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
Why is the supply of New Listings so low?
Our current real estate market is in unusual territory. While home values in the Cambrian-Willow Glen 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

Two big indicators of current market conditions are the Sales vs. List Price and the Average Days on Market. Below is a unique chart that combines the two for Los Altos homes sold in 2013.

Los Altos Home Sales price

The initial observation is homes that sell within the first 14 days on market tend to sell for over list price.  If not, then most sell for below list price. This basic trend has been true over time. However, a couple of years ago the break point was closer to 30 days on the market before majority of homes would sell for below list price.

There are two market forces at work. The long-standing one is that if the home does not sell within 14-30 days, then the market is voting with its feet that the price is too high. The downside for Sellers is that when they do reduce the price, there are much fewer prospective Buyers looking at the home, as most have already seen it, and have labeled it off as “not interested”. With multiple offers unlikely, Buyers submitting offers are more likely to offer below even the reduced price.

In this current market, we have the unusual condition of supply being much lower than demand. If the home is desirable and priced at market, there is a very good chance of receiving multiple offers within the first 7-14 days. My rule of thumb is that a home sells for 1% over list for each offer received: 5 offers equals 5% over list (and round up).  The above chart reflects that in 2013 Los Altos homes were receiving 10-20 offers!

The expectation for 2014 is that the above real estate trend will continue. However, the number of multiple offers not be so high. As a result, I expect the above graph to retain the same shape with more of the over list price sales falling in the List Price to List Price + 20% range.

Charts on Los Altos real estate trends and home sales available at www.SiliconValleyMLS.info/los-altos-homes.

The annual median sales price for Los Altos single family residences rose 15% in 2013. This was on top of a 11% increase in 2012. Prices are now 17% higher than the 2007 peak and 39% higher than the 2009 low.

los altos homes for sale

The supply of New Listings hit a 17-year low in 2013. About 18% lower than the 2007-12 average, however 38% lower than the 2001-06 average. Demand continues to steadily push down the average days on market to its lowest point in 17-years: 22 days.

I expect prices to continue to rise in 2014.  Probably at a slightly slower pace, something in the 10% to 12% range.  Demand for homes in the Palo Alto-Los Altos shows no signs of letting up. The supply of New Listings will most likely continue at the historically low 5-year average.

Please feel free to email me with any questions at bsweeley@apr.com. There are additional charts and analysis available for you at www.SiliconValleyMLS.info/los-altos-homes

www.BryanSweeley.com

The annual median sales price for homes in Los Altos Hills rose 8% in 2013. This is on top of a 13% rise in 2012. They are now 9% higher than the 2007 peak.

Los Altos Hills

The supply of New Listings has been pretty consistent over the past 5 yeras. There were 162 New Listings in 2013 compared to the 5-year average of 161.  Demand has increased pushing the average days on market to the second lowest level in 17 years.

I expect the upward trend in prices to continue in 2014. The demand in Palo Alto is so strong and the supply so low that Los Altos Hills benefits from the spill-over effect. Price chages don’t swing as dramatically, so a little more steady as she goes.

Please feel free to email me for additional facts or to answer questions at bsweeley@apr.com. More charts and analysis are available for you at www.SiliconVallyMLS.info/losaltoshills

www.BryanSweeley.com