I adore the neighborhood of Willow Glen in San Jose. I remember when I first moved to San Jose I lived in Cambrian Park (another great neighborhood) and would come to Willow Glen each holiday season to admire the Christmas Trees that the residents would place in their front yards. Yes, Christmas trees completely decorated with lights, ornaments, and a tree topper; a sort of neighborhood “festival of lights”. To walk up and down the brightly lit holiday streets and then have a cup of cocoa at one of the coffee shops in downtown Willow Glen remains one of my family’s favorite traditions.
Willow Glen offers that community that so many of us are looking for. Diverse architecture, diverse population, kid-friendly, dog-friendly, and active. There is always something going on. The annual festivals throughout the summer and fall months keep us all full of kettle corn and live music. The parks are great social gatherings for sporting events, birthday parties, and plain ‘ole family fun. We can walk our streets and wave hello over and over to our extended neighbors.
I am a little biased. Five years ago, I was able to make one of my dreams come true by moving into this great neighborhood called Willow Glen. Yes, I bought at or close to the peak of the market. But I have been very pleasantly surprised at how well our little corner of Willow Glen has weathered the financial storm. I thought it would be interesting to take a look at where we were and where we are in regards to the housing market of Willow Glen.
Below is a graph that outlines the boom and bust time specific to Willow Glen. If you look at the average sales price for a home in September 2009, you will see we have dropped back to 2004 prices. When I have run these stats for Alum Rock, they dropped back to 2002. Some parts of South Santa Clara County dropped to 1998 prices. There is something to be said about stable neighborhoods. (These averages are for single family detached homes. Reflective of the majority of homes in Willow Glen.)
In this next graph you can see the market barometer that indicates whether or not the Willow Glen area is in a buyer’s market or seller’s market. Currently, there is only about four months of inventory on hand which would lean toward a seller’s market. The challenge that you can’t see in these graphs for Willow Glen is the number of higher priced homes for sale.
Looking at the price range of a neighborhood also indicates the local market. A buyer requiring a loan for $729,000 or above is paying close to 2% higher to borrow money than someone who’s loan amount is under $729,000. Even better if the loan amount is $417,000 or below. Therefore, you can look at the market in how a buyer affords a home. If the home is under $300,000, many buyers are investors with all cash. Between $300,000 and $500,000 a mix of first time buyers and investors. Many of these loans are FHA loans requiring a minimum of 3.5% down payment.
The $600,000-$800,000 are typically two-income buyers with at least 20% down ($120,000-$160,000). Above $900,000 the buyer either is a “move-up” buyer utilizing equity of a home they sold to buyer a bigger/better home or a home in a better neighborhood or a buyer with the means to support a 25-30% down payment and mortgage payments of $5,000/month or more. These are broad generalizations but it helps to identify the type of buyer and therefore the activity you might see in a neighborhood. Depending on the availability of “jumbo loans” (>$729,000) and their associated interest rates high-end homes may see substantial price pressure in the coming months on these upper level homes in Willow Glen.
Finally, the infamous “straw” for any neighborhood value lies in how many distressed homes are in the make up of total homes for sale. Willow Glen has averaged around 20% of its active inventory in distressed homes over the last two years. If we look at the number of sold homes over the last year in Willow Glen, a total of 37% were distressed. Distressed is broken down into short sales and foreclosures. Compared to other neighborhoods Willow Glen has been on the light end of the foreclosure stick. East San Jose has seen nearly 60% of the homes for sale to be distressed. However, we may see foreclosures increase slightly in 2010 due to unemployment and adjustable rate loans due to adjust this coming year.
Overall, Willow Glen has managed the economic storm quite well considering the challenges facing each home owner. It is interesting to think maybe, just maybe, what makes a neighborhood stable is the community that lives there. Good, stable incomes lead to a reduction in the “struggle factor” related to raising families and the ability to place food on the table and a roof over heads. There is an social economic wake up call that has come out of these last two years. For those just barely “hanging in there” we have to recognize the American Dream remains a difficult dream to make come true. We must continue to find ways to help families not only obtain the American Dream but also help them keep it. In the meantime, another holiday season is approaching and I know the streets of Willow Glen will make me smile once again. Cocoa anyone?