Significant Changes in the Santa Clara Real Estate Market

Autumn markets in counties around the Bay Area have seen considerable shifts, but with wide variance in the magnitude of these changes between counties. So far, Santa Clara County has seen some of the most dramatic changes in conditions and trends, especially as compared to the feverishly competitive, high-demand, low-inventory market that existed in 2017 through spring 2018. However, median sales prices remain significantly higher on a year-over-year basis.

These first three charts look at Santa Clara County home values by median price and median dollar per square foot value. They are seasonally adjusted, smoothed out estimates. There is no disguising the enormous rates of appreciation that have occurred since 2012, however on a year-over-year basis, median house price appreciation rates have been slowing: From a very high 17.6%, August-October 2016 to the same period of 2017, to 7.8% from 2017 to August-October 2018.

September-October 2018 saw the biggest surge in new listings coming on market in at least 4 years – well over 3000 – giving buyers more choices and lessening the competition between buyers.

More supply: The total number of active listings in October 2018 was the highest for that month since 2013, and far above the level in autumn 2017.

Reduced demand: Over the past 3 months, despite the increased supply, the number of sales fell about 14% on a year-over-year basis.

Less competition, less overbidding: After peaking at 111% this past spring, i.e. an average sales price 11% over asking price (a staggeringly high level), by October 2018, the sales price to original list price percentage  dropped to a tad below 100%, for the first time since early 2017.

Price reductions have soared:  October 2018 saw by far the highest number of price reductions in at least 6 years. This is a critical indicator of changing market conditions if it continues.

No sale: The number of expired and withdrawn listings jumped in October 2018, well above recent years. December is typically the biggest month of the year for listings being pulled off the market – for the mid-winter holiday slowdown. We will see if there are substantial further increases in November and December of homes that sellers have not been able to sell at the prices they currently consider acceptable. One of the clearest indicators of a shifting market is a growing disconnect between buyer and seller expectations.

So far, those listings selling this autumn have generally sold relatively quickly. But this statistic is a lagging indicator and won’t reflect properties that have not yet sold, perhaps after necessary price reductions. If the market is in the midst of a sustained transition, future months may see significant adjustments in this metric.

Sales of homes $3 million and above peaked this past spring. Year over year, these sales jogged up in August, down in September, and up again in October. Remember that sales in one month mostly reflect accepted-offer activity in the previous one. In the last 2 years, November sales increased over October’s.

This next chart illustrates median dollar per square foot appreciation for some of the most expensive cities in Silicon Valley. Though their dollar per square foot values are similar – and probably the highest in the Bay Area – since homes in Atherton are much bigger on average than those in Palo Alto, its median home prices are much higher (about double).