Santa Clara and San Mateo Counties 2013 Market Recap

Silicon Valley neighborhoodsAs we are closing in on 2014, it’s a good time to reflect back on the market trends of this year and crystallize our forecast for 2014.  Arguably, 2013 was the most competitive residential real estate market we have experienced over the past 7 years or more.  Based upon the low inventory/high buyer demand dynamic which set the tone right out of the gate in January of 2013 and carried through the year, unthinkable comparisons were beginning to be drawn to 1999/2000.  As we close out 2013 and observe present inventory levels it’s difficult to grasp the reality that we have approximately 20% less inventory this December (in Santa Clara County, for example) than we did during the same month in 2012.  This fact combined with the release of additional pent-up demand, continued investor and foreign investment concentrated in our market areas along with the normalization of new housing formation will result in a highly competitive first half of 2014.  The natural outcome will be another year of appreciating real estate valuations in our market areas.  Note to buyers: if you are in the market, give yourself the gift of a new home for the Holidays.

In Santa Clara County for Class 1/SFR only, the 2 year “sold” Median trend is up 56% while the “for sale” Median has climbed 46% during the same period.  A few other data points to pay attention to within the Santa Clara County Market Graphs:

1. Median Price

a. Sold Median Peaked out at $837,500 in July of this year – July of just one year prior was $684,000, a remarkable market “shift” 

b. The number of Sold/Closed escrow properties this November was 790, last year same month was 967.  This which has been reported as slowing pending home sales in the media remains more a function of simply flat out low inventory levels – not enough to sell. 

c. Forecasting for December Sold/Closed figures we see more of an equilibrium with new/under contract properties @ 809 this November as compared to 820 same month last year. I 

d. The main story as we close out 2013, will be the “same story” in 2014 once the media begins to report on Q1 and Q2 of the new year – “low inventory and high demand once again results in Bay Area real estate appreciation” – Last November we had a total of 2,449 “active” SFR listings (both available and under contract/pending).  This November?  A total of 2,020.  Amazing.  All the talk among Realtors at the end of last year/start of 2013 was disbelief with “how low can the inventory levels go?  We will have our answer at the end of this month and beginning of January.  I believe we are going to experience our “inventory trough” of this cycle in the next 30/40 days. 

e. If we really want to break this down, we should also consider expireds; Oct/Nov 2012 = 507, for Oct/Nov 2013 = 570.  This activity alone results in a -70 in the “active” listing column when comparing year over year.

2. Supply & Demand Units

a. For Sale/Supply in Units 2 year trend down 38%, no surprise here.

b. Under Contracts units remain flat.

c. Total Sold units trending up 3% during same period.

3. Month’s Supply & Days on Market

a. Personally, this statistic has been the most fascinating to watch over the past 5 years.  I believe this statistic alone offers a barometer of intensity in the market.  Keep in mind that most economists will say that 5-6 month’s supply is more of a normal, balanced market.  Meanwhile, we have seen 1 month and under in SCC and SMC and even more compressed in several communities throughout the past 1-2 years.

b. Month’s Supply for November in each of the past 3 years:  2011 – 3.5, 2012 – 1.7, 2013? – 1.2.  In fact, this November ties March of this same year as the low point of the past 2 years (which is really the low point of at least the past 7 and possibly 14 years).

c. Check out the # of SFR properties for sale on the last day of the month of November 2013:  941.  It’s starting to look a lot like “Christmas?”  Well, that too, but how about looking “like it’s 19-99?”  And I am not referring to Prince’s reference either.  Last November, for sale last day of the month:  1,402.

d. Days on market doing it’s typical November/December, I’m going to climb up slightly, to 35 days.  Last November was 40 days.

4. Sales Absorption

a. As another indication of market momentum and strengthening, 40% of the active SFR inventory in escrow at November month end.  Last November was 33.5%.

For San Mateo County, the Sold Median is trending up 56% mirroring the for sale median +56% and under contract +50% over the past 2 years (most significant climbs as compared to all 3 counties in this report).  The for sale median is a leading trend indicator as we see a peak of $1,049M, a 2+ year high this November.  We also eclipsed a sold median mark of $1M in June of this year.  A few other data points to pay attention to within the San Mateo County Market Graphs:

1. Median Price

a. 953 total actives this November as compared to 1,163 same month last year (following the declining inventory trend along with other counties).

b. The November 2013 Sold Median price of $905k is over $200k higher than the same month in November of 2011.

c. The November 2013 “under contract/pending sale” median price of $892,000 is nearly $300k higher than the same figure in November of 2011.

d. The Sold Median price has remained above $900k for the past 9 consecutive months and eclipsed the $1M mark this past June.

e. The number of new listings this past month was 278, down from 337 same month last year.

2. Supply & Demand Units

a. For Sale Inventory in terms of # of listings has trended down 37% over the past two years, # sold +9% and under contract +5% during same time period.

3. Month’s Supply & Days on Market

a. 2+ year low – November stood at 1.2MSI.  Last November was the reverse (in a mirror at least) 2.1.  Two years ago, same month was 3.7MSI.  This November’s mark of 1.2MSI may be the lowest level in 13+ years.  I have been unable to verify if we are experiencing an all-time November low but certainly looks and feels like it may very well be. 

b. For sale last day of month is notable:  Nov 2013 – 461; Nov 2012 – 484; Nov two years ago – 1,364.

c. Days on market again behaving as we would expect towards year end – slight increase to 40 days (same time last year approximately 45 days).

4. Sales Absorption

a. November’s mark of 39.2% under contract is closer to what we experience this past spring (Mar 40%, April 39.5%, May 39.7%).  Last November’s mark stood at 29.9 and two years ago 19.1%.