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Bay Area Real Estate Market Newsletter ("BAREMN") as of November 5, 2005

Executive Summary

The SCC real estate market saw some significant appreciation early in 2005 has seen prices level off and actually drop slightly. The median price that was around $635,000 for much of 2004 had increased to $664,000 in January 2005. By March 2005 it was $733,000. Then from April through August the price fluctuated between $750,000 and $760,000. September experienced a dip to $733,000, which coincidently was the same as March's level. Now for October price has rebounded a bit to $741,000.

Volume is also reduced from last year record highs but there are still more transactions than normal. The volume has been decreasing compared to normal since mid-July and is now only 7% above the 10-year average for initiated sales. Basically the real estate market is slowing more than 'normal for the Santa Clara County since mid-July.

In addition to decreasing volume inventory available for sale has continued to increase from mid-July through mid-October. Inventory is normally decreasing during that time. Even now that inventory has started to decrease, it is doing so at less than the normal rate.

The decrease in demand coupled with the increase in supply has moved SCC into what we consider a balanced market.

Inventory - Inventory is now greater than any good year and lower than any bad years since we started collecting data in 1998. The complaints of no inventory have ceased.

Median Days On the Market – This data is currently fairly useless because some listings are getting reset to zero even though they have not been off the market for 30-days.

Median List Price – Jumped $737,000 is essentially tied with the record highs of $739,000 to $739,900 experienced in May, June and July. This is an indication that median Sold prices are likely to climb again in November.

Number of initiated sales - only 2001 and 2002 had fewer offers accepted in the month of October. This is a pretty amazing considering May-July was the second highest sales volume.

Sold Price - $741,000 This wipes out most of September's lose. Since March 2005 the price has fluctuated between $733,000 and $760,000. Sold price tends to lag behind market changes and reflects market conditions 25 to 95 days ago.

Average Sold Price to List Price ratio – 101% Has been dropping since May's peak of 104.1%. This would indicate buyers were being less aggressive in their over bidding. This is repeating the 2004 pattern. This is an indication that the market had been slowing. We consider 98.5% normal. Remember, this reflects market conditions 25 to 95 days ago because of the length of escrow and how this data is collected. This is one of the few times where a mean (average) is more useful than the median. The median would almost always be100%. This is still a far cry from the 110% achieved in April 2000.

Percent of completed sales with a Sold Price greater than the List Price – 59.2%. This too dropped from it's all time peak of 75.2% in April. But indicates that 3 out of every 5 properties receives more than the seller is asking. This usually happens because of multiple offers. The April peak actually exceeded the 74.8% achieved in April 2000. This would indicate that buyers are more comfortable paying above the asking price but are more conservative in the amount over asking price compared to April 2000.

Number of Completed Sales – 1190  Is a decrease and only 2001 and 2001 saw few closings since we started gathering data in 1998. 

The multi-year improvement in price indicates that real estate remains a good long-term investment. Real estate market prices that have been flat for the last several years (April 2000 through February 2004) clearly reached a new level in 2004 and another new level in 2005.

The media typically uses data from public records that often combine condos/townhouses with single-family homes. Our data is based on MLS data, which allows separation of this data. We believe the MLS data is more reflective of actual real estate market conditions in part because related party transactions are excluded. Because the media uses public records a lot of the most expensive transactions are not counted as the transfer tax is recorded on the back of the grant deed. The media frequently combines data for the 9-Counties that touch the Bay. Santa Clara / San Mateo border often leads local trends. We believe it is important to look at each County separately to more accurately determine real estate market conditions because real estate remains a local investment.

San Mateo County's median Sold price also increased slightly to $870,000. This is down from $922,000 in April. There is no question that the significant appreciation experienced early in 2005 has flattened and prices are fluctuating.

Santa Cruz County has also leveled off at $769,000 some $14,000 below their peak price set in August.

Monterey County's appears to be following this common pattern. After peaking at $698,000 in July MTY has dipped down to $675,000 for October. This represents a 50% increase from October 2003 when the median Sold price was only $450,000.

Although the data contained here is the most complete, factual and up-to-date monthly Silicon Valley Real Estate market conditions data widely available, Creekside Realty does distribute a weekly version to our clients. The weekly version contains additional data not included in this monthly report. The purpose of the weekly version is to let our clients know what the real estate market is doing now, not 90 days ago. The weekly version assists our clients in making more informed real estate decisions. Previous weekly updates may be reviewed here.

The comments expressed here are based on the overall market conditions for single-family homes as shown in the data displayed in the attached links. These general real estate market conditions will not apply to all price and geographic segments of a given market. This monthly analysis does not reflect the additional data in our weekly version that is available exclusively to Creekside Realty clients. If you are considering a sale or purchase you should get real estate market condition data for your specific situation. Creekside Realty can provide that data to those who are interested in becoming clients.

Data for 4-counties (San Mateo County, Santa Clara County, Santa Cruz County and Monterey County) is available via web links. By reviewing all these Counties you will get a more global understanding. The easiest way to accomplish this is to use the top left link "Graphs-house" and step through the 13 graphs. 

Readers are encouraged to read the introduction section until they are familiar with Bay Area Real Estate Market Newsletter. The introduction explains many of the unique features, lists frequently used abbreviations, and provides detailed explanations of the data that is used in the Bay Area Real Estate Market Newsletter. Your thoughts and/or comments about the real estate market conditions and/or Bay Area Real Estate Market Newsletter are always appreciated. Creekside Realty would like to assist you with your real estate needs; just email us.

Background

During the past 6-years of collecting and analyzing real estate data for Silicon Valley daily, weekly and monthly; it has become clear that adjusting a real estate purchase and/or sale by even a few months has become important in order to improve the investment aspect of your real estate holdings. It is equally important to know when to be conservative and when to be aggressive with your real estate pricing strategy.

Creekside Realty believes the old saying 'just buy and hold real estate for the long-term' can be improved significantly by adjusting the timing of your purchase and/or sale by just a couple of months. This is because the local real estate market has become volatile. There have been 4 peaks of about $570K and 3 valleys of about $500K since April 2000. Santa Clara County prices increased 17.2% in just 4 months early in 2002. Longer-term, prices increased 108% in 21 months and fell 43% in a different 21 months.

Since the MLS transition in July 2003 there have been numerous challenges. Unfortunately, we continue to question the accuracy of the MLS database, which is our source for our analysis. The most significant remaining issues are:

     1) DOM (days on the market): This use to be the length of time a property was published on the MLS. Currently, this data is based on the list date entered by the listing agent. This means that DOM can be reset to zero at any time by the listing agent by simply re-listing the same property and may have no relation to when the property went onto the MLS. As the market slows down more agents will re-list their properties. Therefore DOM will be low and not accurately reflect the degree of market slowing.

     2) Number of initiated Sales: This is still being significantly overstated. Previously, the sales date was the date the sales was first reported to the MLS. Currently, there are several events that cause this sales date to be over-written by a current date. If this happens to be in a subsequent month then the initiated sale will count in both the original AND the subsequent month. 

     3) Number of Closings: This is also being overstated, but to a much smaller degree. Sometimes the MLS fails to delete the original listing when an agent re-lists a property. The listing agent reports the sale and closing on both listings causing a double count. This also cause an over stating of the inventory when the listing prior to the offer being accepted. We have also found a listing that closed in December 2003 but was being reported by the MLS as also closing in May 2004. 

Fortunately, we believe that these errors are randomly distributed with respect to the price and therefore the median prices reported should be pretty accurate.