Santa Clara County, CA - Market Analysis Sept 2006

 While we do continue to see a slowing in the Santa Clara County market, we are still seeing growth in average prices.

However, we continue to see an increase in the inventory of homes with no real increase in the number of homes sold. Either click the icon to the left for the video presentation of the data for September 2006, or read on for all the details.

Supply and Demand

So much of the current market can be understood by examining the supply and demand picture for properties in Santa Clara County. Take a look at the following graph which shows us how many homes have sold, how many were listed and how many are in inventory for the month of September 2006.

You can enlarge any image in this article by clicking on it.

 For now, just get an idea of the trends. On the left side we see the last 12 months. September is at the top of the chart in both cases. The red bar is the number of homes sold and the yellow bar is the number of homes currently for sale. Note the relationship between those two bars. 

It tells us that for every home sold, 4.4 homes are on the market. This ratio of homes sold to homes on the market can be a great indicator of how strong the market is. The higher the ratio, the more stagnant the market, the longer it takes to sell a home and the lower the volume of sales.  For demonstration of this fact, lets calculate the ratios for the month of september going all the way back to 1998

 Note that 2001, 2002 and 2003 were years of general stagnation, with an improving market in 2003. If we look at 2001 and 2002 we see that they were marked by very low volume. For the year with the worst (highest) ratio, we see all the other negatives, plus the highest number of days to sell a home for any of the years tracked. So clearly, there is some insight to be drawn from this Sold/Inventory ratio.

Over the last 12 months, we have seen a steady rise in the number of homes on the market, without any increse in the number of homes being sold. In fact, we have actually seen the number of homes being sold decreasing in many cases. When compared to past years,  we can see that we have had markets with worse numbers and the trend has been a gradual move to slower numbers rather than a rapid decline.

Finally, this graph can give us some insights into how many new listings have been coming onto the market. When compared to previous years, we can see that we have had an average number of new listings. When compared with previous months, we are actually seeing a decline in listings. Given the current inventory, this is a good thing. However, this is also natural for this time of year. 

Lets move on and see where we stand with home prices.

Home Prices 

Despite the slowing we have seen, average home prices continue to increase. Perhaps not at the high rate we have seen in previous years, but the fact remains that homes being sold today are being sold for more than they did in previous years.

The median prices tells us that both high and lower priced homes are selling well.

When we look at the last 12 months, we see a modest drop in recent months, but these types of drops are normally given the seasons in which they occur.

Overall,  these home prices reflect a market that continues to grow. Now, the fact that we have so many homes for sale and so few people out there buying them is eventually going to have an effect. With us moving into what is normally the slowest time of year, it is likely that we will see homes dropping further in price as sellers who must sell attempt to draw the attention of buyers.

Sales Volume

Sales volume can be an interesting number to see, but it is simply the total amount of money involved in all the real estate transactions. So it can give you an idea of total market activity.

This is another chart where looking at the overall trend rather than specific numbers can be helpful.

So, you can see that over the last year, there has been some fluctuation in total sales volume. Volume from this time last year is down considerably, which makes sense given the other numbers we have already looked at.

It is also interesting to note that the volume is not at its worst. In fact, despite all the other market influences we have looked at the indicate a slowing market, we still see performance that appears healthy when compared to previous years. 

Days to Sell

Also known as days on market, these numbers are perhaps the second most important when examining the market. While we all want to know how much a home will sell for, we usually also need to know how long we are going to have to wait before it actually sells.

It is currently taking the longest to sell a home in Santa Clara County than any of the previous 13 months. This is not quite double what it took to sell a home at the same time last year.

For those that do not have the time to wait for their home to sell, they find themselves needing to reduce their price to attract the attention of the available buyers. 

Remember, buyers in todays market have a large number of homes to choose from. As we saw earlier, there are 4.4 homes on the market for everyone one that sells. So that means that sellers need to draw attention away from 3.4 other homes, to get a buyer interested in their home. Price is often the most powerful tool for doing this.

Is the market crashing? I still say no. However, this winter is going to give us a very strong indication as to whether or not we are going to see a continuing drop in our local real estate market. Other economic indicators are looking good. The stock market is performing well. These kinds of things usually help to support the real estate market. 

Prices are still up. But we are seeing indicators that we there might be a rough ride ahead.