Home sales may be nearing an end, but that doesn’t mean prices are going to go up anytime soon.
DataQuick released numbers on Tuesday, showing that sales of existing Bay Area homes jumped 33 percent in April from March compared with the previous April, however, sales were still 14.2 percent down.
Although sales usually rise between March and April, the market may be hitting rock bottom because of the unusually big surge last month. Transactions may be low, but prices are not going anywhere down, as how Richard Calhoun puts it, owner of Creekside Realty in San Jose.
Calhoun keeps detailed statistics on home sales in San Mateo and Santa Clara counties.
Keeping unsold inventory, is often a good indicator of where prices are headed based on supply and demand.
In Santa Clara County, 149 days is what usually takes to sell all the single-family homes on the market. “Historically, for Santa Clara County, 45 to 90 days is normal,” Calhoun says. “Above 90 days you get price depreciation, below 45 you have rapid appreciation.”
Based on the county’s numbers today, “I would expect prices to continue to fall,” he says.
What’s most striking about the inventory numbers is how they vary within the county.
“In the outlying areas – such as Morgan Hill, San Martin and Gilroy – and in the affordable areas – such as east, south and central San Jose – they hit 600 days of unsold inventory last fall. Now they’re at 250 days,” he says.
Sunnyvale, Cupertino, Los Altos, Mountain View and Palo Alto – inventory is only up to 60. Prices are up.
The inventory difference between the county should be the same. But it shows that it’s 4 to 1.
But, the fact is that there are different markets in the same county – even in the same city – are wildly different.
122 days on Peninsula
In San Mateo County:
122 days = sell all single family homes
40 – 80 days = normal range
“Foster City and Redwood Shores have roughly 80 days of inventory and the balance of San Mateo County is at 100 days with the exception of the coast, which is at 200. That involves the commute. I think the commute is hitting a lot of outlying areas. In Santa Clara, it’s a combination of the commute and the subprime issue,” Calhoun says.
When the financial crisis hit in 2007, lower-end neighborhoods were hit hardest. Subprime loans virtually disappeared and foreclosures mounted, pushing down prices. “When the low end was on fire, expensive areas were having more normal increases,” Calhoun says.
Usually, prices in higher-end neighborhoods don’t come down as much. In some cases they continue to rise.
People pay cash for homes in high-priced areas but they usually have equity from a previous home or they have other investments they can sell to buy a house,” Calhoun says. As a result, they were less affected by mortgage turmoil.
The same pattern holds true in other Bay Area counties.
Sales bottom in 2nd half
If based in season, sales will hit bottom in the second half of this year. “The most important indicator is the weekly survey of (purchase) mortgage applications” published by the Mortgage Bankers Association.
“Prices I don’t believe will bottom out until next year,” he says. That goes for the Bay Area and the nation as a whole.
Berson – is a former chief conomist for Fannie Mae – and moved to the Bay Area from the Washington, D.C., area recently, he bought a house rather than renting.
“I was able to strike what I thought was a good bargain and I have a long time horizon – five or 10 years, maybe longer,” he says. “In 10 years, it won’t matter whether I bought now or in January.”
