2012 Silicon Valley Real Estate Market Year End Analysis

With 2012 coming to an end, I want to write this letter providing you with our housing market analysis for the year:

The market has heated up this year! There are mostly, MULTIPLE OFFERS! The number of distress property sales (the short sales and Bank Owned properties) is much lower.

As it was predicted, about the Shadow (foreclosed or ready for foreclosure homes) inventory that the banks are holding and that they would flood the market, did not happened this year either. Here is the inventory numbers:

Active inventory, Single Family and Condo/T-houses for sale
October 2010 inventory 4590 homes for sale
October 2011 inventory 3076 homes for sale, a 33% reduction in inventory
October 2012 inventory 1337 homes for sale, a 56% reduction from 2011, 71% reduction from 2010  

Santa Clara County’s employment is increasing faster than the rest of the state and the country again. The number of distressed sales has dropped in all areas including the southern part of Santa Clara County.

The construction activity has picked up much more; builders are paying higher prices for the buildable land or tear downs. The new homes are selling before they are completed. The profit margin for builders and developers has increased, so the demand is high for buildable land. In some new developments the builders are able to set a date for release of a number of the built homes for sale and the buyers are waiting in line at the development site for 3 to 10 days to be the first ones to choose. If the builder is releasing 10 homes, there are 30 to 50 buyers in line. Some builders are turning to lottery to choose the buyer.

Employment has improved much more in the Silicon Valley (we are very lucky to be here). Santa Clara County unemployment rate is at 7.9% vs last year at 9.5%.  The State unemployment is 10.1% vs last year 12%.

Here are the median single family home prices since March 2009, which was the bottom:

 

March

October

October

October

October

 

2009

2009

2010

2011

2012

Median Prices

$450,000

$593,000

$641,500

$549,000

$691,000

The Median Price is the middle point of all the homes that sold in the month.

Total number of single family homes sold and closed escrow in Santa Clara County in a 12-month period starting November 1st of each year and ending October 31st of the following year are as follows:

 

2009

 

2010

 

2011

 

2012

Total closed sales

11,308

 

11,460

 

11,248

 

11,920

Distressed Sales (Bank Owned & Short Sales)

5,705

50.5%

 

4,115

35.9%

 

3,998

35.5%

 

3,476

29.2%

Sales under $500K

5,450

48.2%

 

4,217

36.8%

 

4,551

40.7%

 

4,147

34.8%

Sales Between $500K to $1M

4,349

38.5%

 

5,023

43.8%

 

4,600

40.9%

 

5,122

43.0%

Sales Between $1M to $1.5M

1,067

9.4%

 

1,524

13.3%

 

1,375

12.2%

 

1,531

12.8%

Sales Over $1.5M

590

5.2%

 

850

7.4%

 

838

7.4%

 

1,254

10.5%

The rental market has improved tremendously again. The vacancy rates have dropped to less than 3% and the rental rates have increased 8% to 15% depending on the location and condition of the units.
The rental properties are producing much better cash flow and investors are actively purchasing more rental real estate for long term vs flipping the properties. The inventory of the income properties are at all-time low. I estimate the number of active income properties on the market is less than 60% to 80% depending on the areas. Most of them are selling with multiple offers.

The interest rates are unbelievable this year. It is amazing that I am repeating myself for the 3rd year in a row. In all my practice I have never seen rates this low. The rates on the average are about .5% below the last year rates. Here is a sample of rates as of the first week of November 2012 with zero points:

Loans under          $417K=3.4% (conforming loans)

Loans between      $417K to $625K=3.6% (Jumbo conforming)

Loans above          $625K=4% (Jumbo loans)

Good news 1: 56% lower inventory than last year. We will see higher prices in 2013.

Good news 2: the interest rates are even lower than last year making it more affordable.

Good news 3: the impact of the price increases are offset somewhat with the lower interest rates. Our top buyers in the market are: first time home buyers, move up buyers and investors.

Statewide, As per California Association of Realtors, the inventory is lower across the board in all counties; many homes are selling with multiple offers. There have been more multiple offer sales in the State of California in 2012 than in any years in the past.

My analysis, the employment in Silicon Valley is improving at a much better rate than any other area. Again, high tech is the engine that is powering our employment growth. There is a lot of expansion going on with some of our high tech companies like Apple, Google, Facebook, Linkedin and many others. We are seeing more hiring and relocations to our area this year than in the previous year again.

This year was a much better year than last year and I expect it to continue to get even better next year. We should have a higher number of sales, appreciation rate in the range of 8% to 10%, continued with low interest rates.

2012 has been a good year. I am thankful for your being around and all the great referrals that I have received from you.  As always, I appreciated your business and friendship. It is always a pleasure to talk with you when you call, whether it is business or just to say hello.

I am never too busy to answer any questions you might have regarding any real estate matters, and if in a rare chance I don’t know the answer, I will find it for you. I can also help you with any referrals for people in the home improvement profession to assist you with your home improvement projects or repairs at reasonable prices.

Wishing you and your family a happy, healthy and prosperous 2013!

Jin Chen

REALTOR, REFERRAL REALTY
650-207-1421 (B)
jchen@referralrealty.com

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