March 26, 2008
In some parts of Santa Clara County, a high percentage of homes on the market in the lower price ranges especially are offered as “short sale” listings. For example, recently I’ve been assisting buyers of single family homes in the $500,000 price range in parts of San Jose (such as Evergreen, Blossom Valley, Santa Teresa and South San Jose). The vast majority of those listings, perhaps 95% or more, are “short sales”.
But that’s not happening in Los Gatos, Monte Sereno or Saratoga. Short sales pull values down, so if you live in this lovely foothill area, be glad that the real estate market here is healthier!
Here are the numbers of local short sale listings as of today, March 26, 2008:
- Los Gatos – 5 total, 2 single family houses and 3 condos or townhomes which are listed as being short sales as of today (95032 and 95030 areas)
- Monte Sereno – 1 single family house listed as a short sale.
- Saratoga – 0 single family houses, 0 condos or townhomes which are presented as short sales.
- Los Gatos Mountains – 3 single family homes
How does this compare to nearby areas in Silicon Valley?
For comparison, I’ll combine houses and condos/townhouses. The number after each area reflects the total number of short sale listings for that city or district
- Cambrian Park – 59
- Santa Clara – 56
- Campbell – 13
- Cupertino – 1
- Los Altos – 0
- Sunnyvale – 50
- Blossom Valley – 193
- San Jose (all areas) – 1534
A high number of short sales creates increased risk on home values. Short sales usually sell for lower than market value because (1) they take longer to sell, (2) they take much longer to close escrow, (3) they have a high rate of never closing at all (most short sales become foreclosures), even if the seller, the buyer, and agents representing buyer and seller are doing their best to get it closed. Often the slowdown is with the lender, or a servicing company representing the lender. They are overwhelmed with files.
It can be a vicious cycle on home values once it starts. A short sale listing finally gets a good buyer and contract to purchase the home. The bank “sits” on it for 30 or 45 days or more. Meanwhile, in areas with a lot of short sale listings, prices get pushed down. Buyers realize after a month or more that the house is no longer what they originally offered on it. They don’t want to be tied to yesterday’s price in a declining market. So after a period of time, the buyer is very likely to stop waiting and either ask for a lower price or go on to a more attractive property. If that first home goes back on the market again, it will need to be at a lower price to keep up with market conditions.
It is easy to find a short sale listing in many parts of Silicon Valley, but it is much more difficult to find them in the pricier areas. We are continuing to see a split or “bifurcated” market in which the higher priced areas are more insulated from the recent asault on home values.