Locating a house on the market for under $800,000 in Morgan Hill is like finding a needle in a haystack these days, and home sale prices are only on the rise, according to local real estate people.
Even with the nonstop new construction at what seems like every open nook and cranny throughout town, the demand continues to far outweigh the supply in Morgan Hill and throughout South County.
“This is definitely the time to sell,” said realtor Kathleen Davis with Coldwell Banker Real Estate. “(Home prices) are as high as I’ve ever seen them. You can’t really get much in Morgan Hill for under $800,000 anymore.”
While it is a sellers’ market, the home buyers, with enough savings and annual income, can get “very affordable” interest rates around 4 percent for a 30-year mortgage, according to Davis.
Davis, who lives in Morgan Hill and has children attending the local public schools, said homes are “snatched up and bought right away”—sometimes even above asking price—and can go into escrow in a week or less.
“We have a lot of migration into South County,” added Davis, who estimated at least 80 percent of buyers are from San Jose and even farther north. “They are looking for good schools in a nice community.”
Growth still not meeting demand
City leaders have allowed for an average of 247 homes to be built annually over the last decade. However, with Measure S now in place, the council reduced the number of homes to be built for the 2019-20 fiscal year to 195. That growth control measure caps the city’s population at 58,200 by 2035. Morgan Hill’s current population is about 44,000. Yet, still the supply has not caught up to the demand.
“I am happy about the new construction that’s in town,” said Nancy Reynolds, a realtor with Sereno Group. “The nice thing about Morgan Hill is the new construction is typically really good quality, and the price-point of new construction helps elevate the price-point of re-sale homes.”
The median sales price in June was $860,000, up 9.9 percent from $782,000 in June 2016 and up one tenth of 1 percent from $859,000 the previous month, according to figures from real estate database MLSListings.
The average sales price in June was even higher at $916,065, up 5.4 percent from the same time last year and up 5.5 percent from $868,250 last month.
Davis noted that some buyers come into town thinking they want a recently constructed house in a new development, then soon realize the resale market provides even more of what they want. Other draws for buyers in smaller communities like Morgan Hill—as opposed to more densely populated cities in Silicon Valley—are houses on bigger plots with swimming pools and backyards, less congestion on roadways and a better quality of life with nearby lakes, parks and trails.
Morgan Hill was the second fastest growing city in Santa Clara County (behind Gilroy), rising from a population of 43,484 to 44,145, according to a California Department of Finance New State Population Report.
South County still catching up
Reynolds, also a Morgan Hill resident, cited the new Google campus planned in downtown San Jose as having even more impact on future home prices in nearby cities such as Morgan Hill, since it will shorten commute times. High-tech industry workers won’t have to endure two-hour treks from Morgan Hill to Mountain View or Sunnyvale anymore.
“Investors are just buying stuff up. They believe it is going to push the Morgan Hill market into another threshold,” said Reynolds, noting that home prices are already at an all-time high and “we’re not seeing any relief, any correction for probably two, three years at minimum.”
And while city leaders have been pushing for so-called millennials to move into town with smaller townhome-style units closer to the downtown areas, Davis said most of her buyers are still families.
“South County typically attracts more families than they do the younger (professionals),” Davis said. “People are being relocated who have kids and want to be somewhere that’s not so congested.”
Morgan Hill certainly fits the bill, and, despite record high home prices, South County remains a deal.
“If you took one of those houses (from the desirable Paradise Valley neighborhood) and popped it into Sunnyvale, it would be worth $1.6 million, which is almost double,” Reynolds explained.
Reynolds described buyers in South County as “diverse” since she has encountered “everywhere from first-time young buyers to people over 55 cashing out and downsizing to everything in between.” However, most are from out of town or relocating from out of state for work.
While the real estate business is booming in South County, Davis doesn’t want Morgan Hill to lose its small town charm and become another San Jose.
“A lot of people tell me all this development must be great for someone in my line of work,” said Davis. “But I live here in Morgan Hill, and I don’t necessarily want to see every inch of my hometown gobbled up by development and sprawl from San Jose.”
Median Morgan Hill home sales price in June 2017: $860,000
Median sales price in June 2016: $782,000
Average sales price in June 2017: $916,065
Average sales price in May 2017: $868,250