It is always difficult, if not impossible to predict the very bottom of the market. Los Gatos and Monte Sereno are neighborhoods that have historically maintained value through the bad times and have appreciated well above average in the good times.
We don't have the stats for January as of yet the numbers for December showed a typical increase of days on market and less inventory. The average sales prices was up in December compared to many areas in the Santa Clara County where the average sales price was down. Because there is a reduced number of buyers in the market, the total sales volume for the area is down nearly 50% over 2006.
What all this means to you is that there are more homes to choose from, many homes that have been on the market for longer than average, and sellers that are getting more nervous about finding a buyer to sell to. Finding the right deal is a combination of knowing the market value for the neighborhood and working with an agent that can help you negotiate the best price.
It is no doubt that it is a buyer's market. Buying in a strong value neighborhood like Los Gatos and Monte Sereno will increase your chances of maintaining value over the long term. Waiting too long for the right moment may put you in a position of missing the best deal along the way. If you are ready to buy, my advice is to start looking. Be patient because there is a lot of homes to look at, but that deal may already be there in the list.
We are headed straight for a recession and home prices are dropping like a rock. Check out this article:
My colleagues are correct, it's a great time to buy real estate in today's market. Inventory is up and many sellers are more willing to negotiate. As an investor, buying at the bottom of the market is certainly key, but that time is generally only understood in hindsight. Overall, in the Los Gatos/Monte Sereno area we have seen continuous sales and due to the areas desirability have been somewhat sheltered from the sub-prime meltdown. To put it in perspective, investing in this area in any market is generally a wise decision. However, when a perspective client asked me this question, I like to challenge them with another question, "Is it the right time for you to buy?" It's always a good time to buy or sell if your current situation requires it. I'd reevaluated what your motivations are for purchasing right now and see how putting that motivation first can help you decided to engage now or later. In any market, your personal needs and requirements should always be taken into account first.
Good Luck and I wish you success!
In order to assess what is a reasonable time horizon to expect a positive return on your purchase, you should compare the opportunity cost of renting a comparable property and investing the difference.
Here are a couple of examples from a thread discussing palo alto:
55 HAMILTON CT, Palo Alto 94301 -- Bought in 1995 for $915,000 -- Sold in 2008 for $2,695,000
365 N CALIFORNIA AV, Palo Alto 94301 -- Bought in 1998 for $850,000 -- Sold in 2008 for $2,498,000
1410 PARKINSON AV, Palo Alto 94301 -- Bought in 1996 for $940,000 -- Sold in 2008 for $2,300,000
855 CHIMALUS DR, Palo Alto 94306 -- Bought in 1996 for $1,125,000 -- Sold in 2008 for $2,195,000
1300 DANA AV, Palo Alto 94301(remodel)-- Bought in 1997 for $1,400,000 -- Sold in 2008 for $4,150,000 "
Let's take the best performing home that was not a remodel since we don't know the expense that incurred. That would be 55 HAMILTON CT: Bought in 1995 for $915,000 -- Sold in 2008 for $2,695,000. What is the return on this investment? To keep it simple, assume the buyer paid cash in 1995 (the conclusion does not change if you took out a mortgage) Expenses (prop. tax for 13 years, sales commission 6%) ~$310K, Gain from sale: ~$1.78M, net gain ~$1.47M. Net return over 13 years: ~7.5%
Is this a "great investment!"?
Let's compare this to renting and investing in the dow over the same time period, which returned 9%. I am currently renting a home appraised at 4.5M for $6500, so I'll be more than generous and assume you could rent the hamilton prop for $5K/month $60K/year:
net gain = ($2,9M - 60K*13-$915K) = ~$1.2M
The house barely broke even over renting and simply investing your money. This is true with a 7.5% rate of return for housing, what happens when returns go back to normal? If you suffer a loss, the leverage of the home GREATLY amplifies your net loss. In fact, if an average home loses 30% of its value and you have a mortgage, you will NEVER break even by holding the same property vs renting a comparable house.
In fact the more expensive the home, the more difficult it is to achieve a net positive return compared to renting due to the large discrepancy in rental prices vs cost of ownership. Bear in mind also that there is no net tax deduction for homes >$2M.
People who tell you that holding a home for 5 years is 'conservative' haven't run any realistic scenarios.
No one knows what the market's going to do for sure. Prices are soft right now. Will it be better or worse in 6 months? No one knows. It might be that prices will go down and interest rates go up. If you have a very large downpayment, the issue of the interest rate will not be too important.
Unlike most of my colleagues here, I would say buy if you're going to be able to stay put for 5 years (not 3). Three years was the conventional wisdom for eons but a more conservative approach is warranted now.
Many of the responses to your question came months ago, so I'd like to update you on market conditions. Depending on your price range and desired location, prices have gone down in Los Gatos and Monte Sereno recently. For instance, in the range of $1.5 mil and lower, many homes have gone down $100,000 or more. This is hard on sellers but good for buyers.
I put together a collection of information for Los Gatos home buyers (in particular) that you might find helpful. I'll post the link below.
As for market now, I see a lot of investores buying up the Bank owned properties, most of bank owned properties are getting multipal offers. That tellls me it is a good time to buy a home now if you are planning to keep it for al least 3 years.
There are very few Bank Owned properties in Los Gatos/Monte Sereno area,
The neighborhoods are pleasant and peaceful.
if you are planning on staying in your home for say more than 3 years, than yes this is a very good time to buy. It is hard to time the market, but over the past 30 years Los Gatos has average about a 5% increase, so even if you buy now and it goes down a little more, you will still be ok if you stay in it.
I've ben a Los Gatos Realtor for 23 years and I can say with confidence "absolutely" it is a great time to buy in Los Gatos, Monte Sereno or Saratoga. These areas are highly desirable (as you know!) and have not suffered during the downturn. The number of sales are down, but the prices are the same, and in many cases, higher than last year. This is especially true if you are buying within the Los Gatos/Saratoga school district. Because inventory is up, you not only have more homes from which to choose, but sellers are more willing to negotiate. I understand your wanting to buy at the bottom of the market, however, we only know when the bottom hits in retrospect. Once the bottom comes and goes, you will be looking at higher prices, multiple offers and more "as is" deals. If you can find a house that has been on the market for over 4 weeks in the locaton you like and the size that works, go for it. The seller will probably negotiate and you will have made yourself a nice long-term investment.
While most of California is currently in a "buyers market", Los Gatos, Monte Sereno, Saratoga and Palo Alto are still in a Seller's Market. Case in point: two homes in the area recently one had16 offers and the other 24 offers. The difference between the market last year and today is not all homes are obtaining multiple offers thus providing a buyer some latitude in obtaining concessions from the seller.
If you qualify to purchase a home in LG or MS I can't think of no better time than now. There is no crystal ball to tell us when the optimum time is is, thus the best time for you is when you are ready to make the move.
Good luck and I hope you become a member of our community.
So my advice is this, if you found the home which suits you, it's within your budget, and you plan on living there for 5 or more years, then it may be the time for you to buy.