You probably haven’t noticed because of all the rain, but I’ve been keeping an eye on the calendar for you. Would you believe that we’re more than half way through the first quarter of 2017 already? Despite the torrential rains, flooding, land slides, and innumerable road closures, our local real estate market is slogging through it, and its story is dying to be told! So I’d like to give you the January 2017 local real estate update, my first of the year!
Our local real estate market has for the most part shrugged off the many calamities which have beset us since the year began. I’m going to tackle each of the primary counties I serve (Santa Clara, Santa Cruz, and Monterey), going from north to south. But before I get started with that, I’d like to touch some macro factors.
Last month, a lot of folks in the real estate and mortgage industry (myself included!) were freaked out about the sharp jump in mortgage interest rates since Donald Trump was elected President. The good news is that mortgage interest rates have since moderated somewhat; the 30 year fixed mortgage today averages around 4.05%; depending on your credit score, loan amount, and lender this rate could be higher or lower for you. Lower interest rates mean that buyers can afford to pay more for housing, which should buoy home prices.
The other key housing price metric I look at is employment, and here we see job growth weakening. In 2016, the nine-bay area counties added 26,700 new jobs which is an increase of 3.5% – more than the non-tech job growth of 2.6%. However, this is slower than 2015, when the tech industry added 42,300 jobs (6% growth). So while the tech industry is still expanding, growth is coming more slowly than in recent years gone by. By far, Santa Clara county had the lion’s share of tech job growth, with 12,900 new tech jobs added in 2016.
Opening up the lens a bit, USA Today notes that American consumer confidence remains near a 15-year high, and that wage gains hit a 7-year high near 3% in 2016. They also note that Americans are buying existing homes at the fastest pace in a decade, up 3.3% in January compared to the month prior. On a macro level, the economy appears to be on very solid footing, with few icebergs on the horizon.
Now, let’s explore how the local housing market has been performing so far this year.
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Santa Clara, CA January 2017 Real Estate Update
The median sale price for single-family homes in Santa Clara county in January 2017 was $930,000 – that’s up 3.9% compared to a year ago (when it was $895,000 in January 2016). That’s only a couple of percent over inflation, but a respectable bump to prices considering that job growth is slowing and interest rates have risen compared to a year ago. The number of home sales did drop considerably year over year; just 495 single family homes closed in January 2017, down 7.5% from last year.
On average, the 495 homes that closed escrow in January sold in just 36 days on market! You always hear about homes in Silicon Valley selling overnight, so you might think that’s a high number. But an average days on market includes all those over-priced McMansions that take months to sell; an average of 36 days is pretty fast considering it’s all homes, county-wide. For comparison, last year at this time, homes sold in an average of 37 days. Of course, a year ago, sellers received an average of 102.1% of full asking price for their homes; in January of this year, sellers got “just” 100% of full asking price.
While the water drought is officially over, the housing drought sure isn’t. Just 658 new single family homes were listed in all of Santa Clara county in January 2017. Yep, there were 1.36% fewer new listings in January this year compared to last. The good news is, there were more new listings than closed sales, so inventory should start building up here, which could give some relief to bidding-war-weary buyers.
Today, there are a total of 1,501 single-family homes listed for sale on the Santa Clara County MLS, but only 678 of those are available for purchase; the others are already pending sale. Hold your breath folks: that works out to a 37 day supply of homes for sale in Santa Clara County, a painfully bad market for buyers but nirvana for sellers.
Santa Cruz, CA January 2017 Real Estate Update
The Santa Cruz County real estate market continued on its merry way, even though at times it seemed like half the homes were inaccessible because the road was blocked by a slide, fallen tree or power line. A total of 118 homes were sold in Santa Cruz in January 2017 – a jump of 22.9% compared to this same time a year ago (just 96 homes closed in January ’16)…pretty amazing considering all the mayhem we’ve experienced!
The real sizzle though comes in the median single-family home price: a cool, even $800,000 which is up a staggering 15.2% year over year. Before you get too excited, realize that the median price has been hovering around and close to this mark for much of the last year…but it is a big jump year over year!
These 118 homes were sold in an average of 53 days – just a tad longer than a year ago, when in January 2016 homes sold in an average of 51 days. And sellers only received 97.8% of asking price when their homes sold; down from a year ago, when sellers got 98.3% of asking price.
If you’re one of the masses yearning to be free from paying nosebleed rent in Santa Cruz, the new inventory numbers will be a bitter pill to swallow: just 109 new single family homes hit the market in January 2017 (compared to 103 a year ago). That’s 8.3% fewer new listings than sales in that month, which means inventory continued to drop in January.
Speaking of inventory, there are presently 323 homes listed for sale on the Santa Cruz MLS; of those, only 188 are “active” and available for purchase. That’s just a 62 day supply of homes for sale. It’s a pity for the home buyer, but it’s party time for the home seller!
Monterey, CA January 2017 Real Estate Update
Like its brothers just north, the Monterey real estate market remains in unflappable good cheer. The median single family home price in January 2017 in Monterey county was $546,250…a gain of $13% compared to a year ago. The number of sales was up, too – 172 homes closed in January, a squeak higher than the 170 which closed a year ago at this time.
Those 172 homes sold in an average of 66 days – a tad slower than a year ago, when homes sold in an average of 64 days. That seems to indicate a market that’s a lot slower than Santa Clara or Santa Cruz, but remember, Monterey county is huge and mostly vacant; there’s a lot of hard-to-reach, out-of-the-way rural properties in that mix, and those always take longer to sell.
Monterey home owners received 95.4% of asking price for their homes; this is down about 0.5% compared to a year ago. Again, a lot lower than in Santa Cruz or Santa Clara counties, but understandable considering how many hard-to-price rural homes there were in the mix.
Even though the market is critically low on inventory, even fewer homes were listed in January 2017 than a year ago: just 227 homes hit the market that month, vs. 235 in the same year-ago period. There are presently a total of 932 homes listed on the Monterey county MLS, but 238 of those are under contract, leaving just 604 available for purchase. That does work out to a 114 day supply of homes; still a seller’s market, but not as strong as in Silicon Valley or Santa Cruz.