There has been a lot of talk over the past year or two about “off-market” listings. This is referring to homes for sale, but not listed on the MLS (multiple listing service), and therefore not listed on the various internet real estate sites. This has become a more popular topic as Buyers are finding it harder to compete against multiple offers and are hoping that they would have a better chance if fewer people knew about the listing.

Of course that is exactly what most Listing Agents will tell their Sellers. Only that they want as many offers as possible so the buyers will bid-up the price to the highest price the market will bear. Sellers should put their homes on the MLS and promote it as much as possible. However there are circumstances where an off-market listing is in the best interest of the Seller and an opportunity for Buyers “in-the-know”. (I personally bought and sold my own home this year, both off-market).

Our local MLS service has been tracking the percent of homes sold “off-market” in the five county area that it serves from San Mateo to Santa Cruz counties. Their analysis is that up to 20% of homes are sold off-market (11.8% in 2011, 14.5% in 2012, 20.7% in 2013, and 16.4% YTD 2014). Of course, this may or may not be what you see in the specific market you are interested in.

So what is the answer in Los Altos? The short answer is that around 95% of Los Altos homes are listed on the MLS, 2% are sold by Realtors off-market and posted on MLS after the sale, and 3% are never posted on the MLS.

Los Altos homes sold off-market

 

To give you more of a feel, here are the specific numbers as of Dec 15th for 2014:

–  Homes listed for sale on the MLS = 279

–  Homes sold by Realtors and posted on MLS after the sale = 6

–  Homes sold and not posted on MLS (assume by owner) = 10

The sell and purchase of my personal homes represented 2 of the 6 homes sold by Realtors and posted after the sale.

A couple of key conclusions for Buyers:

1. The MLS is a very strong reference base for assessing market values and finding comparable homes with 97% of home sales being reported on the MLS.

2. There are very few “off-market” homes for sale (16 out of nearly 300 per year). Certainly worth having your Realtor work their network to keep an ear out for off-market listings and to get a jump on upcoming listings, but not a silver-bullet.

3. There is a small hand-full (~10/year) that are sold directly by the owners. About 1/3 are new construction homes that most Realtors hear about. Maybe 1-2 post on the various For Sale by Owner (FSBO) internet sites. The rest; just happens.

For Sellers:

1. The base-line answer is that you should market your home on the MLS in order to attract as many prospective Buyers and offers as possible. This is usually the best path to maximizing the value you receive for your home.

2. There is a way to market your home off-MLS. Realtors, especially ones in the major brokerages in Los Altos, have a very extensive network of Realtors that they can reach. I sold my personal home off-market by marketing it to agents in my brokerage, Alain Pinel, which happens to be the #1 brokerage in our area. It worked well in our case and the Buyer’s agent was not from my brokerage!

Hope you find this helpful. Feel free to email me with any questions or requests for additional information.

Bryan
Bsweeley@apr.com
650.793.0355

Buyers ask me whether their offer has a chance against an all-cash offer. Here is some insight in the Los Altos market.

Realtors reported on MLS that 37% of the Closed Sales in 2014 were All-Cash and 63% were with conventional financing. Pretty impressive given Los Altos is one of the most expensive real estate markets in the nation.

Here is a little more detail. This charts shows the distribution of all-cash vs. loans by the length of the escrow period (days).

Cash vs Loan

Interesting to note how nearly one-half of buyers requiring loans are able to close escrow in 2-3 weeks, rather than the typical 30 days. This reflects many lenders, such as Wells Fargo, to complete a full loan approval prior to submitting offers. This eliminates nearly two weeks of diligence work by the underwriters.

Conclusion – 1. all-cash buyers don’t dominate the market, you can successfully compete with financing. 2. get full loan approval prior to submitting an offer. No cost and no obligation. Enables you to better compete and shows the Seller that you are doing everything possible to win their acceptance.

Hope this helps. Let me know if you have any questions or would like more info.

