Market Trends Report

The Silicon Valley Real Estate Market Trend Report: September 2020

Santa Clara County (SCC): Home Prices Pop, Pending Sales Surge Continues

The median sales price for single-family, re-sale homes in August jumped 17.6% compared to last year. The average sales price was up 17.1% year-over-year.

The sales price to list price ratio went from 101.7% to 102.4%.
Pending sales were up 43.7% year-over-year.

Sales of single-family, re-sale homes fell 13.3% in August compared to July. Home sales were down 0.8% compared to last August. There were 857 homes sold in Santa Clara County last month. Last August there were 864 homes sold. The average since 2000 is 987.

Year-to-date, home sales are down 14.9%.

Inventory of single-family, re-sale homes was down 37% compared to last year. That is the twelfth month in a row inventory has been lower than the year before. As of September 5th, there were 900 homes for sale in Santa Clara County. The average since January 2000 is 2,703.

Days of Inventory, or how long it would take to sell all homes listed for sale at the current rate of sales, rose five days to 32 days compared to July. The average since 2003 is 89.

It took only twenty-four days to sell a home last month. That is the time from when a home is listed for sale to when it goes into contract.

The median sales price for condos was down 1.5% from last August. The average sales price gained 1.2% year-over-year.

Condo sales were down 12.2% year-over-year. There were 288 condos sold in August.

Year-to-date, condo sales are down 15.1%.

The sales price to list price ratio stayed at 100.6%.
Condo inventory dropped 20.6% from last August.

As of September 5th, there were 594 condos for sale in Santa Clara County. The average since January 2000 is 757.

Days of inventory rose to sixty-two from forty-nine.

It took an average of twenty-eight days to sell a condo last month.
If you are planning on selling your property, call me for a free comparative market analysis.

August 2020 Sales Statistics (SCC)

* Total inventory is active listings plus pending     listings. Active listings do not include pending.

More information is available in our on-line report at https://avi.rereport.com/market_reports

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Fed Changes Its Stance; Refi Fees Later (SCC & SMC)

August 28, 2020 — After several years reviewing and considering how it shapes monetary policy, the Fed this week formally abandoned a rigid inflation target in favor of an average level of inflation over time. For a long stretch of years, the Fed used an implicit inflation target, and starting in 2012 an explicit inflation target, where it would not allow core Personal Consumption Expenditure (PCE) inflation to surpass the two percent mark.

The central bank’s change in thinking encompasses two related components. To start, the Fed will no longer look to start raising interest rates simply because unemployment falls below some arbitrary level. For a long while, it was thought that unemployment below 5% would foster inflation… then 4.5%… then 4%… and the reality is that the Fed simply doesn’t know what level might cause inflation, and so will stop preemptively raising the federal funds target rate to counter anticipated inflation, as it did back in 2015 through 2018. At the time, unemployment was about 5%; as it continued to decrease, the Fed began to accelerate its pace of rate increases, which slowed economic growth to a crawl by the end of 2018. Even then, the labor market remained very strong, and inflation still remained at bay.

So, the change in this component of policy essentially puts to bed the Phillips Curve model, and markets will no longer start to expect higher interest rates even if unemployment returns to 50 year lows or more at some point. With this in place, the Fed is less likely to tighten rates even in good economic times, and supports its mandate for “full employment”.

The other component means a bit more for mortgages. The Fed will no longer target a specific inflation rate, but rather an average rate of inflation over some unknown time period. Following periods where inflation has run below its preferred 2% level, it will allow inflation to run above 2% for some length of time as a counterbalance. What’s not clear yet (and may not be clear) is exactly how much higher inflation might be allowed to run, and for how long, before the Fed would feel compelled to act. For example, would three quarters of core PCE at 1.75% be allowed to be countered by three quarters at 2.25%? Alternately, is this tempered by the trajectory for inflation, with a quarter at 2.1%, then one at 2.5% a policy-triggering event? The Fed has provided no guidance in this way but may have to at some point, else it may risk a sudden policy adjustment for which the markets are unprepared. Of course, this “how long above target” isn’t much of a problem today; getting core PCE inflation reliably back up to 2% (let alone beyond) has proven elusive and so this is more of a tomorrow’s problem than today’s.

