Peninsula Upturns Lead Saratoga
This weekend at open house I was asked how the market for homes in Saratoga compares with that of surrounding communities and those up peninsula.
Firstly, I mentioned that historically there has been a market distinction between 650 and 408 telephone area codes, but that recently I have been seeing that separation soften as peninsula buyers increasingly recognize the price advantages of considering Saratoga, Monte Sereno and Los Gatos as a place to buy and live.
Secondly, I noted that historically market strength in the peninsula real estate market generally leads (in terms of time) strong market demand further south in Saratoga. Put another way, a boom in Saratoga real estate generally lags a boom up peninsula around Palo Alto.
Some graphs may help illustrate this later point as well as clear up misunderstandings about current market conditions. The graph below illustrates that the median value of homes in Saratoga has not dropped dramatically even with the general national economic downturn we have been experiencing since 2007.
What has changed, however is the supply/demand imbalance in Saratoga:
Historically inventory of available homes had always dipped to a low point in at the first of the year and climbs through summer and declines again through fall through the end of the year. This pattern was followed this year in Saratoga, but demand dropped lower than ususal and inventory remained nearly double the previous year! If the global downturn is slow to recover, this could result in dropping of prices, but many Saratoga sellers have the economic staying power to weather out the storm. Only if large numbers of those who have to sell in this market lower their price in order to sell, will we likely see values erode. This is a very different situation compared with portions of Silicon Valley (mainly east and south areas) that are awash with foreclosures (what we read about in newspaper headlines) that will keep prices depressed there for some time until the inventory is worked out.
What this means I believe is that now is a particularly good time to be a buyer in Saratoga if you have sufficient cash for a substantial down payment and good credit history. Smart money is moving to assets that don’t appear to be as volatile as the stock market.
Here’s a snapshot of inventory and sales trends in Palo Alto:
Sales in Palo Alto last year peaked in early summer and inventories peaked in late fall. Sales in December remained respectable and although not shown on this graph there are now 62 single family homes available for sale and 15 pending sales in Palo Alto; 6 of these pending sales have occurred in the first 10 days of January! It will be interesting to watch to see how this trend develops. To me this is surprising strength in a market where many people are sitting on thier hands waiting for the Obama inauguration to see which way the economy will move.
