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.

I’m writing this post for those buyers who are looking to purchase a home under $300,000 in San Jose.  Affordable homes in this price range have not been seen since the late 90’s creating a flurry of potential real estate buyers in the San Jose area.

The shock for most buyers comes generally after making an offer for the 10th time only to hear the same answer “Sorry but your offer wasn’t accepted”. The challenge is that most buyers in this price range are competing with a larger pool of potential homeowners.

Investors are also taking advantage of the affordability and have no problem making all cash offers at this price range.

How do I compete in a hot price range?

I have compiled a short list of considerations when purchasing in this price rage. My goal is to help those buyers understand what we are experiencing and as such help you create a strategy to find your home.

The following list is in no particular order but should be considered if you are looking to buy under $300,000 in San Jose.

1. Low Ball Offers – Never try to low ball an offer in this price rage. Time and time again I have seen some of the ugliest homes end up with several offers. Remember that at this price range even the worst home can generate great returns as a rental.
2. Highest and Best – The fact that you may have cash is nice but your offers will be rejected every time if your competition is offering more. The bank selling the home is  interested in selling the home for the highest price a buyer is willing to pay.
3. Proof of Funds to Close – Anyone can make an offer, The key ingredient in making an offer is to convince the seller that you have the financial means to perform.
4. Approval Letter – I see more and more requests from listing agents looking for a pre-approval from a preferred lender. Having an approval in your hand may not be enough, in some cases you will be asked to submit your information to a preferred loan officer. You must be willing to do this quickly otherwise is will significantly reduce your chances of having your offer accepted.
5. Price Range – Look for homes in a price range that gives you the ability to offer over the asking price. Suppose you are approved for $300,000, my suggestion is that you look for homes under $250,000 giving you the ability to offer over the asking price. Many buyers are making the mistake of looking for a home at the maximum approved price. The competition will always offer more and it will make it extremely difficult if others are bidding above your approved price range.

REALTORS understand that the current real estate market is a moving target and implementing new strategies for submitting offers are  just as important.  Buyers who are willing to roll with the punches will eventually find a home. Are you willing to make the necessary adjustments?

Real Estate Relationships are Key in a Hot Market

Buyers experiencing a HOT market in our area continue to deal with one frustration after another as they wage a bidding war on the low inventory we are currently experiencing.

Within all of this chaos I have developed a relationship building approach both as a listing agent and with other listing agents. I have to know that the other REALTOR is willing to work as hard as I am prior to reviewing or submitting an offer.

For example; say you want to make an offer and there are multiple offers involved. The strategy I tend to take is to make sure I package the offer in such a way that the listing agent can see that I understand the way a Bank Asset manager or a Short Sale Negotiator prefers to see an offer.

The key is to understand the inner workings of the submission process to a Bank and as such covey to the decision maker that I am well versed in this process. Its not surprising to have a listing agent pass on a offer because of the way it was presented.

I have had more success by focusing on how I have package an offer and communicated with the other agent.