Santa Clara Valley Real Estate Report October/November 2010

Sales momentum for single-family, re-sale homes in Santa Clara County dipped into negative territory in October for the first time since November 2008.

We calculate…

sales momentum by using a 12-month moving average to eliminate seasonality. By comparing this year’s 12-month moving average to last year’s, we get a percentage showing market momentum.

In the chart on my on-line site…

are two of the most important statistics determining market momentum. The blue shows momentum for home sales while the red line shows momentum for pending home sales.

Sales momentum peaked last July and has been trending down ever since. Pending sales, which normally track closed sales closely, have jumped out of the norm due to the large number of foreclosure and short sales in the past two years.

In a normal market…

pending sales close within 60 days. In today’s market, pending sales are taking much longer due to the high number of foreclosure and short sales, which require lender approval. This has pumped up the number of pending sales, which, in a normal market would indicate increasing sales in the coming two months. But, because a majority of pending sales are foreclosure or short sales, a greater potion of these sales never close.

Pricing momentum…

on the other hand, generally lags the buying and selling indicators provided by the sales momentum trend. In the chart below, the purple line shows the median price momentum indicator.

As you can see, when the sales momentum indicator changed to a sell signal in June 2005, prices didn’t peak until November, when they started a gradual decline. The median price indicator really started falling when it crossed the 0 axis in August 2008.

The sales momentum indicator turned up in December 2008 and the price indicator kept falling until sales momentum peaked in July 2009, when pricing momentum started picking up.

More statistics…

The median sales price for single-family, re-sale homes, after falling for the previous three months, turned upward in October by 1.8% from September. Year-over-year, the median price was up 7.4%. This is the thirteenth month in a row the median price has been higher than the year before.

Inventory turned downward, as is its wont this time of year, dropping 8.4% from September. Year-over-year, inventory was up for the fourth month in a row: 30.7%.

The sales price to list price ratio continued slipping last month, down 0.2 of a point to 99%. This is the sixth month in a row the ratio has dropped. Since January 2000, the median ratio has been 99.8%, which is incredibly high. A falling ratio also indicates that momentum is faltering.

Statistics: Tracking Momentum

As we mentioned last month, the Internet is strewn with statistics, some good, some bad, and some downright ugly. So, what are statistics for?

Statistics are for…

determining the best time to buy or sell real estate. If the statistics you are tracking do that, they’re good. If they don’t, they’re misleading, at best.

Tracking momentum…

is the best way to determine when to buy or sell real estate. The question becomes which statistics to track.

Robert Campbell, a San Diego based real estate investor, in his 2004 book “Timing the Real Estate Market”, lists five “vital signs” he tracks to time the market, in order from strongest to weakest:

1.  Existing home sales

2.  New home building permits

3.  Mortgage loan defaults

4.  Foreclosure sales, and

5.  Interest rates

He uses the same basic formula for all five: (current 12-month moving average—previous 12-month moving)/current 12-month moving average.

Finding the data…

means tapping into a variety of sources.

Sales data is the easiest to track. Local newspapers publish this data each month. If you want historical sales data, you can call us and we’ll provide it for you.

In California, new home building permits are tracked by the Construction Industry Research Board. The board charges for their data. (

There are a variety of sources for mortgage loan default and foreclosure sales data starting with the county recorder’s office. Other sources, for which you will have to pay are:, and

Interest rate data can be had at a number of different sites: http://hsh.com, or While Campbell tracks 1-year t-bills, monthly mortgage rates can also be used.

Next month, we will review the timing method Craig Hall uses in his 2003 book, “Timing the Real Estate Market: How to Buy Low and Sell High in Real Estate.”

This author identifies seven trends to track to determine when real estate cycles are about to turn.

Go to my on-line site for the full report, plus a city-by-city breakdown.

Real Estate Report August/September 2010

Prices for single-family, re-sale homes were up in August, year-over-year, for the eleventh month in a row. The median price rose 13.7%, while the average price was up 15.4%, reflecting a higher share of $1,000,000+ home sales.

Sales of single-family, resale homes continued to slide and were lower than the year be- fore for the third straight month: -13.1%.

In a turn, pending sales were also lower than the year before for the first month since March 2008: -6.9%.

