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A few days ago, I did a post about the biggest, most common mistakes sellers make that cause their homes to not sell. The # 1 error is overpricing, and often that's connected with hiring an agent who tells you what you want to hear instead of what you need to hear (or sometimes it's the agent not understanding the market and accidentally misguiding the owner).
Are prices rising or falling in Los Gatos? Both! It depends on what part of town, what price point, what school district, you are considering. We don't have just "one market". It is imperative to understand the micro-markets to get the pricing right.
So let's look at "the market" and "the markets". Let's have a look at the information that homeowners are using to determine how to price their Los Gatos (or Saratoga, or San Jose) home. Below, see a general view of the "Los Gatos Real Estate Market" for single family homes (very broad, including two zip codes and even more school districts). This is relating to list price, not sold prices.
Would this help you to understand pricing trends? To a degree, yes it would.
But it would also add a lot of insight to see how the market is performing within zip codes:
As you can see, there is a vast difference in performance between the town as a whole and the 95032 zip code.
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What is going on here? Clearly, the 95030 part of town shows rising list prices, while offered amounts in 95032 have been falling. The zip codes are a little different demographically, with 95030 being more expensive and being all within the prized Los Gatos School District. Some of 95032 is in that same district, but some is assigned to the Union School District or the Moreland School District. (Unfortunately my data is not available by schools.)
Another point to consider is the pricing range. Here's a view of Los Gatos single family homes by listed price quartiles:
The town overall appears to be "flat". But is the market really flat?
And let's see again the quartiles, but this time broken out by zip code:
In 95032 you see a distinct slide in the 2 middle percentiles especially, but also in the lowest range of homes.
Now let's see how things look in 95030:
In contrast, pricing are rising across the board in the 95030 area. The highest cost homes have suffered the most volatility in the market.
For months, we've heard that we have a "bifurcated market" here in Silicon Valley. We know that homes in east San Jose, south San Jose, and south county are under a huge oppression of short sales and foreclosures. Prices have fallen dramatically. At the same time, homes in Palo Alto and areas closest to it are experiencing a strong sellers market. Los Gatos does not have a ton of short sales or foreclosures, but it does have both a buyers market and a sellers market all at the same time.
The above chart looks like there isn't much movement, just a slow and gradual upward push...but have a peek along the quartile lines and you'll see it's not really flat. Here's a view of the 1st quartile of each zip code over the last year (I'm not going to run all 4 here, contact me if you want more info about a different price point):
and ...
If a home is "in the schools" and has no issues (like high voltage lines, train tracks, busy road, or a disfunctional floorplan), and if it's priced between one and two and a half million and is priced appropriately, marketed well etc, there's a good chance it's going to receive multiple offers.
If a home is NOT in the Los Gatos School District, prices are falling and buyers are probably waiting rather than buying in most neighborhoods.
To complicate matters, we have very few solds to use as comparable properties. If agents and sellers are using "comps" from 6 or 9 months ago (when the last similar home sold), they might be too low in 95030 and too high in 95032 (mostly along school lines, in my experience). It is imperative to adjust for market conditions. For example, if a home was worth $1,500,000 last March (since the charts begin there), it has possibly swung up or down in value by $100,000 to $200,000 depending on the area of town.
Warning: if you are in an area where prices are falling and you list your home too high, you may experience the unpleasant phenomena of "chasing the market down". A Realtor friend of mine from Long Beach, Laurie Manny, did a post on this topic that I highly recommend: "Chasing the Market Down - Are You Guilty?"
What is the market in your area of town doing? I would welcome feedback. Are homes selling, and if so, are they going fast? Are they "just sitting" and taking price reductions? What do you see happening in your area, with your type of property? Feedback is posted immediately - please chime in!
(Coming soon - a similar post on condos and townhomes in Los Gatos.)
