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.

5 Home Improvements to Boost Your Home Value

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5 Improvements Guaranteed to Raise Your Home's Value

Our topic today comes to us from people asking about the recent increase in home values throughout California and Silicon Valley. I wanted to show you 5 different ways that you can increase your home's value through home improvements.

1. Front Door: You never get a second chance to make a first impression. A new front door can cost anywhere from $700-$5,000 but on average, you can expect a 125% return on the replacement of a front door.
2. Interior Doors: Interior doors are relatively inexpensive but can add a lot to your home. There is a company in Silicon Valley (Interior Door Replacement Company) that can replace your doors for $100-$200. This is a very inexpensive way to upgrade the look of your home. It's amazing what new door handles can do as well.
3. Garage Door: This will typically increase your home value and your curb appeal substantially. I recently replaced my aluminum garage door with a wooden one, and it made a world of difference on the curb appeal of my home. This is another project that will return well over 100% of the money invested.
4. Kitchen Remodel: While this is more extensive than my other suggestions, kitchens sell houses. A kitchen remodel can dramatically upgrade the appeal (and market value) of your home. In my opinion, a good kitchen remodel can return 2-3x the cost, making it one of the best investments you can make in your home.
5. Bathroom Remodels: Bathroom and kitchen remodels go hand in hand. Consumers love seeing updated kitchens and modern bathrooms. You can spend as little as $3,000 dollars on a half bathroom, or you can spend as much as $15,000 on a full bathroom remodel. Little changes to your bathroom can also add a lot of value.

For a FREE report on the cost vs value of home improvements, visit: 
http://www.remodeling.hw.net/cost-vs-value/2014/pacific/san-jose-ca/

If you're considering a specific project for your Silicon Valley home, be sure to look at that report and also consult with a professional real estate agent. Most remodels don't raise your home's value and will cost you both time and money. A local real estate expert can help you determine where your home would benefit the most from key improvements.

Please don't hesitate to contact us. We'd love to take a look at your property to discuss the improvements you're considering and how they will affect the value of your home.

How to finance your home improvements

David Lawver and Brett discuss three ways to finance your upgrades.

 
Please don't hesitate to contact us. We'd love to take a look at your property to discuss the improvements you're considering and how they will affect the value of your home. 

2014 Silicon Valley Real Estate Market Forecast

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To know where the market is headed we first have to look at where we’ve been.  In the past two years we have seen a rise of more than 15% per year in home prices. Although this may seem like good news for homeowners, too much of a good thing can easily turn into a bad thing.

So when the Federal Government saw the real estate market getting red hot in the summer of 2013, they simply ANNOUNCED that they would soon scale back on buying mortgage bonds, and that sent mortgage rates shooting up from 3.5% to 4.5% . This put a lid on the rise in home prices and prices stabilized in Q4 2013.

What I expect in 2014: Inventory will be at historic lows. With only 25% of the supply we need to satisfy current buyer demand, there will be upward pressure on prices. I do expect inventory to rise as we reach the summer, but even so, this will only be half the inventory needed to match the demand. Mortgage rates will likely rise from our current 4.5% to 5.3% or 5.5% so the longer you wait to buy, the higher your monthly mortgage payment will be. The sooner you buy, the better.

As for the Silicon Valley economy, 2014 should provide good job growth and also increase demand for housing.

Low Supply + High Demand + Slight Rise in Rates = Steady appreciation of 3-6% in 2014

•    These conditions will create opportunities for both buyers and sellers in Silicon Valley but if you are considering buying, buying sooner will save you money.

Thanks again for reading, and I'll see you soon for another Silicon Valley Market Minute.

And of course, if you have any questions, call us at (408) 807-4541 or email brett@bjrex.com.