Inventory was higher than last year for the second month in a row: 18.4%.

The sales price to list price ratio for homes dropped below 100% for the first time since June 2009: 99.6%.

The median price for condos was up 5.3% year-over-year. This is the tenth month in a row the median price has been higher than the year before. After nine straight months of year- over-year gains, the average prices for condos dropped 1.7%.

Condo sales were up 0.4% compared to last August.

Pending sales were down from June, and were lower than the year before for the first time since March 2008: -11.2%.

Inventory for condos was higher than the year before for the third month in a row: 40.9%.

Real Estate Report July/August 2010

Sales of both single-family, re-sale homes and condos fell in July with the expiration of the Federal tax credit.

Home sales were off 15.6% compared to last July, while condo sales were down 18.8%.

The new state tax credit has pumped a little life into the high-end market. With more sales in that segment of the market, the average price for homes in July went over $800,000 for the first time since August 2008.

The high-end market has been helped by increasing access to jumbo and super-jumbo loans. Historically, and until July 2007, the spread or difference between conforming mortgage rates and jumbo rates moved within a narrow range of about 0.20%. At the trough of the market, the spread was 1.9%. Now, the spread is down to 0.5%, and the secondary market for jumbo loans is awakening.

The median price for homes was off 1.1% from June, but it was up 7.2% year-over-year. The average price was up 2.4% from June and up 12.3% compared to last July. This is the tenth month in a row prices have been higher than the year before.

The sales price to list price ratio for homes stayed over 100% for the thirteenth month in a row: 100.2%.

The median and average prices for condos were up 3.3% and 9.5% respectively year-over-year.

Pending sales were down from June, but were still higher than the year before. Pending home sales were up 44.2%, while pending condo sales rose 44.7%.

Inventory for homes rose 9.6% year-over-year. This is the first month since November 2008 inventory has been higher than the year before.
Speaking of inventory, Leslie Appleton-Young, chief economist for the California Association of REALTORS® (C.A.R.), said, at a recent Silicon Valley Association of REALTORS® (SILVAR) meeting in Palo Alto last month, in five to ten years California will experience a housing shortage.

She said household growth for the state is expected to be 200,000 a year. The CBIA reports only 13,000 permits pulled in the first six months of the year.

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Real Estate Report May/June 2010

HIGHLIGHTS for May 2010

– Home sales increased, year-over-year, by 8.5% in May. Year-to-date, home sales are up 26.7%.

– The median price for single-family, re-sale homes gained 4.5% from April, down 35.8% year-over-year.

– Days of Inventory now stands at 93.

The aftermath of the Fed tax credit, which expired April 30th, won’t be completely known until the end of June. Although the tax credit expired at the end of April, when buyers needed to be in escrow, buyers have until June 30th to close the sale.

The effect of the tax credit was complicated by the new state tax credit which started May 1st. Many buyers delayed escrow so they could take advantage of both credits, stealing sales from April, down 1.4% year-over-year, and pushing them into May, where home sales were up 21.1% year-over-year.

Pending home sales, goosed by the tax credits, continued to be near the record high recorded in April. We expect home sales to be strong in June.

The median price for single-family, re-sale homes edged upward in May by 0.2% from April. It was up 29.1% from last May. This is the eighth month in a row the median price has been higher than the year before.

Although inventory grew 2.4% from April, it was down 19% year-over-year. This is the eighteenth month in a row inventory has been lower than the year before, putting upward pressure on prices.

The sales price to list price ratio stayed over 100% for the eleventh month in a row: 100.9%. This signifies that well-priced homes in the best areas are receiving multiple offers.


If the previous numbers don’t convince you the real estate market in Santa Clara County has bottomed out, let’s look at some other statistics.

First, foreclosures levels: they dipped by 2% in April year-over-year. That’s the first annual decrease in more than five years, according to report issuer RealtyTrac.

Second, shorter marketing time: in May, average days on market was 39. That’s the shortest time since July 2007.

Third, Case-Shiller Home Price Index: often considered the gold standard for real estate statistics, the index for the San Francisco Bay Area was up for the eleventh month in a row, according to their latest statistics reported for March 2010. I expect when they report on April and May, we will see the index continue rising.

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