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Comments (15) :: Post A Comment! :: Permanent Link :: Email This Entry
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RE: Understanding the Los Gatos Real Estate Market Trends
Posted by: Anonymous
Date: Feb. 15, 2008
Wow Mary,
That is quite a Market Report! How confusing it must be to agents, sellers and buyers to have prices swinging so radically from zip code to zip code.
Thanks for the mention.
Laurie
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RE: Understanding the Los Gatos Real Estate Market Trends
Thanks Laurie. Yes, it IS confusing. Sellers hear about the hot Los Gatos market and don't understand why their home - in the non-hot part of town - isn't selling. (I see a lot of homes in 95032 just sitting.)
Your post on chasing the market is great and I think it will help a lot of people. Great stuff!
Mary
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Understanding the Los Gatos Real Estate Market Trends
I was told that the Altos Research Graphs show LISTING PRICES only, not SALES prices. If this is true?
anne arjani
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RE: Understanding the Los Gatos Real Estate Market Trends
You are absolutely correct! I am a new subscriber and mistakenly thought that their data was sold info, but it is, in fact, list prices. (Apparently because they are not a member of the MLS.) Thanks for flagging this. I've edited my post. I also pull this type of info from The Real Estate Report, which does use sold data, but at this point not by zip codes. Both are helpful in understanding what is going on.
Thanks again for letting me know.
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RE: Understanding the Los Gatos Real Estate Market Trends
This is one of the best analysis of market trends that I've ever read. You demonstrate that not only is real estate local...it's hyper-local and can vary within price ranges. That's why it's so dangerous to paint the picture in broad sweeping strokes.
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RE: Understanding the Los Gatos Real Estate Market Trends
Hi Lola,
Thanks so much for the feedback. I spent a lot of time looking at the data and agree with you: real estate truly is local and it's crucial to view the information that way.
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RE: Understanding the Los Gatos Real Estate Market Trends
Posted by: Sharon Simms
Date: Feb. 18, 2008
Excellent examples of how average DON'T tell the story. The micro markets vary so much, and you DO need a professional, knowledgeable real estate agent.
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RE: Understanding the Los Gatos Real Estate Market Trends
Thanks Sharon. You are exactly right!
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RE: Listing vs. Sold data
Posted by: Scott Sambucci
Date: Feb. 19, 2008
Hi Mary - One of your commentors - Anne Arjani - asked about the data that we provide here at Altos Research (listing vs. sold).
We collect listing data for a number of reasons. By collecting listing data, we are able to provide a real-time perspective for homes on the market. When a property comes off the market, it may be (1) sold, (2) in escrow and will not close for possibly several months, (3) off the market temporarily, (4) off the market for a longer period of time.
Regardless, properties that have been "absorbed" by the market are no longer available for buyers in the market to consider for purchase. Properties currently listed on the market are competing for buyers against other properties also currently listed, and thus listing prices become very important to understand where a particular property falls compared to the rest of the market.
Sold is the single best value to use when looking at comps for a neighborhood, but without sold data, listing provides a very clear indication of what is happening in a market because listing prices adjust based on properties that have recently sold. There will always be some difference between the actual sold price and listing prices, but the differences are relatively predictable when looking at a large number of properties. This enables you to use listing to understand market trends. If you want to compare an individual property's list price to sales comps, then the MLS is a great resource among others to utilize in your analysis.
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RE: Understanding the Los Gatos Real Estate Market Trends
Scott, thanks so much for weighing in on this!
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RE: Understanding the Los Gatos Real Estate Market Trends
Posted by: Metrowest Blotter - Boston MA Real Estate
Date: Feb. 20, 2008
Scott from Altos shot me your link to see the data being used well. I learned a lot and I am sure clients in your area will too. Great job. The interpretation of the data is the real meat on the bones.
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RE: Understanding the Los Gatos Real Estate Market Trends
Posted by: Ken
Date: Feb. 23, 2008
Hi,
Thanks for a peek at whats happening to list prices, and pointing out how local the market is. Do you happen to have any data on whether sales volume is also significantly different between the 032 and 030 zip codes? (and sales price might also be interesting to present, if you have access to that data)
Again, thanks for the information. As a perspective buyer, I find it very helpful!