Bryan
Bsweeley@apr.com
650-793.0355

AN OVERVIEW ON HOW HOME VALUES INCREASED IN 2014

2014 was the third consecutive year of this market up-cycle. Started in early 2012 after two years of being flat following the 2008 financial crisis. Values are now well above the pre-crisis peak and appear to be heading for another up-cycle year in 2015. Hard to imagine that this can continue for much longer, but equally hard to imagine values dropping.

I publish 17-years of history on home values and market activity levels for a dozen key cities in Silicon Valley. Interesting to note the similarities and differences between high-end and more moderate (relatively speaking) communities, such as Palo Alto and Santa Clara. Seeing all of them on one page certainly brings the Silicon Valley real estate market into view. Below is a good sampling. Click on the link to see all the cities and the various metrics: www.SiliconValleyMLS.info

Palo Alto up 15% in 2014 after being up 22% and 21% in 2012-13.

Palo Alto homes for sale

Los Altos up 12% in 2014 after 15% in 2013 and 11% in 2012

Los Altos homes for sale

Mountain View up 16% in 2014 after 16% in 2013 and 14% in 2012

Mountain View homes for sale

Sunnyvale jumped up 20% after 18% in 2013 and 11% in 2012

Sunnyvale homes for sale

Cupertino up 17% after 15% in 2013 and 12% in 2012

Cupertino homes for sale

Santa Clara up 15% after 17% in 2013 and 9% in 2012

Santa Clara homes for sale

Saratoga up 10% after 11% in both 2013 and 2012

Saratoga homes for sale

Los Gatos was flat at +0.5% after 13% increase in 2013 and 4% 2012 (the only market that I follow showing less than 10% increase).

Los Gatos homes for sale

I will be sending more information on the market in the coming days. The holiday season is a good time to prepare for the coming year.

Please feel free to email me any questions or requests for additional information.

Bryan Sweeley
Bsweeley@apr.com
650.793.0355

Residential real estate must be one of the most efficient markets. Buyers and Sellers meet in a virtual market with extensive information instantly available. They negotiate an arms-length transaction. The current market price is set in a pretty fair and open market. So how is the supply-demand pressures working today?

First some definitions. Some folks think of supply as being the number of Active Listings on the market. My view is that the inventory of Active Listings is the net result of the supply of New Listings, less the demand of Buyers that convert the listings into Pending Sales. Hence:

New Listings (supply) – Buyers (demand) = Number of Active Listings.

The answer in one chart:

Los Altos homes for sale: supply and demand

First the Red Line: Number of New Listings (Supply)

Significantly down. Amazing that it appears to continue to be declining with no end in sight. I suspect that the decline over the past two years is the effect of more homes being sold off-market (the above numbers are based on MLS data). So I would say we have been seeing a supply of ~400 New Listings per year since the financial crisis. Pre-crisis we were seeing ~550. That computes to ~25% decline in the supply of New Listings pre- vs. post-crisis.

Next the Blue Bars: Average Days on Market (Demand)

Talk about being down. It is the lowest in 17 years, by a lot. The long-term average is in the 30-40 day range. The entire year of 2014 averaged 16 days, 50% of the long-term average! Now a 25% reduction in supply would account for some of this. Hard to imagine that it accounts for all of it. My view is that there is also a significant increase in the number of Buyers that is compounding the pressure on home values. Case in point: Google has grown from less than 100 employees in Mountain View to 11,000 last year and building offices to house 20,000+. And that isn’t counting Facebook, LinkedIN, Apple…

What is the impact on the market?

There is more demand (Buyers) than supply (New Listings). The result is that a given listing gets multiple offers (6-12 is typical), who now compete to get the Seller to accept their offer over the others, which includes a higher price. I tell my clients to expect the wining price to be 1% over list for each offer (10 offers = 10% over list), and this has been short many times in the past year.

Here is a chart that shows you how it plays out. Each blue dot is one real transaction. Theses are all the Closed Sales for SFRs in Los Altos in 2014. Now what does this chart tell you. First, most homes are selling after one weekend on the market. Second, most are selling for 5% to 25% over list. For Buyers this is a competitive reality. For Sellers, a watershed (unless they intend to buy in Silicon Valley, then welcome to the club).

