SubscribeThe Silicon Valley Market Report for February 2010
February 8, 2010
So far 2010 is off to a roaring start, with multiple offers again becoming commonplace, and highly qualified buyers lining up in some cases to present strong offers for well-priced, desirable properties.
As a couple of data points, our listing for a three bedroom home at 842 Sycamore Drive in Palo Alto, an entry-level home priced at $949,000, received 14 offers and sold for over $1,100,000. A similar property nearby on Greer received 12 offers the same week and sold for just under $1,100,000 vs. a list price of $979,000.
842 Sycamore Drive, Palo Alto
This market imbalance of large demand chasing limited supply isn’t limited to the entry level, homes in Los Altos and Palo Alto listed between $1.5M and $2M are receiving multiple offers as well, and even our office listing at 75 Coronado in Los Altos priced at $3,995,000 has been getting more interest lately.
As we begin to see more homes coming on the market as we move through the spring, I expect to see the market cool as the supply of homes for sale catches up with demand, and buyers have more choices. In the meantime, the Sellers seem to have the advantage if they have homes that are attractive to mainstream buyers.
That $45,000,000 estate on Stonebrook Drive in Los Altos Hills is a great example, as it is now an $28,000,000 estate. Do I hear $15,000,000?
In summary our current market continues to be driven by the following conditions:
- Low inventory of desirable homes for sale that are well priced
- Buyers motivated & feeling like they will miss out with limited selection
- Fears of rising interest rates are driving motivation to buy now
- Realization by buyers that they can’t buy for 20% below list now. Most sales in $1M – $2M are 10% under to 10% over list.
Opportunities:
- Interest rates are currently at historic lows
- The government is buying down conforming rates under $729,750 through March 2010, which holds down jumbo rates as well
- Consumer confidence is picking up – I’m seeing new cars more often, and new car sales are an indicator of increasing consumer confidence which leads to a strengthening economy, as consumer spending is the largest component of our economy
Threats:
- Government buydowns of conforming loans are scheduled to end in March which will lead to rising interest rates on conforming and jumbo loans
- Forecasted loan resets on commercial property in 2011. You can’t refi empty office buildings and vacancies are up
- Lots of buyers rushed to purchase before the tax credit expired December 1,2009 – Will this leave a hole in demand in early 2010? Not so far . . .
- Unemployment is 10% locally, and there is limited job growth forecasted for the next year.
In the threat department, I’ll refer again to this report from Bloomberg last month, which is especially relevant in our area:
Homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S. rate. This brings the rate of default for these considerable loans up to a skyrocketing level of 12 percent as of September, compared with 6.3 percent on loans less than $250,000 and 7.4 percent on all U.S. mortgages. This is quite a jump from the year prior where the rate for default on the $1 million dollar plus mortgages as only 4.7 percent.
In contrast to these ominous reports and Threats, we are seeing strong upwards trends across our area in our Market Action Index, that catch all indicator based on prices, inventory, and time on the market. We are even seeing the MAI climb toward parity in the lower price ranges in markets like Palo Alto and Mountain View.
On to the numbers:
Atherton:
The Average Price of a Single Family Home in Atherton is $6,124,821 with a range of $1,150,000 to $14,900,000. 25% (versus 33% last month) of the homes in Atherton have had price reductions, and the average number of Days on Market is 270 days versus 272 last month. It remains a Strong Buyer’s Market in Atherton, although the Market Action Index has been trending upward over the last quarter.
Los Altos:
Currently, the Average Price of a Single Family Home in Los Altos is $2,165,536, with a range of $995,000 to $4,995,000. 25% (down from 39% last month) of the homes in Los Altos have had price reductions, and the average number of Days on Market has fallen to 165 days versus 172 last month.
Los Altos Hills:
In Los Altos Hills, the Average Price of a Single Family Home is $4,983,866, with a range of $944,900 to $28,500,000. 30% (down from 33% last month) of the homes in Los Altos Hills have had price reductions, as Sellers are learning that the market has shifted, and the average number of Days on Market has declined to 247 days from 261 days last month.
Menlo Park:
This month, the Average Price of a Single Family Home in Menlo Park is $1,491,797 with a range of $190,000 to $6,495,000 (The $225,225 is in East Menlo Park, the bottom of the Menlo Park market is about $800,000). 27% (up from 24% last month) of the homes in Menlo Park have had price reductions, and the average number of Days on Market has risen to 163 days versus 150 last month.
Palo Alto:
In Palo Alto the Average Price of a Single Family Home is $2,270,343, with a range of $750,000 to $23,950,000. 20% (versus 34% last month) of the homes in Palo Alto have had price reductions, and the average number of Days on Market has fallen to 158 from 179 last month.
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Thanks for reading . . .
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2 Responses to “The Silicon Valley Market Report for February 2010”
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It’s good to hear that the real estate market is doing good. It probably is a sign that the market is recovering from the recent economic downturn.
I also think that this is a very good indication that the economy is moving normally compared to the economic slowdown last year.