The Tale of 4 Markets
Overall the market is more balanced with the advantage skewing in favor of Buyers. Actual performance depends on the specific market segment. Homes in fully renovated condition and/or in prime locations continue to sell at a premium, quickly and with multiple offers. Sellers continue to struggle with the reality of the market by holding onto prices from the peak market last year. Those that do, find their homes sitting longer on the market with very few visitors every week and lower prices to no offers. Buyers that do offer are not willing to pay last year’s prices and often have other homes on the market to pursue. We have seen anywhere from a 10% to 20% drop in prices since last year in varying neighborhoods.
The Luxury market will continue to be its own market segment. These Buyers are looking for “the” home that matches “their” requirements. They have the means regardless of the state of the real estate market, though the number of available competitors reduces in a down market which is to their advantage.
The age-old adage “Location, Location, Location” really shows itself in a declining market. In the Silicon Valley, a Prime location is defined as a pairing of an excellent school district with the closest distance to work. This segment has made a comeback in the second quarter with the return of multiple offers and competitive bids, albeit not as aggressive as the price overbids in the last decade.
Single Family Homes
Single Family Homes have always been the preferred home class for Buyers. It is preferable to own the lot with space for the family, with no Homeowners Association (HOA) rules and possible increases in the monthly fee or special assessments. Single Family homes around the million dollar price range continue to sell due to affordability. Single Family homes greater than a million dollars will vary depending on the neighborhood but will generally struggle without a strong school district and location.
Condominiums and Townhomes
This market segment has been decimated and extremely slow. One of the key reasons is that there is quite a bit of brand new home construction coming online. When the market shifted, new home builders scrambled to acquire land that they had stopped purchasing during the downturn. Once acquired they have a long and arduous process of design, city and county approval for their plans, and the leg work in order to get their developments online, which all take time. As these finally start coming to fruition the market turns, and this product group floods the market with more inventory in addition to what is on the market. The second reason is that prices have risen so high and with a market correction, Single Family homes are more within reach. Homes with excellent schools paired with locations have not seen an impact.
Santa Clara County Real Estate Snapshot
As we head into election year, most presidents have kept the economy stable in order to support their re-election. The key wildcard is the China trade war which continues to weigh on the markets. However, the NASDAQ hit yet another record this week and despite the volatility, Silicon Valley workers do have equity to tap into if they choose to. The Federal Reserves has signaled that they may drop interest rates sometime this year which will help the real estate market by lowering interest rates further. These are all important foundations for the real estate market.
The Silicon Valley continues to hum along with low unemployment rates and multiple initial public offerings (IPO’s). The blackout periods have yet to free up capital that will surely be poured into real estate. We are expecting Q4 2019 and much of 2020 to have an influx of homebuyers centralized in San Francisco, the Peninsula, the South Bay and parts of the East Bay as well.
Interest Rates Have Dropped; Time to Refinance or Purchase
It is time to refinance your mortgage - especially the 30-year fixed mortgage. Rates have trended downward and have hit and surpassed the lowest point in the last decade allowing you to reduce hundreds of dollars off of your mortgage. The 30-year, 10-year and 7-year fixed products all have excellent purchase rates. Needless to say, you can buy more house with these lower rates. For those of you that are cash heavy, our lender can also drop your rate by approximately 0.125% for every $250,000 of assets under management. Re-casting is also a feature that our lender provides. Re-casting is when you pay down your mortgage by $20,000 or more and your monthly payments are re-calculated and brought down if you so choose to do so.
Looking Forward to Q3 2019
As we wrap up the summer months, inventory levels tend to peak in July and homes that don’t sell linger into the fall season. This year the Days On Market have been longer and we will likely continue clearing out inventory for months to come with fewer homes coming online as the year progresses. Not all homes will sell, hence we will likely see more canceled, expired or withdrawn listings. With interest rates dropping to again historical rates with another looming federal reserve rate drop, mortgages won’t stop Buyers from purchasing. The question is, do Buyers feel confident enough in the economy and market to make home purchases? More importantly, have Sellers come to terms with home prices dropping anywhere from 10% to over 20% in the last year? If you are a Seller being patient, making the necessary updates to stand out from the competition and adjusting your price expectations will be the key to selling your home. If you are a Buyer, unless you are going for a home in the prime locations, the advantage is on your side in every way.
For a customized real estate consultation or more details on these loan programs, reach out to us at firstname.lastname@example.org (408)313-4352 so that we can analyze your specific real estate situations!
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