Sunnyvale, where sugar daddies abound and home prices rebound.

Sunnyvale doesn't get much notoriety around here.  In fact, it doesn't even have a motto, although see above for one man's suggestion.  Nearby Redwood City, on the other hand, not only has a motto—"Climate Best By Government Test"—its downtown used to have its own unofficial motto—"Palo Alto Without The Attitude"—until the booster responsible for this marketing masterstroke was taken out and shot.

But Sunnyvale, known locally mostly for its placid neighborhoods, good governance and schools, keeps vaulting into national prominence, or at least national magazine top 10 and top 100 lists.  CNNMoney ranks it on its best places to retire.  Paradoxically—something for young and old alike, I guess—CNNMoney also ranks Sunnyvale 21st in "best places for the rich and single", recommending it to those "seeking a sugar daddy (or sugar-mama)".  Statisticians and far-away magazine writers see something we local yokels can't:  family-style Sunnyvale has a swinging side.  This slickly-packaged fun fact confirms what I've long suspected, that young adults sow their wild oats in Sunnyvale, then move to San Francisco to settle down.  The article, perhaps written with input from the Chamber of Commerce, features a photo of Murphy Avenue, Sunnyvale's vestigial downtown, with the camera set on "quaint" mode.

And the love doesn't just come from CNNMoney.  Forbes ranks it 27th among "America's Most Recession-Proof Cities To Retire To", a blow to every alleged market-timer allegedly waiting for Silicon Valley to collapse so he can buy a home for pennies on the dollar.  And just to rub it in, Forbes housing editor Francesca Levy, in her February 24 article "Top 10 Cities with Climbing Home Prices", places Sunnyvale third nationally among cities "showing impressive year-over-year price increases", based on Altos Research data claiming a 32 percent rise in median price.

Yes, you read right:  a 32 percent rise in median price.  In Sunnyvale.  Hot market, I guess!

I guess!  But not that hot!  I guess!

Because I'm pretty sure Sunnyvale home prices didn't go up 32 percent in a year.  And Forbes isn't exactly saying they did, although you couldn't blame Sunnyvale homeowners scanning (or even poring over) Levy's article for thinking they can take that 32 percent bump to the bank.  I wonder how many are buying new powerboats and planning family vacations to Disneyland after seeing Sunnyvale listed under "The following 10 cities have seen the greatest price increases."  Pretty clear cut, right?  "Median price: $800,604".  Yup.  "Year-over-year price change: 32%."  Woo-hoo! 

Yes, it wasn't until I'd read the article about twenty times that I noticed Altos is comparing year-over-year median "asking" price, not median sales price. 

Now, I don't mean to be pedantic, but "asking" price isn't the same as "getting" price.  As you may have heard, homes can sell for more than list price, and they can sell for less.  So when median asking price rockets skyward 32 percent, something's stirring in swinging old Sunnyvale, that's for sure, but local homeowners should think twice before laying down a deposit on a new powerboat.

Okay, okay, let's cut Forbes some slack and concede that median asking price has at least some correlation to median sales price.  On second thought, let's not.  Because asking price is the only real estate market indicator that can be manipulated.  After all, sellers can ask all they want.  The real test—and the only real information—is what they get.

But okay, okay, let's concede that if median asking price goes up some stupendous amount, it strongly suggests (although, as we'll see, it doesn't guarantee) that sales price goes up too.  (We'll concede this under the highly scientific theory that "where there's smoke, there's fire".)  But let's never concede, or even imply, that a 32 percent rise in asking price means homeowners have picked up an extra 32 percent in home equity.  So if we're discussing asking price, not the more relevant sales price, let's take a silent vow to always say "greatest asking price increases", "median asking price" and "year-over-year median asking price change".  In fact, let's get real hip and call asking price list price.  Just like the pros.

Feels good, doesn't it?

And when you try to verify Altos' claim, you run into a problem:  Sunnyvale asking prices rose 32 percent year-over-year compared to what?  Forbes says "last year".  Remember, the article came out in late February.  So is Forbes saying January 2010 median asking price was 32 percent higher than January 2009?  I hope not, since official MLS data shows Sunnyvale's median asking price dropped 7 percent January over January.  Or is Forbes saying the median asking price for all 2009 was 32 percent higher than for all 2008?  I really hope not, since MLS data says it plummeted 12 percent.  Okay, how about Q4 2009 over Q4 2008?  Slightly less doubtful, since the MLS says median asking price rose almost 14 percent, but that's still not 32 percent.  Then how about December 2009 over December 2008?  A very healthy 24 percent increase in asking price, which is still not 32 percent, but at this point we'll take what we can get.

So now can Sunnyvale homeowners pack their minivans for Disneyland and start looking at powerboat ads?  Not yet, because I have this theory.

What was selling around here in December 2008?  Not much, I can tell you, and what was selling was mainly distressed properties:  bank-owned homes and, to a much lesser extent, short sales.  December 2009?  A much more normal market, not skewed toward any price range.  How can we prove this?  Let's examine Sunnyvale's sold listings for each month, looking for indications that December 2008 was a real estate aberration.

Oddly enough, December 2008 had more sales, suggesting a more robust market, but the other categories correct that impression.  Sales in north Sunnyvale, an affordable area of small homes hit hard by the subprime crisis, were 30 percent higher in December 2008, and a larger percentage of total sales.  Average home size was almost 40 sq.ft. smaller in December 2008, another indication that sales were biased toward affordable (and hard-hit) neighborhoods.  But sales of distressed homes really tells the tale:  77 percent higher in December 2008, with bank-owned homes a whopping 160 percent higher.

So if Sunnyvale asking prices weren't up substantially a year after one of the weirdest months in local real estate history, we'd all be in a heap o' trouble, because it'd mean the midrange market in Sunnyvale was still closed and padlocked.  The increase is also due to a modest rise in overall sales prices between the two Decembers, although I'll emphasize "modest", because if you compare sales price per sq.ft. between comparable neighborhoods, they were virtually identical year-over-year, which may just show how difficult it is to do an analysis with small numbers.  My guess is that north Sunnyvale sales prices followed the Silicon Valley low end's overall trend and were probably about 10 percent higher in December 2009, with prices in the more expensive Sunnyvale neighborhoods only a few points higher than the year before—midrange South Bay prices didn't take off until February of this year. 

Add them together and, best case, you've got less than 10 percent appreciation year-over-year for the entire city of Sunnyvale, and worst case maybe no appreciation, both cases contrary to what the Forbes article seems to imply.  And that's if we're comparing the same time periods, and we'll never know if we are.

So here we are at the end and I'm not sure what we've proved, except that Sunnyvale homeowners should probably cancel those powerboat orders if they can get their deposits back.  The trip to Disneyland is still on. 

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