Ken
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RE: Understanding the Los Gatos Real Estate Market Trends
Hi Metrowest - Glad to hear it! There is a ton of data and I'm sure you're finding it really valuable too!
Hi Ken - I don't have the solds data in the same format, unfortunately. In addition to Altos, I've been using the Real Estate Report for sold info, but it only does the town as a whole in the case of Los Gatos (in San Jose, it's broken up by region, such as Blossom Valley, Santa Teresa, etc but those are all composed of multiple zip codes). Sometimes I do absorption rates by using our REInfolink, now "MLSListings.com" stats - but these are only by MLS area. They are not createable on the MLS site by zip.
So those are the things that I can't do: I don't have a lot of data at my fingertips that is fairly easy to view.
What CAN I do to get solds info by zip? I do have a market analysis tool that I use when I am speaking with prospective sellers and I can run a "CMA" on their home. I could do hypothetical CMAs in adjoining areas with different zips and school districts, and do them historically. I once did this on our first home in San Jose - I did the same type of home over a 9 year period or so to see what was the appreciation in that tract of Cambrian Park. It did match the appreciation for "area 14" or the Cambrian area of San Jose - but it was concrete. Obviously, doing this is a lot of work and would only cover one small part of the market in either zip code (not even "one quartile") so I am not sure that it is a great use of time to do it.
My Realtor colleague and friend, Steve Leung of www.1SiliconValley.com, is extremely good with all the stats and I will ask him if he has any suggestions on getting the solds data by zip in particular. He may have a trick up his sleeve!
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RE: Understanding the Los Gatos Real Estate Market Trends
Posted by: Sandra
Date: Feb. 27, 2008
Interesting, and a bit annoying. My home was in 95030 until a few yrs back. It's in 95032 now, but I am just one block N of H9 and in LG schools area. I will be selling my home in the future and am looking for insights into how to position it properly...LG schools walk to town, nice quiet neighborhood. What sells today?
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RE: Understanding the Los Gatos Real Estate Market Trends
Hi Sandra,
Thanks for your comments. Yes, it is frustrating when the zip code changes and appears to harm your home's value. But do not worry - that is a generalization. Most local agents understand the school district issue is much more telling than the zip code.
Right now there are about 5 times as many single family homes for sale (in both zip codes (with LG Schools and non) as those which are sale pending. So the average home in Los Gatos has about a "one in five" chance of selling at the moment. (In the LG Schools it's 84 available and 18 pending, and in the Campbell Union High School District it's 31 available and 6 pending. So actually fairly similar success rates.)
The main issue right now, I think, is price point. The 95030 area has more expensive homes than 95032 generally. And the highest priced homes are not selling so well. Right now, there is nothing sale pending in Los Gatos over $5 million. In fact, nothing has closed in Los Gatos over $3 since the start of the year (in single family homes). So the first thing is this: the very, very high end homes are having more trouble selling.
The next thing is the price relative to the market. Most homes that are not selling are simply overpriced (this is true in most markets and it's true now). Values are still rising in much of town, but not dramatically. To get a home sold now, it needs to be priced aggressively (lower than where it feels right, it most cases). Sellers worry about "giving the home away" but buyers worry about "overpaying". Price it low enough and you'll attract more than one offer. Price it too high and you won't attract any offers. The homes that are not selling, by and large, are priced too high to attract buyers.
Something that can improve the odds of selling at a great price is the condition. New carpet and paint will usually do wonders, but so will front landscaping improvements and decluttering. If the front is bad, often buyers won't even go inside. I can't stress this enough. Too often, sellers are not willing to stage the home, and this greatly hurts both the odds of selling and the amount the house will sell for.
This is a buyer's market, so to sell now requires being aggressive about this project. The home needs to be gorgeous and it needs to be perceivable by buyers as being "a good deal". Look at the competition - then put your home in the bottom 20% for pricing. That's what it takes when only one in five is selling.
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