Rising Prices in Los Gatos?

Are home prices rising in Los Gatos? It does appear that way.  What is reported, though, may not be what it seems.

Below are the stats for the closed sales in July - they are still off, year over year, considerably, but they are up from the month before.

Los Gatos Single Family Home Statistics - Closed Sales

Los Gatos Condominium and Townhouse Statistics - Closed Sales

What does it mean?

Clearly, while single family home sold prices are higher than a month ago, this is not the case for condos and townhomes (which have been "beat up" in this market, all over San Jose and also countywide).   This is our first clue that "the Los Gatos Market" is again not one unified block, with everyone benefitting equally.   Rather, there are micro-markets.  Part of the market is advancing strongly - the lower priced homes in the Los Gatos School District - and those homes are selling and appreciating briskly.  Other parts of the market, such as the townhouse and condominium market, the luxury market, and the homes not in the Los Gatos school area, are not faring as well.   In fact, most homes in Los Gatos are not selling at all, and overall, it is still very much a buyer's market, but it IS improving.

Below, please see a chart displaying the "market barometer" for Los Gatos. NB the gap between the number of properties on the market (168) and those sold (28) - divide the former by the latter to get the "months of inventory", which is 6 months right now.  According to the National Association of Realtors, 6 months is a "balanced market" or a "neutral market".

How can this be? How is it possible for it to be a neutral market (or in some segments of Los Gatos, a buyer's market) when prices are rising (and homebuyers are experiencing multiple offers in places)?

It's not happening in every segment of the Los Gatos market, that's how.  The homes that are selling are doing well. But many - most - remain unsold.

Broad sweep - here's a view of inventory by Los Gatos zip code (95030 and 95032):

As you can see, inventory is rising among homes in the 95030 part of Los Gatos, but falling among 95032 (often more affordable).

Here's the 95030 zip code area by price quartile:

And here's the 95032 part of Los Gatos by price quartile:

Unfortunately, I cannot break out the school district differential with this subscription, but anecdotal information indicates that homes "in the schools" are the ones selling with multiple offers if they are priced low (close to or under $1 million). So I went to the MLS and checked a few numbers myself.

Right now in 95030 and 95032, there are 47 single family homes for sale in the Campbell Union High School District (meaning Leigh High & Westmont High), and 4 closed sales of the same in the last month.  That is an 11.75 month supply of inventory.

Right now in 95030 and 95032 there are 159 single family homes for sale in the Los Gatos-Saratoga High School District, with 28 closed sales in the last month, which is a 5.67 month supply of inventory.

Price point aside, the school district is the driving force.

List prices by zip code in Los Gatos:

Prices are rising more in the 95032 part of Los Gatos than in the less-affordable 95030 part of town. Knowing what we do about the months of inventory, what we see are that the most affordable homes with the schools are the "hot" segment of the market. 

What homes are these?  The ones where a buyer can get into a single family home for close to a million dollars or less (up to about 1.3 mil max) and enjoy the Los Gatos Schools.  Even so, houses must be "turnkey" and priced aggressively.

Homes outside of this parameter - which is most of the Los Gatos real estate market - are struggling.

Please contact me for help in buying or selling a home anywhere in Los Gatos.

RE: Rising Prices in Los Gatos?

An outstanding analysis that confirms what we have seen personnally in the market. Thank you for your insights and courage to educate the buyer and seller of market realities. Its so refreshing to hear both sides of the market story and not just the "market is rising" hot air.

Coupled with national news on the higher echelons of the market pregnant with a deep correction, we should expect to see more LG/Monte Sereno and Saratoga homes that are still in the $1.5-2.5M range to come down by 20-30% from their peaks.

RE: Rising Prices in Los Gatos?

Thanks for your nice comments.

I'm wondering how you arrived at the 20-30% correction still to come that you anticipate in the 1.5 - 2 mil price point? 

If I saw a lot of foreclosures on the horizon in Los Gatos and in that price point, I would agree with you.  Of course, there are 2-3 more years of foreclosures to come and anything is possible but I am skeptical that a large number of them will be in that particular segment of the market

We ARE seeing "luxury homes" come down, though, and that dos not appear to be stopping.  In our area, though, the 1.5 to 2 mil house really isn't a luxury home per se - it's just a nice home on expensive land in a good area.  Homes in the $3 mil, $5 mil and more range are more of the "luxury market" - or the $25 mil listing in Los Gatos.  They may well come down a bit more - but how much? Perhaps the range you've suggested, but I really don't know.  I'd need more data to be able to see that far ahead.

RE: Rising Prices in Los Gatos?

I mentioned that the 20-30% reduction is from the peaks in 2006-2007 of sales, which are bringing prices back to the 2002-2003 ranges. I have seen numerous homes, some short-sale, reach or even go below the price they were sold in 2003.

In general, it looks like homes that were purchased in the mid-late 1990s are showing around 5% annual appreciation from that time to now., which is the trend line. I have done this by looking at several samples sold recently in the 1.5-2.5M range with previous sales in the 1990's. So, for example, a home purchased in 1995 for $750K would now be priced at $1.5-1.6M.

So, no I am not expecting further 20-30% declines, just 20-30% declines from peak sales prices. This is of course hard to fathom for some folks who purchased then and are trying to sell now. But the reality is that many other parts of town have already experienced the same and the move-up buyers have already adjusted their budgets accordingly.

Thanks again for the indepth analysis.

RE: Rising Prices in Los Gatos?

Thanks so much!  I had misunderstood and thought you were expecting another 20-30 % reducrtions  - I just misread your comment, sorry!

Thanks for chiming in and for your feedback. I agree with you about the prices and "rollback" timeframe, generally!