Has the Real Estate Market Peaked?

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Market Update for Los Gatos, Willow Glen and Saratoga Areas

Many people here in Silicon Valley are asking if the real estate market has peaked. If you know anyone who has sold their home recently, they are probably thrilled with their sale price; on the other hand, people who recently bought a home probably feel relieved just to get their foot in the door. But to truly understand if the market has hit a peak, we need to understand what pre-peak conditions are like, so we can determine where prices are heading going forward. 

Typically, two things happen when any asset reaches its peak: a significant run-up in price and a simultaneous decrease in the volume of units sold. For example, if Apple's stock price rises at a steady pace over a long period of time, buyers will begin to lose interest in the stock. When the price continues to rise but the number of shares start falling, the stock price will peak.

So, what are we seeing in real estate? A few things:

• Significant increase in price. Year-over-year, prices have jumped 13% to 17%, depending on the neighborhood.
• Decrease in the number of sales. Home sales have fallen 24% compared to this time last year. 
• Increase in price reductions. This year there has been a 90% increase in the number of homes that come on the market and later reduce the price to effect a sale. 

Have prices peaked? The data seems to support that conclusion. We're still seeing multiple offers for homes that are priced well in some of the best neighborhoods, but not as many as we've seen in the recent past. Again, we are also seeing  more cases of homes coming on the market, receiving no offers, and having to reduce the price - which indicates prices are trending downward. 

What does all of this mean for you? If you are a seller, now is probably the best time to shoot for a high market price, as we may see prices drop significantly in the future. If you are a buyer, you may be able to get a great price on a home because many sellers are pricing their property more competitively.

If you have any questions about conditions in your neighborhood, or are interested in real estate in Silicon Valley areas such as Los Gatos, Willow Glen or Saratoga, reach out to us. We're ready to help you create a better life through real estate.