Home Buying in Mountain View>Question Details

Douglass Mcn…, Home Buyer in Palo Alto, CA

Where is the SFH inventory?!?

Asked by Douglass Mcneil, Palo Alto, CA Thu Jun 13, 2013

Wow, I am really, really shocked at how low the SFH inventory is...I've been looking for 6 months and people have been telling me "once summer hits, it's going to be absolutely crazy with lots of homes and buyers on the market!". This made a lot of sense to me -- as sellers/families don't want to move in the middle of the school year and buyers/families want to get settled in the new home before the school year begins. Then, of course, there are people who have been waiting on the sidelines, considering putting their home on the marke, and watching the historic price levels -- I think there should be a lot people interested in 'cashing out'.

Yet here we are...mid-June and I see practically nothing. I am now focusing on Mountain View, West of El Camino. I see only (1) new home on the market this week (Begen Ave in Cuesta Park). Crazy!

Is this normal? Or is there some market dynamic that I don't understand?

Thoughts?

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Thanks Aileen. I did notice all those new homes (West of El Camino) on the market this week (there's also 2404 Villa Nueva and 943 Rincon)...at least this week, the inventory looks pretty good!

My sense is that the Bonita, Leona, Villa Nueva, and Rincon are a bit overpriced -- or will sell closer to ask. There isn't a LASD premium for these homes. Although Bonita is a nice home, people will discount based on the lot size. Leona and Villa Nueva are priced at $869/SF and $847/SF, respectively...so I don't expect significant overbidding. I am surprised to see Rincon priced so high, given that the home on Valencia sat on the market for for 50 days and subsequently withdrawn.
0 votes Thank Flag Link Fri Jun 21, 2013
Hey Douglass,
There are actually a few new listings in Cuesta Park and close by this week.
1176 Bonita Ave is 1950+ sq ft, built in 2007, and listed at almost $1.5mm. It's also on a super tiny lot...I think probably less than 4k sq ft, from memory. Lovely house, tiny yard. Last time it sold it was fairly good value because it looked over a derelict house next door. The derelict house is gone and next door is all new and shiny, so the price has gone up accordingly. Is it worth $1.5mm? We'll see.
There's 552 Leona Lane. Great location. Right in the middle of the neighborhood. Nice, middle of the road remodel. Standard 6000+k lot. You'd have to lose the lattice patio cover, though. Al least I would!
Then there's 973 Mountain View Ave. Some people think that's a better location, and the lot is certainly more attractive at 7400+. I hear that the house has been remodeled, but I haven't seen it yet, so I can't see how well it's been finished.
Inventory is increasing, and has been for about a month or so. I think that now sellers are realizing that values are up, it will continue to increase, and you'll see the pendulum swing as I mentioned before.
That swing won't necessarily mean lower prices, but it will mean that buyers have choices that are broader than just 'how much to pay'.
0 votes Thank Flag Link Thu Jun 20, 2013
If all things were equal then we might see that, but with interest rates rising and the economy still kind of floundering people are scared.
0 votes Thank Flag Link Thu Jun 20, 2013
Everyone - Thanks for all the great perspectives.
0 votes Thank Flag Link Fri Jun 14, 2013
There is an ebb and flow of real estate. You are looking in a very desirable area where homes are in high demand and typically hold or increase in value.

In Santa Clara County in general inventory has been very low. We are seeing a tick up, but not at crazy levels. And as the other agent stated, they come on the market and off the market so quickly.

My thoughts are if you can find something you like and can afford it, you may want to consider buying it.
Web Reference: http://www.terrivellios.com
0 votes Thank Flag Link Thu Jun 13, 2013
Hi Doug:

Thanks for your post.

Your frustration and confusion regarding the lack of available homes for sale is shared both by many home buyers as well as Realtors.

But here, is my personal opinion regarding housing right now...

Why Sellers Aren't Listing Their Homes:

Reason 1 - There is no "replacement home" the seller can buy in the area.
Unless the seller is planning to leave the area entirely, the prospect of finding a new home is a daunting one, indeed. Most of the homes being sold right now are by those individuals who actually plan to leave the Bay Area or whose family member(s) no longer needs the home. In these cases, finding a "replacement home" is not necessary. Whether moving up or moving down in home size, sellers know that there will be a battle to find a new home, so many are opting to "stay put" instead of trying and hoping to find a replacement home.

Reason 2 - They're not quite convinced that the market will hold.
Although many sellers have seen their neighbors sell their homes for many thousands more than the listing price, there is a "niggling" feeling amongst the home buyers that the prices simply won't hold when they come to market. Sellers believe that they need to make their home "picture perfect", and while they're painting and replacing carpet, and fixing many items, there is a sense that the bottom will fall out of the sales market. While there is some reason for concern--interest rates have actually risen in the past couple of weeks and the current interest for a Jumbo 30 year fixed is now about 4.38% (according to Marketwatch.com)--there is such a huge backlog of buyers and unless interest rates make a significant move upwards, there will be ready, willing and able buyers out there looking for homes.

