As many have said, no one can predict the future. That said lets look at what is causing the current market condition where demand is much stronger than available inventory. This imbalance is what is causing the rapid rise in prices and multiple offer situation. The strong demand is caused by the following: many 1st time buyers where waiting to get into the market until prices stopped falling, investors have been buying because real estate offers better returns than they can get elsewhere and interest rates remain at record lows. Inventory levels remain low because builders quit building in 2006 and many seller's do not have the equity or confidence to move. To decide what to do you need to ask yourself will any of these factors change and cause the market to change direction. First, interest rates can rise at any time. There is a lot of talk in Washington that the Fed should raise rates when the economy begins to show continued growth. With the recent rise in prices, investors are having a harder time finding the deals they have in the recent past. Builders are starting to build again. Seller's confidence is increasing along with their equity. My sense is the market has a better chance of normalizing than continuning on its current pace. I don't see a crash just a better balanced market.
Real estate prices can move quite quickly both up and down. Interesting that you posted for zip code 94043. Real estate statistics for 94043 show slightly less pronounced movements.
compared to Mountain View real estate statistics
Trying to time the movement is very difficult. Some new analysis showed that tracking Google searches for certain key phrases could be a very good warning of future price changes. The key phrases are constantly changing though.
One of the things pushing real estate prices up is the low interest rates. A low interest rate has a double impact. The payments are less and equity builds faster. A $500k mortgage at 3% has a monthly payment of about $2,108 and builds $55,468 of equity in five years. The same mortgage at 6% has a payment of about $2,998 and only builds $34,782 of equity. See
Interest rates, Google hiring and profits, venture capital are some of the key factors driving Mountain View home prices. ABAG has been pushing cities to plan for significant increases in available housing. This mandated change may not track real needs.
Top 2 agent nationwide at Keller Williams Realty
Over 30 years experience
Over 1,000 homes sold in Santa Clara and San Mateo Counties
Santa Clara County experienced a 25% price increase in the last year, month over month. Those increases can not be sustained for long.
I've had 6 buyers decide to stop writing offers because (1) the Prices have gone beyond their affordability and (2) the competition with all cash investors was outside of my buyers comfort zone and/or ability. No appraisal contingency is very risky and unless buyers can afford to loose 3% earnest money or have a bucket of cash to make up the difference, it is best not to venture into that arena.
As the prices continue to climb, more investors will pull out of the market because they will not get the cash flow or return on investment they expect. When that happens buyers will be able to have their offers considered with standard contingencies one again.
It may be a good time to sell - depending on the goal.
All of a sudden, there's been a tidal wave of "irrational exuberance." Multiple offers on properties. Offers being made that waive the home inspection. Price jumps of 10% in 6 months, 20% in a year.
That, my friend, is unsustainable.
Sure, lots of people are pleased that they're not under water anymore. For the first time in years, there are buyers out there. For the first time in years, they can sell and walk away from the closing table with some cash in hand. And that reflects pent-up demand. Example: Someone who wanted to move 3 years ago now can. Someone else who would have sold 2 years ago, but couldn't afford to, now can. And someone who decided last year that it might be time to sell is looking around and figuring that now really is the time to sell.
But the problem is that while those people are now able to sell (and that's a good thing), they're buying into a hot market. And if--no when--the market stalls out, they may see prices delining below what they've paid for that new home. And the cycle begins again.
It's quickly moved from a depressed market to a highly unstable market. I'd just advice folks not to get too caught up in the frenzy.
Hope that helps.
Creative Property Services
Santa Rosa, CA
Thanks for your question. You are correct that this is a crazy time in real estate and that will often happen before a crash, but I personally believe we are at the beginning of the craziness not right before the bubble.
1. I have a slightly different take on the "tons of sale" view. Yes, homes sell quickly, but there are not many of them. As far as condos/town homes go, in January we started the year with 5 condos/town homes for sale. Right now there are 19. In a buyers market there would have to be at least 90 on the market to start to have any down ward pressure on prices.
2. The last crash happened because the run up came from the fact that there was easy money pushing the sales prices higher, then that money went away and people could no longer buy, making fewer people want to buy. The short crash in 2001 happened because of the dot com bust which meant fewer jobs and less people looking for homes as well as less money to buy. The bubble that happened before the crash came from high employment and high stock values. the down turn was short.
3. Right now we have high demand, historically low inventory, and cheap money. There are many more people who want homes than homes for for sale and these people have good jobs. there is also a lot of money coming in from over seas and people who have cash to purchase investments.
So the way I see things there are so many reasons that the market is hot I think we have a big buffer before the next crash. If we loose the over seas money there is still high employment and low interest rates. If interest rates go up there is still cash and high employment.
I think the only thing that would have a true chilling effect on the market would be an employment crash. Until that happens I believe we will see high housing demand.
Keller Williams Realty
As far as our local economy is concerned, we shall continue to see price growth throughout this year and into next at about the rate we have been seeing it for the past year. The hiring spree in Google, LinkedIn, Yahoo, Facebook, and the ubiquitous start-ups is far from over. This area is attracting high priced software engineers from all over the world with six figure salaries. They get here and want a place to own.
I personally expect to see Greece leave the Euro this year and Spain collapse further. This will put a crimp in lending in Europe and keep US bond prices high no matter what the Fed does. This will keep housing interest rates low. If Spain gets much worse, it will be the next Greece, which may be sufficient to create another world wide credit crunch. If that happens, we'll again have a loss of lending at any interest rate for up to half a year, with resulting retreat in real estate prices, reduction in employment, and a return of the distressed sale even in this county.
So you have a small risk of seeing prices topping out and retreating in this area within the next 12 months that will be the result of events in Europe. Otherwise, prices will continue to rise at a rapid rate throughout this and next year. Greece may go belly up with regard to the Euro as early as this summer. Spain will be about 6 months to 12 months behind Greece.
Now you have the macroeconomic report for what will influence home prices in this area. I presume you will decide to again consider a sale of your Mountain View home this summer. I hope you will contact me at that time.
There might be an ebb to the flow. The lending industry has very tight standards on loans right now, and I don't think we're going to see the same kind of fallout.
In the last peak, buyers were getting mortgages if they had a pulse. Those days are long gone.
For instance, where do you plan to move if you sell your home!? Some rental markets are experiencing shortages specially in good school districts in Silicon Valley. Finally, you need to make plans on what you will be doing with the proceeds of your sale. If plan to purchase another piece of Real Estate in Silicon Valley, they also have appreciated as much as your Mt. View home, so the net gain might be offset by the higher price you will pay for your next purchase.
Ironically, I blogged about this few days ago on what some sellers are considering. We have investors who are willing to purchase high-end homes while allowing the owner to remain as tenants. That offers best of BOTH worlds for Sellers like your neighbors who want to take advantage of the appreciation without being forced to move.
Good luck with your decision and let us know if we can help.