Many parts of the country are simply having their breath taken away as prices spiral down. The media is enjoying re-hashing the “sky is falling” message and NAR (National Association of Realtors) is the only group trying to remain calm. Maybe too calm. As representatives of the industry, it is NAR’s job to balance out the market with positive projections.
For local real estate, it is important to find a balance between drama and local facts using the knowledge of your local Realtor. Between August 2006 and August 2007, employment in the San Jose-Sunnyvale-Santa Clara, which also includes San Benito County, grew by 14,000 jobs or 1.6 percent. The metropolitan area experienced its 35th consecutive month of gains on a year-over basis.
• Private educational and health services led the year-over increases. Private schools rose by 1,700 jobs, largely at colleges, universities, and professional schools. Health care expanded by 1,300 jobs, and social assistance firms grew by 900 jobs.
• Professional and business services gained 3,400 jobs, with significant increases occurring in computer systems design and related services (up 1,300 jobs), architectural and engineering services (up 600 jobs) and investigation and security services (up 400jobs).
• Leisure and hospitality climbed by 1,800 jobs from last year. Food services and drinking places added 1,500 jobs, while arts, entertainment and recreation gained 300 jobs.
Jobs will be the one component that helps the San Jose and surrounding areas avoid the drastic adjustments in real estate prices other communities in the state are experiencing. On the other hand, short sales and foreclosures will be driving factors on price adjustments in each neighborhood. Here are a examples that demonstrate which neighborhoods are being hit hardest by the sub-prime fallout.
For Willow Glen inventory has continued to climb since January 2007 and in October 2007 there were over 200 homes on the market for sale. In the 3rd quarter of 2007 only 7 homes of the 220 were listed as short sales.
For Blossom Valley inventory nearly doubled in 2007 compared to 2006 and prices took a significant hit in the 3rd quarter due to the high number of homes for sale on the market and in particular the number of short sales and foreclosures. Most areas of Blossom Valley have seen anywhere from 4-6% drop in price compared to 2006. In the 3rd quarter of 2007, 43 of the 255 homes were listed as short sales.
Cambrian has been holding value better than other San Jose neighborhoods. The average price peaked almost 3% higher over 2006 in the Spring of 2007. Schools test scores have helped a great deal in making this neighborhood desirable. In the 3rd quarter of 2007, 16 homes of the 215 were listed as short sales.
The Berryessa neighborhood of San Jose has had significant challenges in maintaining value in 2007. Inventory continues to climb and the average days on market are nearing 60 days. Prices have had some peaks with a couple of +1 million dollar sales but on average the prices are dropping. In the third quarter of 2007, 37 of the 246 homes were listed as short sales.
Foreclosures and short sales are impacting the San Jose area markets more than any other component. Once the house next door sales for $30,000-$50,000 lower than it would have in 2006 the value in the neighborhood is adjusted down. If you live in a neighborhood that is seeing a lot of “Reduced Price” signs or if you are aware through your real estate agent that there are homes in your neighborhood that are foreclosures or short sales, your home is losing value.
If you have equity in your home, do not spend it. Hold off on major remodels until you see your neighborhood stabilize. Analysts are predicting the foreclosure peak to be late 2009. Two more years of leveling out and adjustments are predicted.
If you would like to know how many short sales or foreclosures are happening in your exact neighborhood, contact me. I can provide you monthly or quarterly updates with no obligation. I am a true believer that knowledge is power. Your home is one of the most important investments you own. Do not rely on the media to keep you updated on its value. There is always more to the story than the headlines produced.
CJ Brasiel Realtor, SRES