Are there bargain homes to be found in Los Gatos (and Monte Sereno), as in a lot of short sales or bank owned houses, condos & townhomes on the market? These types of properties have been in far shorter supply in the Los Gatos area than in most of Silicon Valley (San Jose, Santa Clara County). Yesterday I logged onto MLSListings.com and did the research on the "Area 16" or Los Gatos - Monte Sereno real estate market - tedious, but interesting. (Area 16 includes Monte Sereno, consists of the 95030 and 95032 zip codes and a sliver of Campbell and San Jose, Cambrian Park - but is about 95% Los Gatos). Results below:
If you are a Los Gatos homebuyer, you'll find that there are not very many distressed properties on the market.
Los Gatos Houses for Sale
Of the 142 active listings in "area 16" (the Los Gatos area, including Monte Sereno and an exceedingly small sliver of Campbell and San Jose - Cambrian Park), only 10 are distressed homes for sale (short sales and REOs combined). That's just 7% of the available pool of Los Gatos houses for sale are distressed properties (4% short sale, 3% bank owned).
Los Gatos Condos and Townhomes for Sale
Among the condo market, about 10% is short sales and none is a bank owned property.
Pending & Closed Sales of Homes in Los Gatos
The pendings show a lot more activity among short sales - but will they close escrow? (Unfortunately a significant percentage of short sales never close. Buyers get tired of waiting, banks request things that sellers won't do, such as sign a promissory note, or foreclosure happens prior to the short sale being completed - just a few of the reasons why the success rate is lower than with either regular sales or REOs.) Although about half of all homes in escrow are short sales, a look at the closeds over the last month belies that most won't close - only about 3% of the combined closed sales in the last month are short sales. Fourteen percent are bank owned - still a small fraction of the combined market (12% are distressed properties).
Will the info (and percentages of sale type) be different if we view it "year to date"?
It's pretty similar in that the distressed homes in Los Gatos are a small pert of the market - among the single family homes sold in 2009 in Los Gatos, about 6% are short sales, 11% are bank owned homes (about 17% of the solds are "distressed" sales). Interestingly, the amount of recently closed houses that are distressed is a lot less than the year-to-date.
Among the condo and townhome market, year to date about 8% of the sales are short sales and about 5% are bank owned home sales (13% are distressed sales). For the current month, it's a similar 12%.
The distressed element of the Los Gatos real estate market is significant but a minor part of the available, pending, and sold properties in the Los Gatos area. The lower prices of short sales and bank owned homes will have a negative effect on home valuations, but not nearly so strong as is seen in most of the San Jose area. Depending on your price point and location, there may be more or less of an impact on your home's value (or the value of the home you wish to buy).
For more posts on short sales & bank owned homes in & near Los Gatos, please see: http://www.realtown.com/LiveInLosGatos/blog/short-sales-and-bank-owned-homes
Sometimes I get calls from people wanting to get a "steal of a deal" on higher priced Silicon Valley real estate by purchasing short sales and bank owned properties in areas with great public schools like Cupertino, Saratoga, Monte Sereno, Los Gatos, and Almaden Valley.
Unfortunately for bargain hunting home buyers who are seeking premium school districts in Santa Clara County, there just aren't that many of them.
It's very easy to find distressed properties for sale in less expensive areas. In fact, for the first quarter of 2009, 95% of all sales in the Alum Rock area of San Jose, which is one of the poorest areas of Silicon Valley, were either short sales or bank owned properties.
It's a different story in most of the expensive west valley markets, though. We see far fewer of these in places like Palo Alto or Los Altos (or Los Gatos, Monte Sereno and Saratoga). There's a very direct correlation between the best public schools, low crime, higher income, and higher education levels of homeowners with lower numbers of foreclosed homes.
Here are the numbers of available homes for sale, which I've culled from our MLS, without further elaboration:
MLS Area - info as of 5/3/09
Type
Active Listings
Short Sales
Bank Owned
16 (Los Gatos/Monte Sereno)
SFH
200
11
4
Condo/TH
52
5
1
17 (Saratoga)
SFH
172
10
2
Condo/TH
20
1
0
14 (Cambrian Park)
SFH
129
28
11
Condo/TH
38
12
4
13 (Almaden Valley)
SFH
124
6
3
Condo/TH
19
2
0
18 (Cupertino)
SFH
162
2
1
Condo/TH
62
5
0
15 (Campbell)
SFH
155
26
11
Condo/TH
70
17
5
So, bargain hunters, what CAN you do to maximize your potential in this market?
Easy: don't go after the turnkey home. The perfect home with everything remodeled is getting lots of attention because most buyers want exactly that. Aim for the home that needs updating and remodeling, though, and you will have a far better chance to make a great deal because you won't be trying to outbid every other buyer.
