Well, what a difference a few months can make! If you haven’t picked up on it, the real estate market in many of the Bay Area neighborhoods is heating up. Some areas are actually on fire. For me, the printer and emails are flying presenting and receiving multiple offers on homes that have been on the market less than a week! On average for “highly desire-able” areas we are seeing sales prices at 2-5% over last comp. Even in areas like Morgan Hill, Milpitas, and Evergreen, we are seeing multiple offers. I have presented offers on homes with as many as 18 other offers!
Why is this happening now?
1.) Hope! Even the smallest signs that the economy and jobs are recovering, gives people a reason to consider making a move. The smallest positive sign makes buyers realize this may be the time to buy. Not to mention Warren Buffet spoke and said now was the time to buy. : )
2.) Low inventory. Bottom of the market (six months ago), keeps regular equity sellers off the market (buy low – sell high mentality) and therefore the only sellers on the market are …BANKS and motivated private sellers. Banks in the form of short sales (lender must approve sale) or REO/bank owned/foreclosure properties and private sellers in the form of relocation and “I’m not going to wait any longer to get the bigger/better house I want” or “I am not going to wait any longer to move on and retire!”.
A brief side step on this topic of “deals” and short sales and bank owned properties. The banks have already taken their losses. We the taxpayers bailed them out of their loss. Now, it is upside time. Most banks are completing full appraisals on short sales and REOs. They know the value. They also know, the market is starting to improve in certain areas (Silicon Valley being one). Therefore, they are countering buyers more often than not and only pricing below market to create a frenzy.
If you are an REO or short sale real estate agent, presenting the best offer out of 10 has a better chance of acceptance than presenting one low ball offer. REO and short sale agents business model is based on volume. They do not have time to keep a home on the market forever. Also, they have no patience for agents and buyers that can follow their rules. If the offer requirement states get a pre-approval through their lender – do so. If their requirement is show a proof of funds to close escrow – do so. If you don’t want to do so, don’t make an offer or don’t assume the agent will place your offer at the top of the pile. The truth sometimes hurts. So recognize the pricing strategy in the market place and become savvy about average price for the neighborhoods you are looking at. If the home is priced 2-10% under market there is a reason why. Oh, by the way, banks do not care what Zillow says the value is for a home. : )
3.) Low interest rates hovering around 4%, homes, sales prices in the bay area being pretty much back to 1998-2000 prices (pre-boom), low inventory particularly in highly desired areas and/or great school score neighborhoods, and you have the complete making of a hot market.
According to Santa Clara County Association of Realtors “re-sale homes continued to rise in April, gaining 3.4% from March, and up 11.2% year-over-year. This is the 4th month in a row home sales have been higher than the year before.”
If you are a buyer, why should you buy now? It is most likely you missed the bottom of the market and therefore you have to decide why you would wait any longer? It is pretty definitive rents will be going up. All indications (cyclic market) interest rates will go up over the next two years. Home prices are going up (slowly in some areas – faster in others). Palo Alto, Mountain View, and Cupertino are all reporting complete rebound in average sales price. What they lost between May 2007 and May 2010 has been recovered and climbing. If you want great schools, be ready to compete and the more money down the better. If you want good schools, be willing to do a little repairs/updates and you can find a solid deal in Blossom Valley, Berryessa, and areas of Morgan Hill. If you want an investment property look to East San Jose and Gilroy. Condos/townhomes have fewer choices because of litigation and non FHA ability in most newer developments. Look to older, stable complexes close to tech for good value.
If you are a seller, why should sell now? The biggest reason to sell now is that you want to buy a bigger/better home in the bay area. If you price your home competitively, you can reap the benefits of low inventory and see multiple offers. The more your home is “Move in ready!’ the better your chances will be to create a frenzy. If you have outdated baths and kitchens, talk with me before completing major updates. Let’s make sure you only invest in items that will get the most return. If you need an updated valuation on your home let me know. Buyer’s have become very savvy about what a flip home means. They would prefer to buy from a seller who has taken care of the home and completed appropriate repairs and updates. Based on a recent article here are the top items to complete that give you the best return on your investment:
1. Cleaning and de-cluttering ($200 cost / $1,700 price increase / 872% ROI)
2. Home staging ($300 cost / $1,780 price increase / 586% ROI)
3. Lightening and brightening ($230 cost / $1,300 price increase / 572% ROI)
4. Landscaping ($320 cost / $1,500 price increase / 473% ROI)
5. Repairing plumbing ($385 cost / $1,250 price increase / 327% ROI)
Let me know how I can help you with your next real estate move!
Now for the numbers!
Sales Price to List and days on average to sale – by city – Detached/Condo/Thome
New listings over last 6 months by neighborhood in San Jose Single Family Detached
Average Sales Price last six months by City Santa Clara County – Detached/Condo/Thome
Average Sales Price by neighborhood last 12 months San Jose Single Family Detached
Average Days to Sale – and List Price to Sales Ratio – year to date Detached/Condo/Thome