Los Altos homes for sale list vs. sold price

Net effect on home values: UP

If Buyers are offering 10-15% over list in order to successfully compete against the other Buyers, then you expect the fair market value is going to raise by 10-15%. This is exactly what has happened: 11% in 2012, 15% in 2013 and now 12% in 2014. Note that some accuse Sellers and their Agents of setting low list prices. My experience is that they set list prices comparable to recent sales (past 2-6 months) and the Buyers take it from there. The rising prices below support this view in that the end home values are rising 10-15% per year.

Los Altos home prices

Outlook for 2015: more of the same

There is just no indication that the market is going to change, this coming year. Always a possibility, however not expected. The high-tech companies continue to hire. More and more of their employees are going to want a home for their kids with strong schools and a reasonable commute. The supply is certainly limited by physical space and there is no indication of a mass sell-off by the folks already living in arguably the best place in the world.

For Buyers, the main consolation is that they can be pretty confident that buying a home in Los Altos will be a good long-term investment. First, it is unlikely that they will have or want to leave, so it is a long-term investment. Secondly, the underlying market drivers of limited supply in a high-demand area is bound to result in above average appreciation.

Hope you found this interesting and useful. Send me an email if you have questions or would like additional information. Always my pleasure.

Bryan
Bsweeley@apr.com
650.793.0355

Almost everyone asks whether there is a lot of Google money driving home sales. My responses is that there are a lot of buyers that happen to work at Google, but it is not like they are throwing their money around. Just your typical high-tech buyer with a good job at one of the local high-tech companies. It is just today it is Google instead of Apple, Microsoft, Oracle, Tandem, Intel, AMD, IBM, National Seminconductor …

It is the long-term outlook that I find more interesting. There was an article written by Sean Hollister at theverge.com titled “Welcome to Googletown“. Google currently employs over 11,000 employees at its Mountain View facilities, which is about 10% of the entire workforce and taxable property in Mountain View. And it is getting bigger. Google hopes to add more space that would enable it to double its Mountain View workforce to 24,000. Below is the campus they are proposing to build on the Moffett Field site.

How might this impact future home values? It has to be positive. Very positive. Google is bringing 24,000 prospective home buyers into the area. There were a total of 638 homes and condos sold in Mountain View last year. This is an overwhelming tide of demand for housing in the area over the next 5-10 years. Add on top of this the other Mountain View companies (LinkedIN, Microsoft, Symantec, Intuit and others) plus its neighbors in Palo Alto and Sunnyvale and North San Jose.

Google does have a reputation for hiring the very smartest people from top-tier universities. That suggests their employees will have a preference to find homes with top-tier schools for their kids. That should generate higher-demand for areas such as Palo Alto, Los Altos/Los Altos Hills, Cupertino, parts of Mountain View-Sunnyvale, Saratoga and to a lesser extent as far as Los Gatos to the south and Belmont to the north. It is hard to imagine that the Palo Alto-Los Alto-Mountain View-Sunnyvale-Cupertino real estate market will not see rising prices over the next 5+ years. There is just too big of an influx of highly educated and highly paid employees based in Mountain View.

This might explain why there is a historically low-level of New Listings – homeowners are hanging on to a good investment that should appreciate nicely. Might also explain why Buyers are willing to pay 10-20% over list price – both prices and interest rates are going up faster than their income. They lose purchasing power every month. Plus within 1-2 years the expected appreciation will offset any premium paid over list.

Look on the bright side – this is a good problem to have when you think about the problems people are facing in the rest of the world.

Why is the supply of New Listings so low?
Our current real estate market is in unusual territory. While home values in the Palo Alto-Los Altos area are at all-time highs, the supply of New Listings is at a 17-year low. Last year the number of New Listings that came on the market was about 35% lower than the supply prior to the financial crisis. Yet, demand is very strong pushing the average days on market to 17-year lows. No wonder it is such a strong Seller’s market.
The big question is what is keeping/pushing the supply of New Listings down. Yes, there is virtually no space to build, but that has been the case for 20+ years. Certainly obvious why the supply dropped immediately following the financial crisis, but why hasn’t it recovered like prices did starting in 2012?  In fact the supply dropped even further in 2013. And yes, why would anybody want to leave (this has always been true). Is there something structural or is this a temporary market cycle?

