuable) as one that could have been bought for the same price in ’09. Actual home price appreciation was likely several percentage points higher during 2010 than the increase in median sales price reflects. We believe this will also be true in 2011.
SINGLE FAMILY HOMES
South and Mid-Peninsula Market Snapshot
? 2009 vs. 2010 ?
All Real Estate is Local
Fortunately, our local real estate markets are relatively strong compared to the rest of the country. One must be cautious, therefore, when reading media commentary on “the real estate market”. A recent Investopedia article 10 Reasons Real Estate Could Rebound in 2011 wisely points out, “Following the national real estate news can be valuable, but keeping up on local market conditions can be even more important.”
If you would like an in-depth discussion of trends in your particular town or neighborhood, we would be glad to provide it.
Simply call Jeff at 650/823-8057 or Steve at 650/450-0160, or email: [email protected]
All market factors point to a sharp uptick occurring in local prices during the first half of 2011. Last year, the number of sales, median sales prices, and percentage of list price received were up in almost all areas. In addition, it took less time for a home to sell in most areas. All of these factors are good leading indicators that buyer competition for homes will continue to be strong (barring a major economic shock of some kind) and sales prices will continue to rise.
An interesting side note to the increase in median sales prices during 2010 (see below) is that the quality and location of a home purchased in a given area was usually not nearly as good (i.e. not as valuable) as one that could have been bought for the same price in ’09. Actual home price appreciation was likely several percentage points higher during 2010 than the increase in median sales price reflects. We believe this will also be true in 2011.
November Market Snapshot
Home sales data for Palo Alto, Los Altos, Los Altos Hills and Menlo Park have recently become available from MLSlistings.com. Here’s a look at data for November from the last 10 years and our commentary about what it means to you. If you would like information about another city or neighborhood, we’d be happy to provide it to you.
CHART OVERVIEW:
The charts below show the median sales prices in November, ’01 through ’10, plus the number of home sales each November, and the number of homes on the market on Nov 30th for Palo Alto, Los Altos, Menlo Park and Los Altos Hills. At the bottom of the charts, you will see the “months of inventory” (number of homes for sale divided by the number of sales), plus the average percentage of list price received by sellers during November of each year.
Here are generally accepted interpretations of the home sales trends in our area.
- 0 to 2 months of inventory is a “Sellers Market”
- 2 to 4 months of inventory is a “Neutral Market”
- 4+ months of inventory is a “Buyers’ Market”
- Average percentage of list price received exceeds 100% generally indicates rising home values
CURRENT RECOMMENDATIONS:
| SELLERS |
MARKET IMPROVING If you are thinking of selling your home, it is once again a good time to do so as buyers are eagerly buying when the home is accurately priced to market value and there are not too many negative issues with the property. |
| BUYERS | FAVORABLE INTEREST RATES; DECLINING INVENTORY Inventory has been steadily declining and prices are returning to nearly pre-recession levels. This is a great time to take advantage of extremely favorable interest rates. Look for homes with the fewest irremediable issues. |
PALO ALTO
Commentary - The Palo Alto market has definitely entered into the “Sellers’ Market” range once again with only 1.4 months of inventory at the end of November. The number of sales were back to the ‘03/’04 level, nearly 25% above the previous nine year average.
The decline in median sales price for the month of November had to do with what was for sale. Values were not falling. In fact, the average percentage of list price received by sellers in November was in excess of 100%. There is a distinct shortage of homes for sale in the $1.5m to $2.5m price range.
LOS ALTOS
Commentary – The supply/demand ratio is barely in the “Neutral” level at 2.2 months of inventory and heading toward a “Sellers’ Market” similar to Palo Alto. Los Altos’ excellent schools and larger average lot size will continue to attract buyers as the market heats up. This is a strong buying opportunity we believe.
MENLO PARK
Commentary – Like Los Altos, Menlo Park sellers will benefit from the shortage of homes for sale in Palo Alto. The average percentage of list price received was just below 100% and rising in November. Inventory of homes for sale has been steadily declining, also. Homes purchased now in the areas of Menlo Park with better schools will likely be very good investments going forward.
LOS ALTOS HILLS
Commentary – Properties in Los Altos Hills, except for entry level – $2m or less – are still declining in value with 7.4 months of unsold inventory on the market. We expect that we will likely see some REO’s (bank owned properties: Real Estate Owned) start to come to market that banks have been holding onto in hopes that values would rise. When this starts to happen values should quickly hit bottom then begin to rebound. How low the bottom will be is the question. It may be close now – or maybe not. Compared to Atherton, however, Los Altos Hills appears to be a bargain for those willing and able to hold long term.