But it does have implications for mortgage rates, or at least will eventually, when the Fed is no longer involved in the mortgage market directly, buying up MBS and long-dated Treasuries. When investors again drive rates in the marketplace, both current and expected levels of future inflation factor into decisions of what investments will be purchased, and at what required level of return. In this equation, there is a big difference between 1.75% inflation and 2.25% inflation, and if inflation will be tolerated by the Fed at higher levels, the compensation (yield) to the investor must also be higher to achieve an acceptable or desired “real” rate of return. Higher required yields on mortgage bonds ultimately mean higher mortgage rates for consumers.

Also of import to mortgage borrowers this week was the FHFA’s decision not to implement it’s new 0.5% fee on refinancing until December 1, three months later than announced just a couple of weeks ago. Although detailing an expected $6 billion hit for Fannie Mae and Freddie due to CARES Act forbearance costs, the FHFA nonetheless bowed to considerable industry and political pressure to hold off. The GSE regulator also took into account the impact on low and moderate-income borrowers hoping to refinance, and exempted loans below $125,000 from the fee altogether.

Last week, we saw that homebuilding continued a strong post-shutdown resurgence, and learned that the nation’s homebuilders were ebullient. This week, we learned more about why they are so happy; sales of newly-constructed homes leapt by 13.9% in July to an annual 901,000 pace, besting forecasts by a wide margin and a returning to a sales pace last seen at the end of 2006. The surge in sales drew down supplies of homes available to buy, which declined to 4 months worth of built and ready to sell stock. At 299,000 actual units available, this is the thinnest stockpiles have been since March 2018 and will likely allow for a strong pace of homebuilding to continue, providing a key bit of support for the economy. As well, and although more expensive to start with than existing homes, prices for new homes were actually 2.7% lower in July than June; coupled with lower mortgage rates during the month, affordability of new homes was actually improved a bit, too.

Sales of existing homes have also been strong, if tempered by surging prices and a lack of homes available to buy. The National Association of Realtors advance Pending Home Sales Index climbed another 5.9% in July, and so existing home sales should have some upward strength yet to be seen, if perhaps less so than in recent months, as gains have been 44.3% in May, 15.8% in June and now 5.9% in July, a diminishing pattern of activity as we head into the end of summer. That said, if the percentage increase for July over June translates directly into sales for August, we could see existing home sales crack the 6 million mark, something that hasn’t happened in close to 15 years.

Call or email me if you have any questions.

For further details and a city-by-city breakdown statistics, go to https://avi.rereport.com/market_reports.

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Send me a note with subject “Real Estate Investment Alerts .”

For a focused review of current and historical market trends go to https://avi.rereport.com/market_reports and click “change’’ see below

Real estate related Articles

RISMedia
August 28, 2020
Fannie Mae Announces Suspension of Foreclosures and Evictions on Single-Family Mortgages Through Year-End
By Fannie Mae
ATTOM
August 27, 2020
More Homes in U.S. Fall Into Vacant Zombie Foreclosure Realm in Third Quarter of 2020 
By ATTOM stuff
WSJ
August 26, 2020
Ford Rethinks the Office, Betting That Work Will Be Partly Remote Longer-Term 
By Mike Colias
The San Jose Mercury
July 23, 2020
Bay Area has the highest wages in nation
By George Avalos


California homeowners interested in building accessory dwelling units
on their property just caught a break, potentially shaving off thousands of dollars in fees and permits.
In a move proponents say will help ease the Bay Area’s housing crisis, Gov. Jerry Brown on Tuesday signed Senate Bill 1069, making the so-called “granny units” easier and less expensive to build throughout the state.