Maybe if we break the problem down into smaller pieces we can understand what dynamics might be going on with the traditional sources of New Listings?

  1. New Construction – as mentioned earlier, there just isn’t enough open land to be a meaningful supply of new homes. The vast majority of new homes are replacing older construction resulting in no net change in the total number of homes. It could generate New Listings, however most of the time these projects are by the homeowner themselves and not being built to put on the market.
  2. Moving out of area –  most locals would not leave unless forced to. Relocating to a new job is a top reason. I suspect that this may be unusually low right now as jobs are slowly recovering nationwide, yet are very strong here. Another reason is to retire. After seeing their retirement portfolios diminish by 30% with the financial crisis, owners might be delaying retirement. Combined with the strong double-digit appreciation in home values over the past two years, they might be staying put for now.
  3. Downsizing - long-time owners downsizing for health reasons is probably the most constant factor. I do hear folks saying that there are not many attractive options in the area, therefore best to stay home. Empty-nesters talk about downsizing to a single-level, 3-bedroom home, but the challenge in this market is finding one and competing with the other Buyers. These homeowners will become a bigger factor as they look for ways to convert their huge investment in their home into a portfolio that generates cash-flow for retirement income.
  4. Trading-up – moving up from the initial 3-bedroom home in the area to a larger 4-5 bedroom home. Usually fueled by stock option money, which you would expect to be more plentiful with the overall stock market back to historical highs. Maybe still hesitant after the financial crisis to commit to larger mortgage payments. Maybe they are about to start jumping into the market. Of course the challenge is to find the next home and compete with the other sellers.
My basic belief is that this is a market cycle. We are just recovering from the second greatest financial crisis in the history of the United States. It is to be expected that there are significant market cycles that follow such an event. Besides, the economy and market always moves in cycles that constantly correct and normalize the market forces. So the real question is whether and how homeowners should take advantage of this once-in-a-lifetime Seller’s market.
I will follow-up on this in subsequent Newsletters. There are new loan programs that will provide bridge-financing at low ARM interest rates. There is the sell-rent-buy option. There is the sell with 1-2 month rent-back option. Certainly options to consider to maximize the cash flow and savings available for retirement. There are also tax programs that allow sellers to retain their low property tax levels and to exclude up to $500,000 in gain.
Please reply with your thoughts. I’m very interested in gaining additional insight and opinion on this very significant real estate trend.  As always, there are a large number of charts and analysis available for you at www.SiliconValleyMLS.info
Bryan Sweeley
Bsweeley@apr.com
650.793.0355
Why is the supply of New Listings so low?
Our current real estate market is in unusual territory. While home values in the Saratoga-Los Gatos area are at all-time highs, the supply of New Listings is at a 17-year low. Last year the number of New Listings that came on the market was about 35-50%% lower than the supply prior to the financial crisis. Yet, demand is very strong pushing the average days on market to 17-year lows. No wonder it is such a strong Seller’s market.
The big question is what is keeping/pushing the supply of New Listings down. Yes, there is virtually no space to build, but that has been the case for 20+ years. Certainly obvious why the supply dropped immediately following the financial crisis, but why hasn’t it recovered like prices did starting in 2012?  In fact the supply dropped even further in 2013. And yes, why would anybody want to leave (this has always been true). Is there something structural or is this a temporary market cycle?

Maybe if we break the problem down into smaller pieces we can understand what dynamics might be going on with the traditional sources of New Listings?

