Today on my Valley of Hearts Delight blog, I posted a long article on the Monte Sereno real estate market.  In places I compared and contrasted it with the Los Gatos & Saratoga markets, so readers of this blog might find that piece interesting as well.

The Monte Sereno Real Estate Market Update, November 2009

Let's take a look at the real estate market for Los Gatos condos and townhomes from a very high vantage point:  a two year overview. (Graphs created by me using Clarus Market Metrics, a subscription of my board and MLS.)

For the "really big picture", let's start with the "Supply & Demand by Month", going from August 2007 to August 2009. Green represents demand, and red represents supply.

As you can see, there's a big gap between available homes and how many are sought & purchased - so clearly this is a strong buyer's market.

Now let's turn to the absorption rate, or months supply of inventory.  Below is the chart for all of "area 16", which is Los Gatos/Monte Sereno (with a few homes in San Jose or Campbell along the border included - but by and large, it's Los Gatos).

The condo and townhome market has improved tremendously since the doom and gloom of last Decemeber (then nearly 22 months, today less than 5).

As I've mentioned in other posts, the market can vary a lot depending on zip code, price point, and school district.  This particular tool, the Clarus Market Metrics, does not use schools as a variable, unfortunately. But we can see what happens just with price point by breaking it down to home under and over $500,000.

Immediately below: absorption rate for Los Gatos homes priced UNDER $500,000 (condos & TH):

and next, months of inventory (absorption rate) of homes priced between $500,000 and $1,000,000:

Interestingly, the "sweet spot" of the Los Gatos condominium and townhome market is not in the least expensive condos and townhouses, but those between $500k and $1 mil.  (I should add that there are some condominiums and townhouses priced over a million, but not a lot and the data gets squirrelly due to the low numbers so I am not using them in this post).

This is curious because the lowest priced homes are usually the "hottest", but not here. Why?  I only have theories, but my thinking is this:

• the lowest priced condos are mostly either senior condos (along Alberto Way, the Los Gatos Commons) or very small units
• if seniors are hoping to downsize to move to a smaller place, they are probably electing to wait so that their home values "recover" some
• some people will elect to purchase a single family home in San Jose for $500,000, but perhaps others are buying a more expensive condo or townhouse to enjoy the benefit of the schools - so this would not be super tiny (more than 1 bedroom) since they are purchases for the schools

I may do more digging in the future to see what's causing this trend, but this is my hunch.  I welcome any comments from my readers on what they see happening with the condo market here 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.

Monte Sereno is a lovely, upscale residential community of about 4000 people. It's located adjacent to the town of Los Gatos and the city of Saratoga, California. There are no businesses in Monte Sereno - just homes, the post office, and the city office building along Highway 9. 

Monte Sereno shares some services with Los Gatos, such as police and schools. While Los Gatos has two zip codes, 95030 and 95032, Monte Sereno shares the 95030 zip code with Los Gatos.  Some folks mistakenly think that whatever is happening in Los Gatos with the housing market is also reflective of the Monte Sereno real estate market. They are sometimes quite different. 

We'll now look at a few key indicators to see how the Monte Sereno real estate market is doing, and also how it's doing compared to the same zip code but in Los Gatos. Graphs and stats are from Altos Research, to which I have a subscription (and the right to republish this information), which uses current listing data (list prices, not sold prices, for instance).  About once a month I also publish an update which uses information from the solds, and you may see that interactive report at any time by visiting http:www.popehandy.rereport.com.

I. Inventory of Houses for Sale in Monte Sereno

This first graph displays the trend of inventory among houses for sale in Monte Sereno, 95030. The four different lines are for the four quartiles, or price points. Sometimes they behave differently from one another, but here we can see that for much of the last year, inventory rose dramatically among all price ranges.

Next, a comparative look between Monte Sereno and Los Gatos inventory levels of homes for sale. While it makes sense that Los Gatos has more homes for sale (it has more households!) it is interesting to note that the rise of inventory has been more dramatic in Los Gatos than in Monte Sereno.

A retrospective: how is inventory in Monte Sereno now compared to two years ago? (The chart says only 95030 but this is just from Monte Sereno.)

 II. Average Days on the Market of Homes for Sale in Monte Sereno

Below, please see the breakdown by price point, or quartile, of the days on market for Monte Sereno this year. The lowest priced homes did not experience the same degree of a "dip" in the first half of the year that the higher priced homes did. It is interesting to note that the most expensive homes had the greatest improvement for the DOM (Days on Market) early in 2008.

How does this compare to the same zip code in Los Gatos?

The patterns are pretty similar, but it would seem that for most of the year, it has been easier (faster) to sell a house in Monte Sereno than in Los Gatos.

Compared to two years ago, how do the DOM look in Monte Sereno?

As we had suspected, it was much easier to sell a home in 2006 than it has been in 2008. In fact, it looks from this indicator that it is approximately twice as hard to sell a home now, if not more, then in 2006. This has been especially grue in the last quarter of the year.

III. List Price of Homes for Sale in Monte Sereno

Now we'll turn to the number which home sellers care about the most: price. Below, please see a graph with the median list price by quartile of homes for sale in Monte Sereno this year.

Interestingly, the most exclusive homes have come down the most, while properties in lower price ranges seem to have adjusted downward the least.

How does this compare to what's happening in the town of Los Gatos?

It is commonly known that homes in Monte Sereno are a bit more expensive than those in Los Gatos, so the gap between the two is not surprising. That said, the way each has responded to the market is curious. While Los Gatos home prices (list prices) went down early in the year, they went up in Monte Sereno for the same time frame. In fact, these two graphs are almost completely inverse of each other!

Finally, how does the median list price of homes in Monte Sereno today compare to the list prices of two years ago?

This is another weird graph which almost looks like a symmetrical inverse from 2008 to 2006. List prices today are higher, on average, then they were two years ago. 

In summary, compared to Los Gatos, Monte Sereno is faring better overall. The inventory is lower, days on market are shorter, and list prices remain higher than in Los Gatos.  Compared to two years ago, it's tougher to sell a home (and easier to buy one) in Monte Sereno: inventory is up, days on the market are up - but list prices are up too, an odd twist! In fact it's an anomoly for most of Silicon Valley, but it does not mean that any one house will necessarily sell for more than it did 2 years ago. The median sales price is the point at which half the homes are selling for more, and half for less. So a higher median list price or sales price may simply indicate that more expensive homes are selling. That seems very likely because with the more expensive homes, buyers are less likely to be dependent on a loan.

For analysis of what's happening in your neighborhood, or where you'd like to buy a home, please contact me. I'm happy to meet with you and go over your situation in person and in confidence.