Trulia is a great source for real estate information, but when it reports on the distressed housing sector, it relies on Realty Trac, which I have found to be inaccurate and unreliable much of the time. Twice I've had a subscription to Realty Trac and seen homes showing up on their database which were long since closed, for instance (so the numbers were inflated). If you are visiting these sites to get a sense of the distressed housing market in Los Gatos, please allow me to provide you information from our MLS as of today. You may be surprised that it's not quite as bad as it may appear on that site.
A couple of disclaimers: first is that not all distressed homes are for sale. The first step in the foreclosure market is receiving a Notice of Default. Some people do "catch up" and that NOD never turns into a foreclosure.
In other cases, the home may be on the market with a NOD but is not actually a short sale - there's enough equity in the home so that when it sells, the bank will be paid off in full. Those types of sales are "under the radar" as our MLS only tracks homes identified as short sales and those known to be bank owned (which the agents are required to disclose).
That said, here's the information as of today on homes in Los Gatos which are short sales or bank owned. I am including the Santa Cruz mountain areas as well (95033). These numbers are far lower than in much of Silicon Valley:
Los Gatos
Total for sale
# Short Sale
# Bank Owned
95030 Houses
57
0
1
95030 Condos
7
0
0
95032 Houses
96
5
5
95032 Condos
38
3
0
95033 Houses
18
1
0
(no condos)
totals
216
9
6
One extreme, in these times of financial chaos nationwide, is to assume that Los Gatos is "tanking". That is one extreme that I hope I have helped to dispell here. The other extreme is to assume that we are somehow so insulated in our beautiful haven that we are not impacted by the crisis at all. Make no doubt, Los Gatans are feeling the effects of the mortgage meltdown and the crisis in our economy overall. The lack of available credit is hurting home buyers and home sellers, but also those who work in any industry where having credit matters or where spending is a matter of discretion. So Los Gatans who sell automobiles are hurting right along side those who sell houses or have anything to do with the Silicon Valley real estate market. The lack of available money to loan is part of the formula which is pushing house prices down, of course.
So yes, Los Gatos is impacted by the mortgage crisis and general roller coaster on Wall Street. Some homeowners are in real trouble with their mortgages. Many residents who work in credit-dependent fields are making much less then they used to and in some cases have walked away from careers in lending and selling altogether. But the sky isn't falling on our housing market. The numbers, above, are proof enough of that.
What's happening with the number of short sales in Silicon Valley? Are they rising or falling? How does this impact the real estate market in various parts of Santa Clara County?
Let's have a look at the numbers over the last few months in selected areas of Silicon Valley. Below, please find the number of active (for sale) short sale listings of single family homes and condominiums or townhomes in Los Gatos, Monte Sereno, Saratoga, and other parts of the San Jose area.
3/26/2008
5/18/2008
7/19/2008
Los Gatos
5
8
7
Monte Sereno
1
0
0
Saratoga
0
1
4
Los Gatos Mtns
3
2
3
Cambrian Park
59
63
68
Santa Clara
56
63
69
Campbell
13
19
23
Cupertino
1
1
0
Los Altos
0
2
1
Sunnyvale
50
58
51
Blossom Valley
196
217
190
San Jose (all)
1534
1777
1708
While there's a noticeable rise from late March to late May, the numbers are backing down a bit now.
Can we infer anything from this? Yes and no.
First of all, we do not see a worsening of the market overall - the doom and gloomers would like us to think that the sky is falling on the local real estate market, but looking through this lens, it doesn't appear to be the case. If the numbers of short sales were swelling, it would portend lower prices because short sales themselves tend to sell for less, and most short sales eventually turn into foreclosures - and they also sell for far less than homes which are lived in and loved.
On the other hand, we are not done seeing loans reset. That is, a lot of folks took out mortgages a few years ago with adjustable rate loans that would be level for 3, 5, 7, or 10 years. As some of these get reset, there may well be more people in trouble who scramble to sell with a short payoff to the bank or who otherwise cannot make the new, higher payments. So we may be getting new waves of homes in the short sale pool.
Whenever I do a post on foreclosures, short sales, and bank auctioned homes, I get emails and calls about how to buy one of these homes at a steal of a price. So I'm going to quickly recap my input on what to do if you are a bargain hunting buyer:
The biggest problem with short sales is that although the seller wants to sell, the buyer wants to buy, and the agents want to help their respective clients, the success of the transaction depends on the lending institution approving the sale. In my experience, this is where the problem is - most often, the banks either do not respond (at all, ever), or they take so long to respond that the home's no longer worth what the buyer inititally offered. Worse, some lenders use a servicing company to handle payments, and some of them would rather service a loan through foreclosure than facilitate a short sale. I spent a lot of time in early 2008 putting short sale transactions together, only to have the bank ignore the offers. My advice: save yourself time and effort and buy a home that you can actually close on. (I am not working on short sales any more in this market.)
When short sales fail to produce a closed transaction, the property continues through the foreclosure process. The next step is the auction by the bank. There is no role for the real estate agent here, so we Realtors can't help you with this stage. With the auction, you'll need a large percentage of cash on hand and you have NO right of recission - no ability to investigate the property and later change your mind. No congingencies - which I think is very, very dangerous.
