PRICE RISE SHOWS MARKET IS SKEWED
By Sue McAllister / Mercury News 7/19/07
While the Bay Area’s June home sales fell to their lowest level in 12 years, median prices continued to rise in the region’s costliest counties, masking problems – and falling home values – in the lower end of the market.
The median price of resale houses sold in June in Santa Clara County, for example, rose to $791,000, up 2.7 percent compared with a year earlier, while sales dropped 22 percent. Condominium prices in the county rose 6 percent, according to the report from DataQuick Information Systems, which compiled the data from public records.
The value of an individual homeowner’s property typically mirrors the median price trends, said real estate broker Richard Calhoun of San Jose, except when segments of the market are skewing in different directions.
"Right now we have a skew," he said. Parts of the market’s high end are selling quickly and appreciating, while the lower end is generally experiencing slow sales and falling prices. The lower end of the market has been hit hard by the subprime lending fallout, which includes tougher lending standards for borrowers, and owners forced to sell if they are unable to afford rising interest rates on their loans.
So, lately the median price – which marks the midpoint among home sales, at which half the homes cost more than the median and half cost less – requires some interpretation. It’s true that some homes are gaining in value, especially those in expensive neighborhoods with the most desirable school districts. But the primary reason the median price keeps rising in the more expensive counties is that considerably fewer homes than normal are selling in the least expensive neighborhoods. With those out of the count, the median price goes up.
What’s not reflected by the median price figures is the depreciation in some parts of the county, including some neighborhoods in southern and eastern San Jose.
One example is a three-bedroom house now for sale on Lean Avenue near Calero Park in Blossom Valley. The 1,143-square-foot house is listed for $580,000. That’s about 7 percent less than the $625,000 price the owner paid for it in September 2005. The owner used a combination of a first and second mortgage to come up with the purchase price, according to public records. The home has been for sale since March.
Areas of weakness
In the broad area comprising central, East and South San Jose, it would take more than a year – 389 days – to sell off the current inventory of houses for sale given the sales pace of the past several weeks. Last July, the supply of houses for sale in those areas was about 100 days, said Calhoun, owner of Creekside Realty, who compiled the inventory statistics from the local multiple listing service used by realty agents.
But in the fastest-selling parts of the county – Palo Alto, Mountain View and Los Altos – there’s a 36-day supply of houses for sale now, half the supply of a year ago.
It’s not clear yet whether the problems in the low end of the market will ooze into the high end, which in Silicon Valley has appeared insulated so far.
"There’s no direct economic connection," said Stephen Levy of the Center for Continuing Study of the California Economy, in Palo Alto. "However, there is a psychological connection in the sense that all of the news is that the housing market has slowed and there’s no rush to buy."
But Joe Brown, president of brokerage Coldwell Banker’s operations in Silicon Valley, pointed out that those having trouble selling homes are not making the "move-up" purchases they might have. Combined with slow sales among first-time buyers and those with bruised credit histories, "there’s two segments of the marketplace being hit tremendously hard."
Plenty of jobs
On the other hand, he and others said the strong job market is bringing relocating employees to Silicon Valley from all over the country, boosting demand for homes.
Carol Burnett, an executive with Alain Pinel Realtors in Saratoga, noted that in the first half of 2007 there were 60 houses sold for more than $2 million in that city. In all of 2006, she said, there were 76 such sales. "I attribute it to the economy of the valley," she said, adding that many local buyers are again using stock-option profits to boost their purchasing power.
Despite relative strength in some high-end communities, just 7,964 homes of all types – new and resale houses and condos – changed hands last month in the nine-county Bay Area, DataQuick said. That’s down 26.5 percent from June 2006, and the least in any June since 1995, when 7,780 homes sold.
The slowdown has been most drastic in lower-priced counties
In Solano County, for example, the median house price dropped nearly 12 percent, to $415,000, and sales of all homes fell 41.4 percent compared with June 2006.
Buyers don’t want to purchase while prices are falling, so the problem for sellers worsens. Even those who do wish to buy are hampered by the reduced availability of no-down-payment loans for first-time home buyers, a consequence of problems in the subprime lending business. The reduced demand is driving down values.
Many prospective buyers are staying renters for now, increasing demand for rental units. Figures released Wednesday by RealFacts, of Novato, show rents rose 11 percent in the San Jose metro area in the second quarter compared with the same period last year, for example.
Key numbers: Valley homes
$791,000: June median price of a resale house in Santa Clara County, up 2.7 percent year over year
22 percent: Drop in June house sales in the county
36: Days of unsold inventory in Mountain View, Los Altos and Palo Alto as of Wednesday
389: Days of unsold inventory in East Valley, Central San Jose and South San Jose as of Wednesday
Sources: DataQuick; Richard Calhoun of Creekside Realty
June house sales volume, median price by county
Median prices of previously owned single-family houses rose in most Bay Area counties last month compared with June 2006, but fell in Solano and Napa counties. For the 29th consecutive month, overall sales in the nine-county region were down compared with a year earlier.
County | No. sold | Change | Median price | Change
Alameda | 1,016 | -30.0% | $660,000 | 1.5%
Contra Costa | 909 | -35.5% | $642,500 | 4.5%
Marin |264 | -14.3% | $1,125,000 | 16.0%
Napa | 94 | -15.3% | $580,000 | -1.6%
San Francisco | 307 | -20.9% | $868,000 | 5.3%
San Mateo | 563 | -22.7% | $905,000 | 10.2%
Santa Clara | 1,366 | -22.2% | $791,000 | 2.7%
Solano | 333 | -44.8% | $415,000 | -11.7%
Sonoma | 384 | -29.8% | $600,000 | 0.2%
Santa Cruz | 196 | -20.3% | $739,000 | -1.5%
Bay Area total | 5,236 | -28.3% | $738,000 | 6.5%
Santa Clara Cty. condos | 497 | -16.9% | $530,000 | 6.0%
Bay Area condos | 1,537 | -23.9% | $530,000 | 6.0%
Santa Cruz County is not included in Bay Area totals. Data is based on completed sales of previously owned single-family houses or condos as recorded by counties in June 2007.
Source: DataQuick Information Systems
Contact Sue McAllister at firstname.lastname@example.org or (408) 920-5833.