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July 05, 2007

The numbers for June’s real estate closings are in. How does it look?

Overall, things are “OK” in Los Gatos. It is a bit of a buyer’s market, but not a strong one. Certainly things are not nearly as difficult as on the east side of the valley for selling(Alum Rock, Berryessa, south San Jose), where sales have almost ground to a halt. Things are selling in Los Gatos. Just not everything, at every price and every condition. So yes, you can sell, but you have to be serious about it and not just “test the waters” to “see if you can get your price”. Buyers, it’s a pretty decent time to buy. No one is giving away homes in Los Gatos, but serious sellers are willing to negotiate to get their home sold. Don’t be afraid – give it a good shot and you will likely be successful!

In our high-tech, data-driven valley, everyone wants to see the numbers. So below, we’ll view them.

Let’s look at the absorption rate first. This is the number that reflects the “months of inventory” or how long it would take to sell off everything currently listed if nothing new were to come onto the market. If that is not plain, think of it like a bathtub full of water. If we pulled the drain (but did not allow any new water to enter the tub), how long would it take for the water currently there to empty out?

For this absorption rate, I used single family homes in Area 16, which our MLS provider identifies as the Los Gatos area (it’s close to accurate – there are some San Jose homes in area 16 but not many, most are Los Gatos addresses and properly within the town of Los Gatos).  (This number is derived by dividing the current inventory by the number of closed sales for that period.) Obviously, for sellers, a shorter rate is better:

Absorption rate for single family homes in Los Gatos

The absorption rate is better for sellers than a year ago (June 2007 3.3, June 2006, 4). For the National Association of Realtors, anything under 6  months is considered a seller’s market. But in our area, that is an unusually long time so we consider other factors, such as the list price to sales price ratio, etc.

Year over year, things are better than this time last year for sellers. They are also improved over a month ago, though not quite as good as the closeds for April (reflecting sales in March, which was the best month of the year to date for selling).

Another factor to consider is the list price to sales price ratio. This, too, improved noticeably and more closely resembled April’s closings/March’s sales, but didn’t quite match it. With this number, we normally view anything over 100% as a seller’s market. Right now it’s not as good as it was earlier in the year, when the numbers ranged from 98-99%. Compared to many places in the country, this list price to sales price ratio is great. This number indicates that it is not a seller’s market. But it is not a super strong buyer’s market, either.

June 2007         97.57
May  2007        95.75
April 2007         97.88
March 2007       98.42
February 2007   98.91
January 2007     98.54
December 2006  96.27
November 2006   97.26
October 2006      98.7
September 2006  94.83
August 2006        97.4
July 2006            98.24
June 2006           98.7

For this ratio of list price to sales price, the Los Gatos single family home market has slipped from a year ago. This indicator is a bit different than others we’re seeing.

The number of new listings has slowed down, and the total inventory has declined a little bit. Sales are keeping pace. These are keeping Los Gatos from slipping into a true or strong buyer’s market.

                       New Listings    Current Inventory

June 2007         58                      134
May  2007         69                     153
April 2007         73                      136
March 2007       62                      118
February 2007   45                      103
January 2007     54                      100
December 2006  11                       81
November 2006   29                      127
October 2006      46                      144
September 2006  85                      171
August 2006        81                      164
July 2006            67                      166
June 2006           87                      170

Visually, it looks like this:

On this front, it is really a much better market for sellers than a year ago as we have about 20% fewer single family homes on the market now as we did then.

 How about the simple number of closed sales? The newspaper keeps reporting that the number of sales are off statewide and countywide. But in Los Gatos, sales for the last 3 months have been close to (and quarte
r over quarter a little higher than) a year ago.

June 2007  &nb
sp;     41
May  2007        33
April 2007         45

March 2007       30
February 2007   29
January 2007     27
December 2006  24
November 2006   31
October 2006      41
September 2006  19
August 2006        35
July 2006            24
June 2006          42
May 2006           36
April 2006          34

Days on Market (or Continuous Days on Market) is not as strong an indicator as the Absorption Rate, but everyone wants to know about these numbers. Let’s look at them next – we will view the CONTINUOUS Days on Market here:

June 2007        37
May  2007        78
April 2007         60

March 2007       65
February 2007   48
January 2007     101
December 2006  82
November 2006   69
October 2006      68
September 2006  80
August 2006        55
July 2006            45
June 2006          46
May 2006           61
April 2006          29

Seems that things are moving around a bit but quarter over quarter, the continuous days on market are longer than a year ago.

In summary, I think Los Gatos is mostly “holding steady”. I do not see a deepening buyer’s market. Nor do I see a quick turnaround back to a seller’s market.

What often happens here in Silicon Valley is that we find ourselves in a ten year pattern in which prices rise (then spike), decline a bit (but not as much as the runup) and then go flat while we catch our breath and wait for it to all begin again. Only in hindsight do we ever really know where we are in the cycle, but it appears to me that we are in the flat, recovery period right now.

The plus to this kind of market is that it is more calm. For people who want to do a move up, this type of market provides enough momentum to sell, but not so much crazy competition that it’s difficult to find a replacement home.

Every home, neighborhood and price range is unique. For specific information on your particular home and needs, please contact me.
Mary Pope-Handy

Mary Pope-Handy, Realtor, CRS, ABR, e-PRO, SRES, ASP, RECS, CNHS
Helping Nice Folks to Buy & Sell Homes Since 1993
Co-Author: “Get The Best Deal When Selling Your Home In Silicon Valley”
Intero Real Estate Services, Los Gatos, CA (Silicon Valley)
408 357-5760 (Direct); 408 204-7673 (Cell); 408 715-0201 (eFax)’