DOI increased significantly earlier this year, indicating a worsening market. DOI was 39 on January 5, 2001. DOI peaked at 160 on April 21^st. The peak was relatively steep and short lived. DOI improved slowly until July 3^rd when it reached 113. DOI then increased and appeared to be leveling out at 125. However because of WTC, DOI increased to 154 on October 16^th. DOI has been dropping ever since (excluding the normal holiday spike) reaching 65 on January 5, 2002. Last year DOI was 52. DOI increases the higher the price range. DOI was 48 for homes under $500K; 64 for homes in the $500K to $1M range and 121 for homes between $1M and $2.5M. Home sales between $2.5M and $5.0M are slow with 92 on the market and only 4 sales which yields a DOI of 805 or just over 2 years. Home sales over $5 Million are still dead with 23 homes on the market and zero sales, yields a DOI of infinite. So the market improvement has not yet hit the top-end properties. It is also noteworthy that if South County, Los Gatos and Saratoga are removed DOI drops from 65 to only 54.

SCC inventory grew rapidly from January 5, 2001 at 826 homes to a peak of 4,433 on May 26^th. Inventory had decreased to 3,822 on September 2nd. Inventory remained flat through 10/6, but has been dropping ever since. On January 5, 2002 inventory dropped to only 1927. This drop is more significant than the normal seasonal drop.

At 29.9 sales per day clearly the lack of buyers following WTC has been corrected. Compares 29.9 sales/day with only 18.7 sales per day for 2000 and 24.5 for 1999. This means SCC is currently having more sales than it did in either December 1999 or 2000. Sales were about 50% of the 10 year "norm" immediately after WTC. Around October 3^rd sales improved to about 75% of "norm". Since October 27^th there has been another marked improvement in the number of sales. SCC is now selling significantly ABOVE the "norm." For the most recent week 141 homes accepted offers compared with a "norm" of about 98. Historically, there is a strong correlation between above normal sales and increasing prices. If this trend continues expect prices to increase.

Days on the market (DOM) for available listings (status 1) continues to increase at 82/110 (median/average) which is longer than the DOM for sales at 68/87 and longer than the closings at 62/79. The resumption in the climb of DOM for sales can be explained by some undesirable properties with long market exposure selling as inventory tightens.

Average DOM (now 110) is greater than the DOI (now 65). This indicates that the general perception of the market is now worse than the reality of the market. This switch happened in November. The market should improve as people learn what the market has been doing.

The median LIST price took a small slip in December to $514,950. Median List price remains $25,000 below last year’s level.

The general trend of an eight day increase in DOM for sales each month ended. DOM has been basically flat for 3 months. The key will be to observe the DOM for available properties. This is likely to decrease as more new listings come onto the market causing the average to decrease.

With 962 sales during December 2001 this nearly matches the sales level experienced this past summer. December sales significantly surpass the 620 sales in December 2000 and the 784 sales in 1999. In fact, this is the best December since records were published starting in 1984. The previous best December was 1998 with only 852 sales.

Percent of transactions fallen through ( %TFT) increased significantly in 2001 compared with 1999 and 2000. Expect the TFT rate to start to fall. However this trend will be hard to notice because of the time it takes for escrows to fail.

The median Sold price in December was $499,000, which is basically unchanged from November. This was somewhat surprising as I was expecting a five thousand dollar drop but got a five hundred dollar increase. I am expecting there to be a small increase in January. It appears the worst is be behind SCC and it was bad, October’s median was off 17% below January’s median of $577,500. This compares with only an 8.9% drop from August 1989 to October 1991. In other words, median price has dropped more (17%) in 9 months during 2001 than the median dropped (8.9%) in 14 months during the 1990 slowdown. December’s median Sold price of $499,000 remains about $40,000 lower than the median of $540,000 in December 2000. Annual comparisons are more significant as they eliminate the seasonal effects. Based on this statistical analysis and market place activity, property values appear to be off more than 25% from January’s peak. High-end properties in general lost more (50% in some cases) than the low-end properties, which maintained more of their value. High-end properties saw a higher percentage of appreciation so it appears that values are returning to their normal distribution prior to this last wave of rapid appreciation.

The trend of less homes selling over their asking price and more homes selling below their asking price continues. It appears that many sellers still have not adjusted to the new lower prices even as these prices began to increase. Last year sellers on average got 101.7% of the asking price. This year the average ratio is only 96.4% of the asking price. This does represent the first increase in the SP/LP ratio. Another positive indication. About 1/9 of the properties are still selling over the asking price.

The DOM for closings in December is 62/79, for sales is 68/87 and for available listings is 82/110. This shows the market times are still increasing. One explanation for the longer time on the market for the available properties is that some properties are overpriced for the current market conditions and Buyers are bypassing them in favor of newer listings and now with shrinking inventory some less desirable properties with long market exposure times are starting to sell. Whenever DOM (110) is greater than DOI (65) there is a tendency for shorter marketing times in the future. Another indication the market will improve.

With 888 closings in December volume improved significantly from November. The higher rate of sales seen since mid-October is starting to increase the number of closings. This shows the impact of the fewer sales after WTC worked through the system. Expect January’s closings to be higher than normal. Buyers were pulling back prior to WTC as sales were about 90% of normal. Buyers clearly pulled back more subsequent to WTC and dropped sales to about 50% of normal. However as mentioned above buyers continue to return to the market and since the middle of October sales have been ABOVE normal which will create more January closings.

Updated# shows an updated number of closings that are NOT included in the data. This is usually caused by the listing agent failing to report the close by midnight of the fourth day of the next month.

Condo/townhouse market - accounts for approximately one-quarter (1/4) of the total transactions and a significantly smaller percentage based on dollar volume due to the condo’s relatively lower prices. The condo market tends to follow the single-family market.

In a nutshell, condos continue to lag behind the SFH market. Some improvement is now noticeable, such as increased sales/day despite the Holidays, decrease in DOI and a flat SP/LP ratio. The condo slowdown was initially delayed compared with houses. Examining key data in the current market condition category, like DOI and sales per day, you can see condos rapidly caught up and passed the slowness being experienced in the single-family home market. Condos also lagged behind the improvement in SFH market and condos are also improving. The median Sold price for condos is still below the previous year’s level. But do notice that the median List price for sales in December is actually higher than one year ago.