We are more than halfway through the year and it is time to examine this housing market.
Whether you're buying, selling, tracking your property value or just trying to stay updated on local market trends, this will hopefully be of value to you.
Always a relevant stat no matter who you are, is prices.
Let's start broad. Santa Clara County as a whole saw prices rise $200k, or 14%, in the first half of the year. The highest sale was a 5600sf house on a 20,000sf lot in Old Palo Alto for $17,950,000.
The lowest sale was a teardown cabin in the Los Gatos mountains for $250k. That's range!
But for the properties that fell smack dab in the middle and sold for the $1,625,000 median price, you have 24 properties ranging from Single Family Homes to Townhouses to Condos in San Jose, Campbell, Cupertino, Sunnyvale, Santa Clara, Los Gatos and Gilroy.
The biggest bang-for-your-buck is obviously in Gilroy, where you get a 2200sf house on 2.5 acres. That same price gets you a 2 bedroom, 2.5 bath, 1400sf condo in Cupertino parked against Highway 85. Again, that's range!
The biggest difference that affects price in our area? Schools and proximity to Silicon Valley jobs.
The first half of this year has really blown the first half of 2023 out of the water. The first half of last year was still sluggish, adjusting to the much higher interest rates.
In the first half of 2023, prices had dropped 6.6% compared to 2022. This year, prices are 11.7% above the first half of 2023, and 4.3% above the peak in 2022.
So prices have set a new record, in spite of the interest rates remaining above 7% for most of the year.
But prices so far this year saw their peak in April, which is a bit premature for our seasonal market. Normally we see the highest prices in May or June. But the market got pushed up in early spring with the hope of a drop in interest rates.
That has actually happened within the last month, with lenders baking in the expected rate drop in September/October time frame.
We had some good GDP news, but the recent job report and some underlying economic issues makes the chance of rate cuts in September more likely.
I had most of my info and stats researched, and initially with that GDP news, thought the Fed might hold off longer on dropping the rate, but with the stock market volatility on recession fears, I think a rate cut, leading to lower mortgage rates for the rest of the year, is much more likely now.
From the articles I've read, tech jobs are getting cut and the East Bay was the only area with job growth recently.
Rates have remained relatively high this year, But that hasn't seemed to impact home prices much. It's important to focus on the types of properties, though, because they are very different markets.
Single Family Homes are by far the standout when it comes to appreciation over the last 5 years.
In that time period, SFH have appreciated 54%, Townhouses 37% and Condos 11%. COVID did a number on the condo market specifically.
And while the data for the county overall shows growth in the condo market, I know from how many condos I've been selling this year that they are still not quite back to their 2018 prices. I've seen this especially in San Jose, Campbell and Santa Clara.
You would think inventory would play a roll, which it normally plays quite a heavy roll, but while the number of properties for sale is up over last year, it's similar or lower compared to the last several years.
June of this year compared to last, inventory is up 49%. But prices are up 6%. That’s not something I'd normally expect, because you usually see an inverse relationship between those two.
Standout cities for price appreciation so far this year have been Los Gatos (17% increase over last year) and Blossom Valley in South San Jose (14% increase)
Areas lagging behind have been Sunnyvale, which only saw a 2.6% increase, and parts of East San Jose, around a 5% increase.
Middle-of-the-road areas have been Santa Clara, Central San Jose and Saratoga, where prices are up 10-11%. But 10% in Central San Jose is a $100k increase, while that is a $350k increase in Saratoga.
So what can we expect for the rest of the year? Likely fairly stable prices, but probably increased competition with lower rates toward the end of the year.
I bet prices soften through August, but September and October are going to be competitive with lower rates, for the people that are still in a position to buy from an employment standpoint.
I think that is the most difficult thing about our South Bay market, is that entry-level buyers are often priced out of areas where they may not have been 12-18 months ago.
But with the median sales price of a single family home being $2 million in Santa Clara County, you have to be earning a lot to afford that. And even among these buyers, there is competition, and more to come with lower rates.
And in terms of Days On Market, or how long it takes for a property to accept an offer, homes are selling quicker than last year, but I’m sometimes surprised at the properties sitting on the market longer. It just depends what and where they are.
If it's got the location, schools, updates and correct pricing, it's gone immediately. But start mixing and matching those factors, and you could be sitting on the market for over a month.
Sellers? I don’t think August will be a lot of fun. You have industry changes with the recent National Association of Realtor settlement (video coming soon!), and seasonally, August is a slow month for sales and prices.
Buyers? August might be an easier month from a competition standpoint, but rates may be higher than they will be in the last few months of the year. You just have to decide whether to buy and refinance, or wait but potentially face more competition.
Please reach out if you are in the planning phase and want to talk about your personal situation! I’ve been having a lot more of these conversations recently and I love creating plans based on the specific situation.