San Jose Real Estate * REALTOR ® * Richard Gonzalez

Months Supply of Inventory

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July’s Market data shows a huge drought in available San Jose inventory complicated by the less than two months inventory we are currently experiencing. While there continues to be rumors of an influx of foreclosed homes my feeling is that investors holding the inventory will release it at a measured pace to maximize net profit.

Supply vs Demand

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Another chart showing the shrinking inventory compared to the up swing in sales activity.

Pending Home Sales

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A year ago the amount of inventory was evident but since then the introduction of FHA loans and low interest rates have obviously fueled pending sales activity. Furthermore the low affordable home prices are contributing to the frenzy and cash investors taking advantage of cash flow positive opportunities.

Median Sales Price

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Affordable homes prices between $250,000 and $350,000 are generating twice as many sales thus impacting the median sales price. This is not an indication that home prices are sliding, it shows the huge pool of affordable homes have been moving over the last 90 days.

New Listing Activity

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while we continue to see foreclosure activity and short sales driving the San Jose market more and more sellers are opting to wait out the volatility of the economy before considering trading up to another home. Remember that any seller may have to take consider taking a haircut in price ultimately preventing some sellers from entering the market.

Summary

Affordability continues to be the name of the game. The sweet spot for our market are properties under $500,000. Buyers considering purchasing a home should prepare themselves for a sellers market. Average months of inventory under six months are considered sellers markets. We are currently under two months of inventory.

If I told you I could wave a magic wand and teleport you into the past you would think I was crazy but ladies and gentlemen its true!

As of October 2008 I can now say that we have all been teleported back to November of 1999, that’s because the affordable areas in Silicon valley have returned to 1999 levels. I recently previewed homes in a San Jose neighborhood and was astonished to see the REO(Bank Owned Properties) activity, to my surprise there were homes selling in the $210,000 to $250,000 range. 80% of activity in this area was REO sales, California is averaging an 80% REO close ratio. Unbelievable to see these prices but so surreal. Investors who have been waiting for an opportunity to jump in are now trying to time the market. I’d say not to wait much longer because at these prices its hard to argue the feasibility of having a positive cash flow property at this point.

The Median home price for Silicon valley has catapulted us back to April 2000 levels and as such reflects what we are seeing from the economic downturn. For some this means not only a loss of their 401k net worth but a loss of equity in their homes, for others its an open invitation to pay attention and get ready for a bottom that may come as early as Q3 of 2009. Silicon Valley and the bay area in general have always been the leading indicator for California. Historically speaking we can count on the Bay Area to rebound first.

The bad news is that we have had an average of a $50,000 loss in the Median sold price month over month where the median Sales price went from $719,500 in July to $550,000 in October.

Median days of unsold inventory for the Silicon valley have creped up to 90 days. We are heading into a historically slow time of the year and as such the number of new listing drop off until we get past the Valentines Day Holiday.

With all the negative news the bright spot is that if you price the property right and can be aggressive then the averages are in your favor. Sales price vs list price average shows a 99% average, great news for those who can be aggressive in their list price. Likewise if you manage to get an offer in the first 42 days you have an 19.3% chance of it closing.