  1. New Construction – as mentioned earlier, there just isn’t enough open land to be a meaningful supply of new homes. The vast majority of new homes are replacing older construction resulting in no net change in the total number of homes. It could generate New Listings, however most of the time these projects are by the homeowner themselves and not being built to put on the market.
  2. Moving out of area –  most locals would not leave unless forced to. Relocating to a new job is a top reason. I suspect that this may be unusually low right now as jobs are slowly recovering nationwide, yet are very strong here. Another reason is to retire. After seeing their retirement portfolios diminish by 30% with the financial crisis, owners might be delaying retirement. Combined with the strong double-digit appreciation in home values over the past two years, they might be staying put for now.
  3. Downsizing - long-time owners downsizing for health reasons is probably the most constant factor. I do hear folks saying that there are not many attractive options in the area, therefore best to stay home. Empty-nesters talk about downsizing to a single-level, 3-bedroom home, but the challenge in this market is finding one and competing with the other Buyers. These homeowners will become a bigger factor as they look for ways to convert their huge investment in their home into a portfolio that generates cash-flow for retirement income.
  4. Trading-up – moving up from the initial 3-bedroom home in the area to a larger 4-5 bedroom home. Usually fueled by stock option money, which you would expect to be more plentiful with the overall stock market back to historical highs. Maybe still hesitant after the financial crisis to commit to larger mortgage payments. Maybe they are about to start jumping into the market. Of course the challenge is to find the next home and compete with the other sellers.
My basic belief is that this is a market cycle. We are just recovering from the second greatest financial crisis in the history of the United States. It is to be expected that there are significant market cycles that follow such an event. Besides, the economy and market always moves in cycles that constantly correct and normalize the market forces. So the real question is whether and how homeowners should take advantage of this once-in-a-lifetime Seller’s market.
I will follow-up on this in subsequent Newsletters. There are new loan programs that will provide bridge-financing at low ARM interest rates. There is the sell-rent-buy option. There is the sell with 1-2 month rent-back option. Certainly options to consider to maximize the cash flow and savings available for retirement. There are also tax programs that allow sellers to retain their low property tax levels and to exclude up to $500,000 in gain.
Please reply with your thoughts. I’m very interested in gaining additional insight and opinion on this very significant real estate trend.  As always, there are a large number of charts and analysis available for you at www.SiliconValleyMLS.info
Bryan Sweeley
Bsweeley@apr.com
650.793.0355
Why is the supply of New Listings so low?
Our current real estate market is in unusual territory. While home values in the Mountain View-Sunnyvale area are at all-time highs, the supply of New Listings is at a 17-year low. Last year the number of New Listings that came on the market was about 35-50%% lower than the supply prior to the financial crisis. Yet, demand is very strong pushing the average days on market to 17-year lows. No wonder it is such a strong Seller’s market.
The big question is what is keeping/pushing the supply of New Listings down. Yes, there is virtually no space to build, but that has been the case for 20+ years. Certainly obvious why the supply dropped immediately following the financial crisis, but why hasn’t it recovered like prices did starting in 2012?  In fact the supply dropped even further in 2013. And yes, why would anybody want to leave (this has always been true). Is there something structural or is this a temporary market cycle?

Maybe if we break the problem down into smaller pieces we can understand what dynamics might be going on with the traditional sources of New Listings?