For more read California eases restrictions on ‘granny units’
and www.hcd.ca.gov/policy-research/AccessoryDwellingUnits.shtml

Helpful resource for home owners

Many new home owners or owners who consider remodeling or rebuilding their homes should take advantage of their county Tax Assessor web site. These web site and their respective city building departments web site typically have vest information regarding the process for applying for permits, the impact on their taxes and many other resources that home owners should be aware are available for them.
For the San Mateo County Tax Assessor office visit https://www.smcare.org/default.asp
For Santa Clara County Tax Assessor visit https://www.sccassessor.org/index.php

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The Silicon Valley 150 Index Corner

The Silicon Valley’s Real estate market is a derivative of the local economy–it prospers and withers depending on how well the local innovation-based sector performs. The San Jose Mercury News tracks the performances of the largest 150 publicly traded companies headquartered in Silicon Valley through an index called the SV150, which may be found at www.mercurynews.com. Stocks are valued based on several criteria, but one of the more important criteria is a company’s future earnings. Therefore, I see the SV150 as a leading indicator for Silicon Valley’s real estate market.

Investors Corner

S&P CORELOGIC CASE-SHILLER INDEX REPORTS 4.3% ANNUAL HOME PRICE GAIN IN JUNE

NEW YORK, AUGUST 25, 2020 – S&P Dow Jones Indices today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for June 2020 show that home prices continue to increase at a modest rate across the U.S. More than 27 years of history are available for these data series, and can be accessed in full by going to  click here

U.S. Housing Markets Moving Into Rent Territory for First Time in Over 8 Years: Report

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San Mateo County (SMC): Home Prices at Record Highs

The median sales price for single-family, re-sale homes was up, year-over-year, by 16.6%. It reached a new high of $1,800,000.

The average price was up 24.3%. It set a new high of $2,274,470.

Sales of single-family, re-sale homes in San Mateo County were up 7.7% year-over-year. There were 362 homes sold in San Mateo County last month. The average since 2000 is 398.

Year-to-date, home sales are down 15.2%.

Inventory of single-family, re-sale homes was up 13.4% compared to last year. As of September 5th, there were 559 homes for sale in San Mateo County. The average since January 2000 is 1,287.

The sales price to list price ratio rose from 101.3% to 102.4%.

Days of Inventory, or the amount of time it would take to sell all homes for sale divided by how many homes have sold, rose nine days to forty-six days.

It took twenty-six days, on average, to sell a home last month. That is the time from when a home is listed to when it goes into contract.

The median sales price for re-sale condos fell 7.7% year-over-year. It was down 1.1% from July. The average sales price rose 4.6% from July. Year-over-year, the average sales price gained 1.2%.

Condo sales fell 3.6% year-over-year. Condo sales were down 6.1% from July.

Inventory rose 76.6% year-over-year. It was up 7.1% compared to July.

As of September 5th, there were 242 condos for sale in San Mateo County. The average since January 2003 is 350.

Days of inventory rose to sixty-seven from fifty-nine.

It took an average of twenty-three days to sell a condo last month.

If you are planning on selling your property, call me for a free comparative market analysis.

August  2020 Sales Statistics

* Total inventory is active listings plus pending listings. Active listings do not include pending.

You can get more information at: https://avi.rereport.com/market_reports

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Call or email me if you have any questions.

For further details and a city-by-city breakdown statistics, go to

https://avi.rereport.com/market_reports.

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Looking to Downsize?

Keep Your Property Tax Base

Under Proposition 60, California homeowners 55 and older get a one-time chance to sell their primary residence and transfer its property-tax assessment to a new one, but the market value of the new home generally must be equal to or less than the market value of the old home.

Prop. 60 was designed to help longtime California homeowners who want to downsize but don’t want to give up the low property-tax assessment they enjoy in their existing home.

Under Proposition 13, homes are reassessed for property-tax purposes when there is a change in ownership or new construction. In between ownership changes, the assessed value can go up by an inflation rate not to exceed 2% a year. (Homeowners can get temporary reductions when property values go down.)

Prop. 60 lets homeowners 55 or older transfer their base-year value from an existing primary residence to a new primary residence, but there are restrictions.

The new home must be in the same county as the old one or, as Proposition 90 added, in one of eleven counties that accept transfers of base-year value from other counties. The eleven counties are: Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne and Ventura.

Also, the new home must be purchased or built within two years – before or after – the sale of the original property.

If the new house is purchased before the old house is sold, the market value of the new house on its purchase date cannot exceed 100% of the old home’s market value on the date it is sold.

Silicon Valley Real Estate Market Trend Report

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