Today’s (09/27/2016) tour was a bit of a surprise. With only 25 homes on tour in 7 towns, versus the 48 homes offered for viewing a week earlier, it is clear that there is a shift. There’s little explanation but plenty of speculation - with elections looming and talk of recession, potential sellers are holding back. The last years frenzy is nowhere to be found.
On the other hand mortgage rates have broken through the historic low of 3.36% of December 2012 and again August 2016. As of today, the 30-year mortgage rate hit an all time low of 3.32% according to Bloomberg/Bankrate. And, yet buyers are few. Fewer offers are being received and open houses, the weekly barometer for real estate’s buyer interest, is tepid. At open houses, what one is more likely to see are potential sellers determining where their own homes fit into the current market.
Buyers, especially at the current Santa Clara, San Mateo prices, appear very cautious. Reasons and rationals abound. Banks continue to be very risk adverse looking for clients with FICA scores of 740 and above, the affordability index for the region is at an all time low of 16% for Santa Clara County and 13% for San Mateo County, and there are extraordinarily few homes to select from and fewer suitable for purchase.
The challenge is this. In Santa Clara County with median household incomes at approximately $93,000, the average family with excellent credit can only afford a $510,000 home loan. Even with the average salary of $151,000 in the high tech sector one can only expect to fund a loan of $820,000 at today’s exceptional rates.
This week in Menlo Park, the lowest cost home on tour is $995,000 and the average for all area tour homes is approximately $3,655,000.
The combination of an extremely small buyer pool and few sellers has created little inventory. Days on market for Santa Clara is 22 days, a 10.7% increase over last month (CAR). Yet, according to the National Association of Realtors we are in a hot market - that with homes on market for less than 30 days. Nationally for August the number of days on market was 36. This is good to keep in mind when pricing homes.
Now for what was seen. We saw 10 homes starting with two very nice small homes, around 1000 square feet. One of these is the home mentioned earlier. The other has been the home of a designer and is truly unique - a period piece with lovely landscaping and one of the most impressive oak trees in Menlo Park. On Henderson Avenue, it represents a great value in the impressive Menlo Park - Atherton school district.
Then we saw an older home on a .46 acre lot in the Willows neighborhood. This home represented the best combined land and structure square foot value of the day. Unfortunately, the front half of the house is quite dated. On the other hand, the rear of the home has a completely separate kitchen and living area, creating the potential of occupying the site while an extensive remodel of the front half is underway. This home has tremendous potential and is an exceptional opportunity at $2,998,000. Smartly priced at $753 per square foot, the lowest of the day, this home will go for more than asking.
Next we saw the most expensive house of the day at $1,426 per square foot. The explanation for the pricing is the exceptional area schools and location, the west side of El Camino. From our point of view, it points to the fact that there are overpriced homes everywhere, and that overpriced home don’t sell regardless of the market or location. We expect to see this home on the market for a while.
Then we saw a number of homes that were built during the 1990s. These uniformly represented a period of uninspired design and construction, often filled with large underutilized space. It seems to be the trademark of the period. In most cases the pricing structures offered room for improvements at about $100 per square foot. For clients who need elbow room and/or multi-car garages, these are great homes well worth further investigation.
Again, there is little doubt that the market is shifting. It is also clear that there are many home types and styles to choose from. We suggest having a strong vision of your home, while maintaining flexibility. This is especially true when looking at larger homes. Moreover, the best homes are not always the largest. And, as always great values are to be found at all levels.
Here is a breakdown of the homes on tour:
|207 Chester St|
|1014 Henderson Ave|
|515 Morey Dr|
|2105 Santa Cruz Ave|
|689 University Dr|
|821 Paulson Cir|
|965 Berkeley Ave|
|28 Sneckner Ct|
|1225 Whitaker Way|
|1812 Santa Cruz Ave|
|1730 Holly Ave|
|1020 Hermosa Way|
|8 Artisan Way|
If you have questions, please feel free to contact either Christina or me. We are here for you.