Understand every region is different but share some of the same characteristics of each. So I thought this is an appropriate post for the subject.
Regards;
dave
realestate.yahoo.com
Silicon Valley Update: Uncertainty Clouds Horizon
Broderick Perkins, Realty Times Columnist
Home buyers who didn't cash in on Silicon Valley's market lull this summer, face a convergence of market conditions that will make buying decisions much more trying as the year wanes.
Mounting uncertainties aren't merely local or regional trends, but events with national and global implications that could also hit home.
"Right now we are in an awkward economic position. Stocks are going crazy, it's election year, oil prices are up, the Middle East is heating up. There's a lot of uncertainty out there right now," says Carl San Miguel, president of the Santa Clara County Association of Realtors, headquartered in Silicon Valley.
The nation's hottest housing market surpassed the half-million dollar single-family median milestone in the spring, but since then prices have bounced up and down on both sides of the record setting mark.
With larger inventories and fewer buyers, the summer's flat market removed much of the over-bidding and multiple-offer frenzy, giving buyers an opportunity to make a move -- provided they could afford it.
Now, as the holiday season approaches and more and more sellers opt to quaff wassail instead of list homes, inventories are falling and prices are poised to surge, just as they have for the past several years.
"The real estate market remains stronger now than it was last year at this time. It's almost scary," says Richard Calhoun San Jose-based Creekside Realty broker-owner, investor and statistician who has accurately forecast Silicon Valley market trends in recent years -- often to the dollar.
Time waning for buyers "Buyers should be making their purchase as soon as possible. The ideal window has arrived and may end by Halloween. There is little doubt it will end by New Years," he said.
As sellers doze, the region's high-tech employers are wide awake decking cubicles with more and more new employees to feed the region's insatiable appetite for workers. And those workers want homes that simply aren't being built fast enough.
"I'm just hearing talk on the Cisco south county expansion, explaining they have 25,000 unfilled jobs. I think we are pretty much insulated from a bubble bursting," said San Miguel.
Perhaps, but some of the glitter left the silicon this spring when a major tech stock sell off forced some buyers out of the market. In recent weeks, near panic selling has continued to plague tech stocks, which are inextricably tied to home prices.
For every 10 percent increase in the stock market prices of San Francisco Bay Area tech companies, the region's home
prices jump 1 to 2 percent. The reverse is also true, according to "Tech Stocks and House Prices in California" a recent San Francisco Federal Reserve Bank study.
The study gives statistical credence to the so-called "wealth effect" -- many high-tech company employee's incomes are boosted by stock options, stock bonuses, discounted stock purchase plans and other Wall Street wealth.
Approximately 28 percent of Santa Clara County (Silicon Valley) workers are employed in the high-tech industry, compared to 11 percent in the greater San Francisco Bay Area.
Rich-on-paper workers often cash in their returns for housing, provided their portfolios pan out.
The number of home buyers using stock market proceeds as a down payment in the San Francisco Bay Area, declined to 23.5 percent in the first quarter of 2000 from 26.3 percent in the first quarter of 1999, according to the latest numbers from the California Association of Realtors.
"These stock prices, when measured by valuation criteria such as price-earnings ratios, show that many technology stock prices got way too high earlier this year and even with the springtime correction, many are still quite high," says Eric Tyson, author of "Personal Finance for Dummies" (IDG Books, $19.99).
But it's not just the stock market.
Oil prices are boosting the cost of living. While the East Coast demand for oil heating will likely cause them greater suffering than auto-driven residents of California, but Californian's now pay nearly twice as much to buy gasoline than they did several years ago.
If the Middle East's conflicts don't push prices up more, the region's oil sheiks will. They are well aware the nation is enjoying the largest economic expansion on record -- even though it's expanding at a slower pace today than this time last year.
"Anything can cause the market to change, including the presidential election which we all know will will happen in
November," said Calhoun.
If national and global events dent consumer confidence, home sales will feel some of the brunt.
Sellers still rule
Meanwhile, unlike buyers, sellers retain the luxury of playing a wait-and-see game to cash in on yet higher home prices expected in the near future.
"Sellers should try to wait until March 15 or April 15 of 2001 and experience most of 2001's appreciation. I see no reason that it won't be as much as 2000. It's almost hard to believe, but my best guess is Santa Clara County will hit a median price of $600,000 (for single family homes), maybe $650,000," Calhoun said.
Trade up sellers, turned buyers should purchase their new home first, now, and then wait to sell in March, says Calhoun.
"This would give them the appreciation on both properties. I would expect the appreciation to far exceed the cost of owning two properties," he added.
"The real question is what will happen after the first quarter of next year? I am not sure the market will be able sustain these kind of increases. Time will tell." |
