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

Executive Summary

The SCC real estate market that has seen some significant appreciation early in 2005 has seen prices level off. Volume is also reduced from last year record highs but there are still more transactions than normal. Basically the real estate market is behaving 'normally' for the Santa Clara County for this time of the year.

Prices had increased ever month since reaching a recent low of $625,000 in August 2004, until the flattening of prices in May. January prices were basically unchanged at $664,000 respectively. February saw a significant jump to $705,000, followed by March at $733,000, April at $750,000. Prices have not moves since April which reflects offers accepted in March.

Inventory - continues to increase even though inventory normally is decreasing at this time of year. Inventory remains about 80% of normal. There is widely spread belief that inventory is very limited. This is because 2003 had unusually high inventory. The record volume experienced during much of 2004 tends to make even normal inventory seem inadequate and caused inventory to decrease more rapidly than normal during 2004. Inventory is growing at the normal rate to slightly faster than normal causing the mild shortage continues. 1999, 2000 and 2004 had less inventory than 2005. 

Median Days On the Market – This data is less useful then in the past because the MLS allows some listings to having their DOM reset to zero. However, the trend of increasing DOM is a strong indication that the market is slowing some. 

Median List Price – Jumped $739,000 in May, after being essentially unchanged for March and April at $715,000. This is an indication that median Sold prices are likely to climb in June. SCC is now seeing a dip i the median List price and this is likely to show in the traditional Fall dip. 

Number of initiated sales - SCC basically tied for the second best year. This is a pretty amazing recovery considering SCC experienced its second worst volume of any January since 1999.

Sold Price - $760,000. The median Sold price has climbed for 8 months starting in September. SCC's median Sold price has set a new all time record high every month since November. So the fact that the median Sold price has essentially been flat since April is a significant change in the appreciation cycle. Sold price tends to lag behind market changes and reflects market conditions 25 to 95 days ago.

Average Sold Price to List Price ratio – 101.6% This is the magnitude of overbidding. Reversed directions and dropped each month starting in May. This would indicate buyers were being less aggressive in their over bidding. This had increased every month since October through April. This is an indication that the market had been slowing and has now gained traction and improving, 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 – 61.6%. This measures the frequency of overbidding. This too dropped since May, although showing a slight rebound this month. This still indicates that 3 out of every 5 properties receives more than the seller was asking. This usually happens because of multiple offers. April saw 75.2% which 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 – 1404  Is a decrease of just 13 completed sales and is tied with 2000. Both 2003 and 2004 beat 2005. 

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. June's median Sold price was a peak with prices falling until August. Then reversing direction and increasing September through February. 2005 has added onto those gains. The price is now $760,000 or $118,000 higher than the recorded of $642,000 set in June 2004. But price have been flat for the last 4-months. 

The media typically uses data from public records that often combine condos/townhouses with single-family homes. The media also excludes many high-end properties where the principals request that the transfer tax be recorded on the back of the grant deed. 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 and properties with the transfer tax on the back of the grant deed are included. Also, most of the media's data combines data for the 9-Counties that touch the Bay. The San Mateo/Santa Clara 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 now sits at $890,000 down from $922,000 in April. There is no question that the appreciation that had flattened, actually declined but once again rebounding.

Santa Cruz County was absolutely on fire with a median Sold price reaching $783,000. Although a new record this is essentially tied with the $780,000 posted in June 2005. 

Monterey County's appears to be following SZC's pattern. MTY's median Sold price was on fire reaching $690,000. Although a dip from the $698,000 last month the trend is still up. This represents nearly a 50% increase in the past two years.

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.