  1. New Construction – as mentioned earlier, there just isn’t enough open land to be a meaningful supply of new homes. The vast majority of new homes are replacing older construction resulting in no net change in the total number of homes. It could generate New Listings, however most of the time these projects are by the homeowner themselves and not being built to put on the market.
  2. Moving out of area –  most locals would not leave unless forced to. Relocating to a new job is a top reason. I suspect that this may be unusually low right now as jobs are slowly recovering nationwide, yet are very strong here. Another reason is to retire. After seeing their retirement portfolios diminish by 30% with the financial crisis, owners might be delaying retirement. Combined with the strong double-digit appreciation in home values over the past two years, they might be staying put for now.
  3. Downsizing - long-time owners downsizing for health reasons is probably the most constant factor. I do hear folks saying that there are not many attractive options in the area, therefore best to stay home. Empty-nesters talk about downsizing to a single-level, 3-bedroom home, but the challenge in this market is finding one and competing with the other Buyers. These homeowners will become a bigger factor as they look for ways to convert their huge investment in their home into a portfolio that generates cash-flow for retirement income.
  4. Trading-up – moving up from the initial 3-bedroom home in the area to a larger 4-5 bedroom home. Usually fueled by stock option money, which you would expect to be more plentiful with the overall stock market back to historical highs. Maybe still hesitant after the financial crisis to commit to larger mortgage payments. Maybe they are about to start jumping into the market. Of course the challenge is to find the next home and compete with the other sellers.
My basic belief is that this is a market cycle. We are just recovering from the second greatest financial crisis in the history of the United States. It is to be expected that there are significant market cycles that follow such an event. Besides, the economy and market always moves in cycles that constantly correct and normalize the market forces. So the real question is whether and how homeowners should take advantage of this once-in-a-lifetime Seller’s market.
I will follow-up on this in subsequent Newsletters. There are new loan programs that will provide bridge-financing at low ARM interest rates. There is the sell-rent-buy option. There is the sell with 1-2 month rent-back option. Certainly options to consider to maximize the cash flow and savings available for retirement. There are also tax programs that allow sellers to retain their low property tax levels and to exclude up to $500,000 in gain.
Please reply with your thoughts. I’m very interested in gaining additional insight and opinion on this very significant real estate trend.  As always, there are a large number of charts and analysis available for you at www.SiliconValleyMLS.info
Bryan Sweeley
Bsweeley@apr.com
650.793.0355
Why is the supply of New Listings so low?
Our current real estate market is in unusual territory. While home values in the Santa Clara-Campbell area are at all-time highs, the supply of New Listings is at a 17-year low. Last year the number of New Listings that came on the market was about 40%% lower than the supply prior to the financial crisis. Yet, demand is very strong pushing the average days on market to 17-year lows. No wonder it is such a strong Seller’s market.
The big question is what is keeping/pushing the supply of New Listings down. Yes, there is virtually no space to build, but that has been the case for 20+ years. Certainly obvious why the supply dropped immediately following the financial crisis, but why hasn’t it recovered like prices did starting in 2012?  In fact the supply dropped even further in 2013. And yes, why would anybody want to leave (this has always been true). Is there something structural or is this a temporary market cycle?

Maybe if we break the problem down into smaller pieces we can understand what dynamics might be going on with the traditional sources of New Listings?

  1. New Construction – as mentioned earlier, there just isn’t enough open land to be a meaningful supply of new homes. The vast majority of new homes are replacing older construction resulting in no net change in the total number of homes. It could generate New Listings, however most of the time these projects are by the homeowner themselves and not being built to put on the market.
  2. Moving out of area –  most locals would not leave unless forced to. Relocating to a new job is a top reason. I suspect that this may be unusually low right now as jobs are slowly recovering nationwide, yet are very strong here. Another reason is to retire. After seeing their retirement portfolios diminish by 30% with the financial crisis, owners might be delaying retirement. Combined with the strong double-digit appreciation in home values over the past two years, they might be staying put for now.
  3. Downsizing - long-time owners downsizing for health reasons is probably the most constant factor. I do hear folks saying that there are not many attractive options in the area, therefore best to stay home. Empty-nesters talk about downsizing to a single-level, 3-bedroom home, but the challenge in this market is finding one and competing with the other Buyers. These homeowners will become a bigger factor as they look for ways to convert their huge investment in their home into a portfolio that generates cash-flow for retirement income.
  4. Trading-up – moving up from the initial 3-bedroom home in the area to a larger 4-5 bedroom home. Usually fueled by stock option money, which you would expect to be more plentiful with the overall stock market back to historical highs. Maybe still hesitant after the financial crisis to commit to larger mortgage payments. Maybe they are about to start jumping into the market. Of course the challenge is to find the next home and compete with the other sellers.
My basic belief is that this is a market cycle. We are just recovering from the second greatest financial crisis in the history of the United States. It is to be expected that there are significant market cycles that follow such an event. Besides, the economy and market always moves in cycles that constantly correct and normalize the market forces. So the real question is whether and how homeowners should take advantage of this once-in-a-lifetime Seller’s market.
I will follow-up on this in subsequent Newsletters. There are new loan programs that will provide bridge-financing at low ARM interest rates. There is the sell-rent-buy option. There is the sell with 1-2 month rent-back option. Certainly options to consider to maximize the cash flow and savings available for retirement. There are also tax programs that allow sellers to retain their low property tax levels and to exclude up to $500,000 in gain.
Please reply with your thoughts. I’m very interested in gaining additional insight and opinion on this very significant real estate trend.  As always, there are a large number of charts and analysis available for you at www.SiliconValleyMLS.info
Bryan Sweeley
Bsweeley@apr.com
650.793.0355
Why is the supply of New Listings so low?
Our current real estate market is in unusual territory. While home values in the Cupertino area are at all-time highs, the supply of New Listings is at a 17-year low. Last year the number of New Listings that came on the market was about 50%% lower than the supply prior to the financial crisis. Yet, demand is very strong pushing the average days on market to 17-year lows. No wonder it is such a strong Seller’s market.
The big question is what is keeping/pushing the supply of New Listings down. Yes, there is virtually no space to build, but that has been the case for 20+ years. Certainly obvious why the supply dropped immediately following the financial crisis, but why hasn’t it recovered like prices did starting in 2012?  In fact the supply dropped even further in 2013. And yes, why would anybody want to leave (this has always been true). Is there something structural or is this a temporary market cycle?

