Homes are selling briskly again in the lower end market here in Santa Clara County with prospective buyers making multiple offers. The median price of a single family home (SFH) in May was $445,000 in the county, up 5.7% from February when prices stopped dropping. The significant drop in prices has lured first time buyers into the market . This segment dominates right now, and they do not have to sell a house to buy. Additionally, they have some great incentives to make the leap including government assistance, and interest rates are still at very attractive rates. The move-up buyer is missing from the equation with little equity in a lot of cases, and difficulty qualifying for a new loan.
I spoke with someone recently whose daughter had purchased a 2 bed/2 bath condo in 2005 in South San Jose for $400,000, and her son just bought the identical unit for $180,000. Does this signal the bottom? I don't think so. CA unemployment rate was 11.5% in May - this could push additional home owners into foreclosure. The banks at some point will have to liquidate those inventories which would put downward pressure on the market and create a buying opportunity.
Here is another interesting statistic - in Silicon Valley the median price of a previously owned home fell 48% to $420,000 in January, down from a high of $805,000 in 2007. This is another reason why people are buying now. The number of pending sales in the county has nearly double to 3882 as of last week up from 2096 a year ago according to the Santa Clara County Association of Realtors.
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