Bank owned properties have gone all the way through the foreclosure process. They are usually vacant (in some cases, the bank allows the former owner to stay on as a tenant so that the house is not vacant and vandalized). The bank wants to sell and will permit you to do inspections and to have a reasonable contingency period. The main risk here is that the house may have been beat up by the former owners on their way out. That doesn't always happen, but it's certainly a possibility. Bank owned homes are usually offered on the MLS, and a Realtor or other real estate licensee can assist you in purchasing one of these. Agents are not afraid of "working these" because they know that the bank needs and wants to close escrow - so there's a chance for a happy ending here (unlike with most short sales).
Whether you want to buy a distressed property in Silicon Valley or just want to know how these sales impact your home buying, home selling, or home value, the data is important for understanding how the real estate market is faring here. I'll continue to keep you updated in the coming weeks and months.
Best regards,
Mary
Mary Pope-Handy, Realtor, CRS, ABR, e-PRO, SRES, ASP, RECS, CNHS, ACRE Helping Nice Folks to Buy & Sell Homes Since 1993 Co-Author: "Get The Best Deal When Selling Your Home In Silicon Valley"
877 397-5391 (Direct/Toll-Free/Fax); 408 204-7673 (Cell) www.DelightHomes.com (PopeHandy.com)
emailto: Mary@PopeHandy.com
Blog: www.LiveInLosGatos.com & www.ValleyOfHeartsDelight.com
In some parts of Santa Clara County, a high percentage of homes on the market in the lower price ranges especially are offered as "short sale" listings. For example, recently I've been assisting buyers of single family homes in the $500,000 price range in parts of San Jose (such as Evergreen, Blossom Valley, Santa Teresa and South San Jose). The vast majority of those listings, perhaps 95% or more, are "short sales".
But that's not happening in Los Gatos, Monte Sereno or Saratoga. Short sales pull values down, so if you live in this lovely foothill area, be glad that the real estate market here is healthier!
Here are the numbers of local short sale listings as of today, March 26, 2008:
Los Gatos - 5 total, 2 single family houses and 3 condos or townhomes which are listed as being short sales as of today (95032 and 95030 areas)
Monte Sereno - 1 single family house listed as a short sale.
Saratoga - 0 single family houses, 0 condos or townhomes which are presented as short sales.
Los Gatos Mountains - 3 single family homes
How does this compare to nearby areas in Silicon Valley?
For comparison, I'll combine houses and condos/townhouses. The number after each area reflects the total number of short sale listings for that city or district
Cambrian Park - 59
Santa Clara - 56
Campbell - 13
Cupertino - 1
Los Altos - 0
Sunnyvale - 50
Blossom Valley - 193
San Jose (all areas) - 1534
A high number of short sales creates increased risk on home values. Short sales usually sell for lower than market value because (1) they take longer to sell, (2) they take much longer to close escrow, (3) they have a high rate of never closing at all (most short sales become foreclosures), even if the seller, the buyer, and agents representing buyer and seller are doing their best to get it closed. Often the slowdown is with the lender, or a servicing company representing the lender. They are overwhelmed with files.
It can be a vicious cycle on home values once it starts. A short sale listing finally gets a good buyer and contract to purchase the home. The bank "sits" on it for 30 or 45 days or more. Meanwhile, in areas with a lot of short sale listings, prices get pushed down. Buyers realize after a month or more that the house is no longer what they originally offered on it. They don't want to be tied to yesterday's price in a declining market. So after a period of time, the buyer is very likely to stop waiting and either ask for a lower price or go on to a more attractive property. If that first home goes back on the market again, it will need to be at a lower price to keep up with market conditions.
It is easy to find a short sale listing in many parts of Silicon Valley, but it is much more difficult to find them in the pricier areas. We are continuing to see a split or "bifurcated" market in which the higher priced areas are more insulated from the recent asault on home values.
A blog about Los Gatos real estate, homes, houses, condos, townhomes, housing market, neightborhoods, history, events, businesses, parks, schools, photos, issues, and lifestyle.
Mary Pope-Handy
Realtor, CRS, ABR, SRES, E-PRO
Luxor Real Estate Group
Mailing Address for Mary: PO Box 440 Los Gatos, CA 95031-0440
877 397-5391 (office/toll-free)
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First of all, we do not see a worsening of the market overall - the doom and gloomers would like us to think that the sky is falling on the local real estate market, but looking through this lens, it doesn't appear to be the case. If the numbers of short sales were swelling, it would portend lower prices because short sales themselves tend to sell for less, and most short sales eventually turn into foreclosures - and they also sell for far less than homes which are lived in and loved. 
In some parts of Santa Clara County, a high percentage of homes on the market in the lower price ranges especially are offered as "short sale" listings. For example, recently I've been assisting buyers of single family homes in the $500,000 price range in parts of San Jose (such as Evergreen, Blossom Valley, Santa Teresa and South San Jose). The vast majority of those listings, perhaps 95% or more, are "short sales". 
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