Thursday, January 10, 2019

2018 Silicon Valley Real Estate Year in Review and 2019 Outlook

2018 Year in Review

2018 has been a roller coaster ride for the Real Estate market. We kicked off 2018 the same way 2017 went all year in an extreme Sellers’ market, with multiple Buyers fighting tooth and nail to win a small amount of homes. Around April of 2018, the market screeched to a halt; homes sat for a month to 2 months or more and it shifted to a more balanced market. Buyers were in a "wait and see" mode, and the Buyers that were ready to buy held strong to their positions looking for a deal. Sellers willing to come down on pricing and were patient sold their homes, but the ones that were holding onto peak pricing did not sell, sat on the market, cancelled their listed or rented out their homes. Buyers got more particular so homes that were re-modeled were highly coveted, as opposed to homes that were not. We saw an average price drop of anywhere from 10% to even 20% in some areas.

Silicon Valley Real Estate Snapshot – Santa Clara County

 
Looking at the data since Q4 of 2018 there is some good and bad news. For Sellers it is refreshing to see inventory levels (your competition) drop by 49%/39%. For Buyers this means that there are less homes to buy for now. We are expecting inventory to ramp up week by week and peak in the summer season, expect competitors will increase and Buyers will have more home choices. For Sellers the other key metrics are not in your favor. The average time homes have been sitting on the market are going for 72/57 days, meaning homes were sitting on the market twice as long than in Q3 2018. The number of days for Sold homes have increased slightly, but the number of actually sold units half dropped by about half. This means about half of the inventory in Q4 did not sell and many may come back on the market this year. Overall none of these are great trends for Sellers, better news for Buyers, overall a more balanced market nonetheless.

Exhibit 1 – Santa Clara County Real Estate Snapshot October to January 2019


Macroeconomics

On a Macro level there are many factors currently in-flux which are contributing to the de-stabilization of Real Estate; such as Interest Rates, the NASDAQ index, Trade Wars and Protectionism.

Mortgage Rates

First off interest rates have leveled off and moved downward slightly. The Federal Reserve has indicated that it would throttle off a bit from the interest rate hikes in the interim, likely due to the volatility in the economy. This may get more buying activity from the Buyer pool.

Exhibit 2 – 30 Year Fixed Mortgage Average in the United States


Source – St Louis Federal Reserve - https://fred.stlouisfed.org/series/MORTGAGE30US

Trade Wars and Protectionism

The NASDAQ Index was hammered most of December but has rebounded 8% from the lowest point last year since Christmas Eve. They new hope is that the US and China trade wars can come to a settlement soon. Remember the health of Technology stocks on the NASDAQ are directly correlated to Silicon Valley housing downpayments that power the real estate market. The Government deadlock and shutdown is unprecedented and is also weighing on the minds of the public.

Exhibit 3 – NASDAQ Snapshot January 11, 2019


Source – Yahoo! Finance

Looking Forward to 2019 
 
Just 2 weeks into 2019, inventory levels are low due to the holiday season. At the moment, the homes that are out on the market are selling quickly - some with multiple offers. The trends of homes in good/move-in condition are selling better than homes in original condition, and some homes are receiving multiple offers, are back for now. If you are a Seller, you may want to strike while the iron is warm. As a Buyer, you will need to adjust from last year's slower market until inventory levels catch up to demand, and possibly get slightly more aggressive in the short run if needed. There is still residual inventory from the winter months and you maybe able to get a deal on those properties. Continued instability in our government, international trade war talks and a continually volatile stock market have brought uncertainty to our Real Estate Market in 2019. All of these will be factors to monitor in the coming year and will directly have an impact on Silicon Valley Real Estate.

We hope you had an amazing winter break. Reach out to us at alan@alanwangrealty.com (408)313-4352 so that we can analyze your specific real estate situations!

Happy New Year!

We hope that you and your families had a restful holiday break! A big thank you for being amazing advocates of our real estate business! It is because of your never ending referrals, loyalty and support as our customers that we were able to help over 105 families in 2018. It was you that helped propel us to be the 64th team in the world out of over 195,000 Agents at Keller Williams. We cannot thank you all enough for all of your support!
Reach out to us at alan@alanwangrealty.com (408)313-4352 so that we can analyze your specific real estate situations!

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4 comments:

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