Maybe if we break the problem down into smaller pieces we can understand what dynamics might be going on with the traditional sources of New Listings?

  1. New Construction – as mentioned earlier, there just isn’t enough open land to be a meaningful supply of new homes. The vast majority of new homes are replacing older construction resulting in no net change in the total number of homes. It could generate New Listings, however most of the time these projects are by the homeowner themselves and not being built to put on the market.
  2. Moving out of area –  most locals would not leave unless forced to. Relocating to a new job is a top reason. I suspect that this may be unusually low right now as jobs are slowly recovering nationwide, yet are very strong here. Another reason is to retire. After seeing their retirement portfolios diminish by 30% with the financial crisis, owners might be delaying retirement. Combined with the strong double-digit appreciation in home values over the past two years, they might be staying put for now.
  3. Downsizing - long-time owners downsizing for health reasons is probably the most constant factor. I do hear folks saying that there are not many attractive options in the area, therefore best to stay home. Empty-nesters talk about downsizing to a single-level, 3-bedroom home, but the challenge in this market is finding one and competing with the other Buyers. These homeowners will become a bigger factor as they look for ways to convert their huge investment in their home into a portfolio that generates cash-flow for retirement income.
  4. Trading-up – moving up from the initial 3-bedroom home in the area to a larger 4-5 bedroom home. Usually fueled by stock option money, which you would expect to be more plentiful with the overall stock market back to historical highs. Maybe still hesitant after the financial crisis to commit to larger mortgage payments. Maybe they are about to start jumping into the market. Of course the challenge is to find the next home and compete with the other sellers.
My basic belief is that this is a market cycle. We are just recovering from the second greatest financial crisis in the history of the United States. It is to be expected that there are significant market cycles that follow such an event. Besides, the economy and market always moves in cycles that constantly correct and normalize the market forces. So the real question is whether and how homeowners should take advantage of this once-in-a-lifetime Seller’s market.
I will follow-up on this in subsequent Newsletters. There are new loan programs that will provide bridge-financing at low ARM interest rates. There is the sell-rent-buy option. There is the sell with 1-2 month rent-back option. Certainly options to consider to maximize the cash flow and savings available for retirement. There are also tax programs that allow sellers to retain their low property tax levels and to exclude up to $500,000 in gain.
Please reply with your thoughts. I’m very interested in gaining additional insight and opinion on this very significant real estate trend.  As always, there are a large number of charts and analysis available for you at www.SiliconValleyMLS.info
Bryan Sweeley
Bsweeley@apr.com
650.793.0355