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 Again, we have a month where I could almost just plug in all the key points from the last few months. Inventory is higher than in the same time last year. It's not at the highest it has been since 1998 - but it ain't good. Sales are at about the same level and fewer homes were added to the inventory in Feb. than at this time last year. That is a bit of good news, but inventories remain high regardless.
Read more to get all the details of our real estate market in Santa Clara County for February, 2007.
Even in the more short term view, we are seeing a steady increase in
inventory and stagnant sales. Given the broader events going on with
real estate across the country - particularly when you realize that
despite all the market forces that should be driving DOWN home prices, we see yet another month in which average home prices INCREASED when compared to the same time last year.
Supply and Demand
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The trends are nothing new. Februay did not add anything to what we have allready seen in the real estate market in Santa Clara County. If anything, it has been more of a continuation of the overall theme we have seen in past month. No dramatic change, but a continuing trend of higher inventory, stagnant sales and more or less stagnant numbers regarding homes listed during the month.
In fact, if we are looking for anything that might be an indicator of where things are going, the fact that not more homes have been listed might just be the clue we have been searching for.
Why is that interesting? Well, since we saw fewer homes listed this month, but still saw inventory increase, that clearly indicates homes are staying on the market longer. We are not selling homes at anything like a pace needed to keep the number of homes on the market stable.
Since we have not yet hit the "Hot" season (but will be soon), it would be a fair bet to predict that this summer is likely to be the hottest for buyers that we have seen in a REALLY long time. As the number of homes on the market rises, and I think it is a really good bet that its going to really jump in May and June, the folks that must sell may finally start lowering their price, or taking bigger discounts on their asking price.
For investors, this market seems to be getting more interesting as well. I am getting far more inquiries regarding multi-unit properties (IE: apartment buildings) since the way value is determined in those cases is what the property makes. With rents at an all time low, those properties are going for less than in the past. However, in this market, most saavy investment owners are realizing it is not the time to buy. Those wanting to sell are probably in a highly motivated place for one reason or another.
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No matter how you slice it, the trends we have seen in the real estate market in Santa Clara County in February indicate that trends we have been seeing are continuing and that some of the more annoying trends are not only increasing, but likely to increase in the coming months.
I have no doubt that the inventory number is going to continue to rise, the time of year we are heading into makes that a very good bet. Unless we see a flood of buyers or a big drop in asking price (to draw more buyers in), I don't anticipate a gangbusters summer season for real estate in Santa Clara County.
If you then factor in the fact that loan practices are likely to get tightened in the wake of the subprime problem, that really just makes it MORE likely that we are going to see fewer buyers this season. Yet another element that is going to push up inventories and make the current asking prices unsustainable.
Home Prices
If there is anything in the current situation that sellers can be happy about this month, it is selling price. Despite all that the market has been throwing at us, sellers are still getting more for their homes in Feb of 2007 than they did in Feb of 2006.
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Even at the size presented here, the trend is unmistakable. The average price for a home in Santa Clara County is nearly $1,000,000. The one clue that things ares lowing si that the rate of increase is shrinking.
The increase in average price from Feb 2006 to Feb 2007 was only 3.4%. That is a pretty dramatic slowdown from previous years. Take a look at the increase from previous years:
- 2005-2006 Increase: 5.1%
- 2004-2005 Increase: 24.6%
I would call that putting on the brakes. Wouldn't you? The big question on everyones lips is, where will this stop? For my money, home prices have already taken their huge hit from 2005 to 2006. Since then, the drops have been tame and gradual.
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Again, this upcoming 2007 summer market is going to give us an idea of what is to come. If we see continued gradual changes in these numbers,we are likely to glide instead of fall into the "New Market".
If we see a huge jump in inventory - which is entirely possible - for those wanting to sell, price drops are going to have to be the order of the day. The bottom line is that the lower priced a home, the more attention it gets from buyers. Currently, we see about 4 or 5 homes for every 1 that sells. What is going to happen when that number is more like 10-12 for every 1 that sells? In that case, days on market is going to go through the roof and sellers who have GOT to sell, are just going to have to lower their price.
If know I have said that before, for nearly a year now! However, it remains true. As we mentioned before, the key to solving this is more buyers and with the subprime situation inspiring a crack down on lending policies (a good thing in the long term), we are likely to see even fewer buyers out there.
Days On Market
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So, with what we know from all the numbers we have looked at so far, we would guess that this number is on the rise. We would be correct in doing so.
Again we see that unmistakable trend... big increases over the last three years. From 2006 - 2007, the days on market increased by 54.3%! That is truly huge.
Sellers are having to wait much longer to get their home sold. They are apparently getting pretty much what they are asking, but it is taking a while.
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When we look at the days on market numbers for the past months, we see that we are at the same place in February as we were in January - 71 days on average to sell a home.
But look at that trend. Nearly three times that amount of time to sell a home this month than in the summer of 2006.
With the influence of an even more pronounced buyer shortage this summer, we may not even get the seasonal bump we normally count on each summer.
So the stage is set for what is typically the "Best" time to try and sell a home. Quite a few forces seemed aligned to prevent this season from being one that folks will remember fondly. However, I also don't see this becoming some incredible bursting of the market like so many extremists out there in the real estate blogosphere seem to fear.
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