Slowest Month in Home Sales . . . Not True for Los Altos
On Friday, Real Estate headlines in the area trumpeted the decrease year over year in closed sales for the month of October. The San Jose Mercury News feature article quotes MDA DataQuick President John Walsh as saying the decrease indicates a “hangover from expired home buyer tax credits, which spurred many to buy in the first half of the year.” That’s not exactly accurate in our view. You’ve got to look back at what was going on in the market in 2009. Sales were very slow in the first half of 2009 and continued through the summer. But by early fall, those who had delayed selling or buying, were coming back into the market. So, sales in October 2009 were up. As compared, Santa Clara home sales in October 2010 looked “off” but were right in line with county sales for October 2008.
What’s even more important is that sales in Los Altos were 40% higher in October 2010 than October 2009 (see chart below). As we’ve said many times, quoting county-wide data is not accurate to determine the strength or weakness of the real estate market in your community. Using a wide brush stroke of statistics covering a large area actually causes confusion and misunderstanding. It should never be forgotten that all real estate (and understanding) is local! We are committed to bringing you the real story on trends in the area. Please feel free to contact me if you would like to discuss the current market conditions.
Robust Fall Market in Los Altos, Palo Alto and Surrounding Towns
The election results are in and so are the Q3 2010 Single Family Home Sales stats. Take a look at the charts below for the communities of the South and Mid-San Francisco Peninsula. All indicators are up: closed sales, inventory, new listings and sales price. Days-on-market is down which means that the best properties are moving fast.
More analysis and commentary is included below.
SINGLE FAMILY HOMES
South and Mid-Peninsula Market Snapshot
? Q3-2010 vs. Q3-2010 ?
THIRD QUARTER SUMMARY
The San Francisco Peninsula & Silicon Valley are experiencing a robust fall home sale market! Although it is relatively flat as compared to the third quart of last year, one must recall that most of the sales in ‘09 occurred in the second half of the year.
In each market area the lower half of the price range is experiencing tremendous demand, multiple offers, and over-bidding (provided that home is priced accurately). The upper half of the price range is finally beginning to see some movement as well. Record low interest rates and increasing (local) consumer confidence should keep this trend progressing into 2011.
AVERAGE AND MEDIAN PRICE CAN BE MISLEADING
We find the best indicator of a rising or falling market to be the Percentage of List Price Received by the seller. Too often average sales prices reflect the price level of homes that happen to be selling at the time – not whether or not they are rising or falling in value. When the average percentage of list price received by sellers approaches or exceeds 100%, you can be sure that there is upward pressure on prices. Having been severely burned by an overheated real estate market in the last few years, buyers – while very motivated – are extremely picky and will demand discounts on properties with notable problems or deficiencies.
On average, both the median sales prices and percentage of list price received by sellers was up in Q3 – 2010 over Q3 – 2009. Fortunately, San Francisco & Silicon Valley are doing relatively well, especially compared to the rest of the country, as recently reported by The Registry, the bay area real estate journal.
For More Information
All of the towns above have diverse neighborhoods and prices. When we only look at averages they can tell us something, but not too much. If you would like an in-depth discussion of trends in your particular town or neighborhood, don’t hessitate to contact us. We live and breathe this information each day and look forward to sharing our insights and knowledge with you. Simply call Jeff at 650/823-8057 or Steve at: 650/450-0160 or email us: [email protected]
September 2010 Market Trends
The charts on the next page show the median sales prices for the third quarter of each year, ’01 through ’10.
At the bottom of the charts, you will see the average number of days it took to sell that quarter, plus the average percentage of list price received by sellers during Q3 of each year. Currently we are experiencing a “balanced” market – 2 to 4 months of supply of homes for sale in the Palo Alto / Los Altos area – favoring neither the buyer nor the seller. However, the most attractive – and attractively priced – homes are receiving multiple offers.
CURRENT RECOMMENDATIONS:
| SELLERS | If you are thinking of selling your home it is once again a good time to do so as buyers are buying when the home is accurately priced to market value and there are not too many negative issues regarding the property. |
| BUYERS |
There is still above average inventory of homes for sale and this is a great time to take advantage of extremely favorable interest rates. Look for homes with the fewest “irremediable” issues. |
Data was gathered from MLSlistings.com
