It’s the beginning of July and we’re now half-way through 2019. And, if you’ve been considering to make a move in real estate, either to purchase a home or sell a home, I wanted to make sure I was able to provide some clarity on the current market conditions in and around Silicon Valley.
First of all, how have things been going this year?
2019 was speculated to be a great market for first-time homebuyers and move-up buyers due to rising inventory levels, diminishing investor demand for housing, and an easing of interest rates. And, with inventory beginning the year at very healthy levels (about twice as many homes available for sale when compared to last year), and interest rates remaining relatively low (even falling again recently), 2019 has held true to its forecast.
[Side-bar: my team and I have already helped numerous families with the simultaneous sale and purchase of real estate…with many purchasing up into a larger home before selling their current home].
But, is this trend likely to hold up through the rest of the year?
Well, let’s talk about supply & demand trends…
So far we’ve seen the rebound in inventory from 2018 continue to hold up. Current “active” inventory across Santa Clara County is sitting at 2,222 listings, down slightly 9% from our peak in May, but up 8% from last year in July. And within San Jose, we’re currently sitting at 1,129 active listings, down slightly again from the peak earlier in May, and up 6% from the same time last year.
What’s interesting to me about this trend, is that our inventory levels are slightly down from the end of the spring market. And, with current interest rates for a 30-year fixed-rate mortgage sitting at 3.75%, down 0.75% from the same time last year, my assumption is that this trend is most likely due to the continued easing of interest rates allowing for an increased number of buyers to come into the market and absorb our housing supply. When interest rates fall, it can be less expensive to own than to rent across many entry-level price points.
And, if we look at “pending sales” figures you’ll notice that our demand has held steady at around 1,300 properties obtaining a contract each month for that last 4-months at the county level, and an average of 700 properties per month going into contract for the City of San Jose.
So, as long as rates continue to remain low, and new inventory continues to be absorbed by steady demand, I expect that we should have a well-balanced market through the end of the year, which will play well for move-up buyers and first-time homebuyers.
So how are these conditions affecting sales prices?
Have we seen a huge crash in home prices across Silicon Valley as some media outlets would suggest?
I hate to disappoint you but in fact, our median sales price for June is up 16% from the beginning of the year at $1,190,000 for Santa Clara County.
Now, considering the spike in sales prices witnessed at the beginning of 2018, when prices shot up as much as 24% in some areas, we’re still down about 8% from these peak prices, but when you consider the longer-term trends our prices have consistently appreciated annually in the 9-10% range.
I may be going out on a limb, but I don’t think our prices are “crashing!,” especially when you consider that the current median Sales Price-to-List Price ratio is sitting around 102%, up 2% from January and holding steady. And provided median days to sell have also declined from January and are sitting at about 2-weeks or less. To me, these statistics still represent a very vibrant housing market across the Valley.
So, how will these conditions affect you if you’re thinking about making a move in real estate this year?
As you know, we’re on the front lines interacting with homebuyers and sellers on a daily basis. What we can share with you is that we’re beginning to see a shift in the way that buyers are approaching our market.
A large majority of the buyers we’ve recently met are getting into the market for the first time this year and haven’t been exposed to the past years of competitive multiple offers. So, as inventory levels have risen recently, these inexperienced buyers are becoming increasingly indecisive.
This is creating issues for sellers and opportunities for savvy buyers. Indecisive buyers mean that sellers need to be more strategic when selling their homes; they should take the time to properly prepare their home for sale, and make sure they price appropriately provided the increased competition they in their neighborhoods.
And for buyers, the influx of inexperienced buyers is making it easier for move-up buyers, or those with experience, to negotiate our market and recognize great values with little competition. And, we’re seeing a lot of great properties in the higher-end of the market selling at very reasonable prices quickly to homebuyers that have gained experience from the competitive markets of years past.