The housing market this summer is expected to be as scorching
hot as the weather. For the first time in years, the Bay Area is in
the midst of a true-blue seller
’s market and there is little reason to anticipate a change.
That market has extended to South Valley, where home prices are up
about 20 percent over last year. Dave Ross, owner of Seven Oaks
Properties, said now is the time to put your house on the market.
“Prices are going up quite a bit right
now,” he said Thursday. “Within a two-week period, we put a
house on the market for $449,000 and a comparable one for $524,000
that sold in one day. It’s amazing in a small market like this one
what a difference a few days has made.”
The housing market this summer is expected to be as scorching hot as the weather.
For the first time in years, the Bay Area is in the midst of a true-blue seller’s market and there is little reason to anticipate a change. That market has extended to South Valley, where home prices are up about 20 percent over last year.
Dave Ross, owner of Seven Oaks Properties, said now is the time to put your house on the market.
“Prices are going up quite a bit right now,” he said Thursday. “Within a two-week period, we put a house on the market for $449,000 and a comparable one for $524,000 that sold in one day. It’s amazing in a small market like this one what a difference a few days has made.”
The median price of a home in Morgan Hill is $660,000, and the average price is $675,494.
The median price is the sale price of the property which falls in the middle of all the sold properties, and the average price is the sum of all sales divided by the number of sales.
Ross attributes the sharp rise in prices to several factors, including the season of the year, interest rates and available housing.
This is the time of year when more people begin to look for homes, he said.
“Another month or so is when we consider it to be the peak season,” he said.
Interest rates, which have been low for quite some time, enticing many homeowners to refinance or put their home on the market, have gone up slightly, but not enough to discourage buyers, he said.
“They’ve gone up slightly, but all the indicators say they will go down again,” he said Thursday. “This time, they could reach a record low. We heard that yesterday in a meeting with the bank.”
The other factor influencing prices is availabilty.
“Right now, we have ony 110 single family houses on the market, and 88 in Gilroy,” he said. “We have a real shortage … Normally at this time, we average 400 (homes on the market).”
Because of these factors, Ross said, it is not uncommon to see multiple offers on one home.
“We may have three to five offers on a house, and if it is a desirable house in a desirable area, it may be gone within a day or two,” he said. “And there have been some offers that are higher than what the owners are asking.”
Ross said he believed the sellers’ market could continue, with the interest rate projections and the peak season approaching. It will also depend, he said, on how many homes are put on the market.
“If we keep this inventory, we could certainly see the trend continuing,” he said.
Sellers in Gilroy have seen a similar increase in home prices.
“In general, things have gone up about $8,000 to $10,000 a month,” said Joe Zertuche, a Realtor with Century 21 Premier. “In some areas, it’s gone up even more, and depending on the condition of the property, even more for the same house.”
In fact, the average price of a single family home in Gilroy last month was $556,000, a 10 percent increase over February. That’s also a 20 percent increase over the average home price in March 2003.
“The norm for housing to go up is 3 to 4 percent per year, so when you see double digits, that’s triple the norm,” said Zertuche, who has been in real estate for 16 years. “That’s phenomenal.”
Unique homes, located in sought-after areas or with plenty of upgrades, are selling not only quickly, but for higher prices, he said.
Today, if homeowners invest $60,000 to $70,000 on a pool or landscaping, they will see that returned when they sell their home.
“It used to mean your house just sold faster,” Zertuche said. “Now, you’re going to get that back.”
The market in Gilroy noticeably picked up last October and really hit its stride this January, he said.
“Even the condo market is kicking,” he said.
The median price for a condominium in Gilroy last month was $268,750, a roughly 6 percent increase over March 2003. Two condos sold last month after an average of 10 days on the market and nine more are available.
Although the market couldn’t be better for sellers at the moment, it could mean the American dream may be slipping away from others. The California Association of Realtors earlier this month said that in February, 24 percent of households in California were able to afford a median-priced home. That figure represents a 6 percentage-point decreased compared to the same period last year.
Households in Santa Clara County actually fared better: 27 percent could afford a median-priced home, which is up from 25 percent last year.
The Realtors association’s monthly Housing Affordability Index also indicated the minimum household income needed to purchase a median-priced home in California was $91,690 in February. That is for a $394,300-home.
The local boom is basic supply and demand: There are few homes on the market and numerous interested buyers, encouraged by low interest rates.
“The inventory has been low and it really hasn’t increased,” said Aytch (pronounced “H”) Roberts, owner of Realty World South Valley and vice president of the Santa Clara County Association of Realtors.
There were 117 homes on the market last month, which Zertuche estimates is about half the normal amount. The result is that homes are going quickly – spending an average of 49 days on the market compared to last year’s 59 – and sellers are receiving numerous offers on their homes, often above asking price.
“You might get two, three, $5,000 over the asking price,” Zertuche said. “Gilroy’s starting house is $300,000 and that’s on the east side for a two-bedroom.”
“The thing that’s also been kind of refreshing is that the high end is even getting some sales,” Roberts said. “Last year it was kind of difficult.”
Morgan Hill resident Gayla Jurevich got caught in the middle of the real estate phenomenon when she and her husband decided to move to Hollister in the middle of February.
Jurevich is pregnant with the couple’s third child and made the decision to stay home with the children after she gives birth – which means downsizing their mortgage and moving somewhere more affordable, she said.
Nothing was available in the couple’s price range in Morgan Hill or Gilroy, so in the middle of February they put their house on the market and began looking at property.
“We looked at 30 houses in our price range from mid-February to now, and they’re all sold,” she said
The couple found that they would look at a house and within hours there already would be multiple offers on it – many over the selling price.
Often times, homes would have offers before they were even listed.
“Houses in certain price ranges are turning over within a day,” said Karey Grimsley, Jurevich’s real estate agent. “It’s a tough market. … And (agents) really have to educate buyers and tell them not to get emotional.”
The couple finally found a home that was in their price range but wasn’t listed. Jurevich said they paid full price for their new house and received full price for their old home in Morgan Hill.
“We’re extremely relieved and very glad it’s over,” she said. “We have two small boys and I’m pregnant – the potential of not having a place to live is unnerving,” she said.
The seller’s market shows no signs of stopping, unless there is a jump in the number of houses on the market or interest rates increase this summer. But before that happens, the selling bubble will probably expand before it starts to deflate.
“If interest rates look like they’re going up, my guess is that it’s going to spur another buying surge, with people trying to get in before the interest rates run from them,” Roberts said. “If anything, that will motivate people who’ve kind of been hanging on the fence.”
Staff Writer Erin Musgrave contributed to this report.