Reason 3 - Seller's don't want to be part of a "summer glut" of homes.
I've actually spoken with a few sellers who've told me that they're looking for an elusive "sweet spot" in the market that may not actually exist, but what they want is the time when the huge glut of homes from summer is almost depleted, but there are still buyers, and they (as sellers) can hope to buy another home without having to compete too greatly. Personally, I think this reasoning is flawed since it's better to enter a market you know now than to wait and hope for specific market conditions in the future.

Reason 4 - The seller has refinanced at an all time low interest rate on their home and feels no reason, whatsoever to move.
Not surprisingly, one of the more prominent reasons that sellers are not moving is because they've refinanced, gotten monthly payments down low enough, that they can actually stay in the home to and through retirement on the lower monthly fees. Moving, admittedly, is a hassle and for many if you can pay to stay in your home...well, why not stay? So it may be a long time before many of those older homeowners (aged 50+) decide to sell their homes.

What will change the market? Simply put...more new housing. New homes allows families to "move down" to smaller more manageable living spaces and gives home buying opportunities to the first time buyer. This then allows the "move down" buyers to sell their current homes, and open up new housing opportunites for "move up" buyers. Since construction was effectively put on hold from 2008 through 2011, we may continue to see this type of "congested" housing market for another year or two as developers work feverishly to break ground and put houses on vacant lots they've been holding for years. We'll see...

This is just my two cents and is based on some of my conversations with sellers, but it is a definitely interesting market out there now!

Good luck!
Grace Morioka
Allison James Estates & Homes
1-1.5% of Purchase Price Rebate to Buyers/Low Cost Commission for Listings
Web Reference: http://www.moovnow.com
0 votes Thank Flag Link Thu Jun 13, 2013
Douglass,

Inventories aren't that far off from their averages over the last several years in the west of El Camino corridor of Mountain View. So far we have had 64 new SFH listings hit the MLS this year. According to our MLS, since 2008, inventories of SFH in the area you are interested in have ranged from a low of 63 new listings (2008) to a high of 85 new listings (2009). 73 SHF has been the average over the last 6 years (year to date).
One thing that may lead to the belief of a lack of inventory is the off market activity that has occurred this year. Although I don't have definitive numbers, it appears that more properties are being sold as off market or pocket listings than in prior years. Over the next few weeks the market will be slow due to folks taking time off after our local schools have ended.
Rest assured, more properties will come on the market but not the levels that would make buyers happy. It is a seller's market and will continue until the foreseeable future. You need to make sure that you are prepared to compete when and if that property that fits your requirements hits the market (or is networked off market).

David Blockhus
Coldwell Banker - Downtown Los Altos Office
DRE# 01169028
650 917-4250
http://www.LosAltosHomes.com
0 votes Thank Flag Link Thu Jun 13, 2013
It is normal that no one understands... The inventories are low but the number of sales is very comparable to previous years. Everything just sells faster.
0 votes Thank Flag Link Thu Jun 13, 2013
Hi again, Douglass.
Well, I think that the real estate market in general has been subject to a number of big changes in the past 5 years, and they all have their effects. I think the reasons for current inventory levels are complicated...

The economic downturn meant that nobody was buying. Sellers would not list, as prices were impacted greatly, and buyers would not buy because confidence was low. In this area, those buyers often still had the means, but were 'smarter' about how they utilized their funds.

As things started to look up, many of those buyers started to buy again, driving a resurgence in desirability of Silicon Valley real estate.
Interest rates tumbled, those who didn't have big down-payments could borrow more, and buyers realized that they could purchase at somewhat reduced prices.

Often in a climate like this, sellers will often wait to see if things go up and buyers will want to buy before things go up!

Sellers in a market like this aren't necessarily as aggressive as the buyers for the following reasons:

In my experience, this current trend will last for a while, and then sellers will re-gain confidence as well...meaning that they'll feel better about listing their homes. This is already beginning to happen - I see a lot more inventory now than there was a couple of months ago, for instance.
During the process, sellers tend to rely on what they hear through the media, and won't necessarily contact an agent to discuss market conditions until they've decided to sell.
By contrast, a buyer searches a little more actively, looking online, and generally speaking with a real estate professional earlier in their process.

The media is almost always behind the 8-ball...by a couple of months. Media usually lumps big parts of the US together and call it 'The Market'. 'The Market' hasn't recovered as much in many parts of the country, so the media has only recently started telling us that 'The Market' has improved.
Thinking this through as a homeowner who doesn't really 'need' to move, there is some fairly recent good local news, so it's likely that they're just starting to think about putting their toes back in the real estate waters.

See the cyclical nature of this? The effects are more pronounced at the moment, following a few years of financial upheaval, but it's cyclical, nonetheless.

Another part of that cyclical effect is that interest rates are beginning to increase a little. Just as sellers are starting to put their homes on the market, there is likely to start a new trend of buyers being a little less aggressive, and the whole pendulum will slowly start to swing in the other direction for the next part of the cycle.

Thanks for asking the question - it was fun answering it:)
Cheers,
Aileen
0 votes Thank Flag Link Thu Jun 13, 2013
Ah! the big question! Where is the inventory.
There are definitely several explanation to the lack of inventory, among which the fact that the economy is very good in the Valley (more people come in the area than people who leave the area).
Another explanation I believe is in one of my blogs, which I link to below.
I agree, it is difficult to have so few homes on the market! Francis
0 votes Thank Flag Link Thu Jun 13, 2013
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