Silicon Valley Home Prices Flat, Rents Gain Strength by Broderick Perkins
Silicon Valley's housing market is changing gears and it's not clear if the market is switching into reverse or banging the clutch for another run up in prices. In August, the median price of single-family detached homes regained the $10,000 the market lost in July and tied the record high $760,000 median, which was first set in June, according to Richard Calhoun, broker/owner of Creekside Realty in San Jose. The revving up and throttling down first began in April when the median reached $750,000 for the first time, but by July prices were still parked at $750,000, says Calhoun who publishes the "Bay Area Real Estate Market Newsletter", a report comprised of statistics from the area's multiple listing service, RE InfoLink of Campbell, CA. Some of the action is seasonal. "I consider it to be a normal pattern to see a significant increase in price from Jan. 15 to April 15, with the March to April increase over shooting (what the market can bear)" said Calhoun. "This year, there appears to be very little overshooting, therefore the price dip has been delayed. In fact, it hasn't shown up through the first week of September, but I still expect to see it any day," said Calhoun who last month forecast a solid price dip by August. If past history repeats, however, any dip likely will be temporary. "We are obviously in a stop-and-rest point right now. I've seen this before, but I don't anticipate the stop-and-rest to be that long," says Jim Myrick, president of the Santa Clara County Association of Realtors. Meanwhile, after peaking at about $1,900 four years ago, Class-A rents have begun to shake off four years of declines as landlords begin pull the concessions rug out from under new renters. Marcus & Millichap's "August Apartment Research Report for Silicon Valley" credits high home prices, along with better employment prospects for the slow, but sure about face in the rental market. The research firm says the disparity between a mortgage payment and Class A rent for a comparable property is now more than $1,900 a month. Rents are expected to climb 1 percent to $1,325 per month by the end of the year. As rents have risen, concessions have disappeared. Early this year, landlords were offering as much as two months of free rent with a long-term lease. Now they offer an average of only three weeks free rent. Unlike the stalled housing market, rentals are on a definite growth pattern. "Private investors are asserting their confidence in the local apartment market by driving transaction volume higher, and large institutions are monitoring the market for improvement and closing deals for high-dollar assets at a robust pace," said Steven J. Seligman, regional manager of the Palo Alto Marcus and Millichap office. What that means in English is that more renters are signing leases even with fewer concessions. That's because while they have a growing confidence in the local economy, they also have become skittish about the high cost of homes. It's not surprising then on the owner-occupied side of the market there's more price-growth strength and sales growth in the condo sector than for the single-family home market. Condo prices also have been see-sawing, but the $15,000 jump from the $480,000 median in July to the $495,000 record level in August came in even as inventories rose from 868 in July to 894 in August. Condo sales from July to August were also up from 581 to 594. Single-family home sales, on the other hand, slipped from 1,417 in July to 1,404 in August this year as inventories likewise fell from 2,931 to 2,816, Calhoun reported. The year-to-year ending in August data shows condo sales rose from 589 to 594 as inventories moved likewise from 860 a year ago to 894 this August. Single family home sales and inventories both reversed year-to-year. Supplies dipped from 2,912 a year ago to 2,816 in August this year and closed sales dropped from 1,547 in 2004 to 1,404 this August. Myrick says inventories continued to swell after the August data came in. "For inventories to be increasing in mid-September is significant. The best explanation I have heard is the all the bubble stories combined with the rapid appreciation this year has some rushing to sell. The analogy is if the consumers believe rates are increasing then there is rush to buy," said Calhoun. In county pockets with the bulk of home sales -- San Jose, South County (Gilroy, Morgan Hill and San Martin), Santa Clara -- prices fell, keeping the countywide median from rising further. Single family homes also took longer to sell, an average 29 days in August, compared to 25 days in July and 30 days a year ago. Again, condos fared better, selling in an average 20 days in August, compared to 19 days in July, and 26 days a year ago. Finally, mortgage rates have yet to become a spoiler. In August, the average fixed interest rate on 30-year conforming loans fell in every week but one. By Sept. 8, rates averaged 5.71 percent, down from 5.89 percent in early August, according to Freddie Mac. "Right now is the perfect market for move-up buyers. If someone has a property worth $700,000 they can buy something for more than $1 million with a contingency (to sell their existing home to close the deal) right now and negotiate for prices at or a little below asking on some high-end properties," said Myrick, who is also broker/owner of Realty World-Realty Solutions in San Jose. |
