A look at local real estate midyear.

2012 has been an eventful year around here, and I thought it would be interesting to quantify just how eventful it's been.  So I've updated the numbers from the "snapshot" series I've been running lately to include closed sales through this week.

Before I release the exciting results, two comments on what updating the early 2012 numbers revealed.  First, average sales price per sq.ft. actually went down by a few dollars in some of the markets I cover, suggesting that they flattened in May.  Other markets, on the other hand, went up by a few dollars, and a handful went up by more than a few dollars.  I won't identify which markets are which because I don't think it's helpful.  Why not?  For one thing, the markets I track are so small, relatively speaking, that minor variations in average sales price per sq.ft. aren't necessarily meaningful.  Broad trends are about all you can hope for.  And if prices have gone way up in the last month or so, there's not much you can do about it.  For another, real estate is very much a local market, and even as the overall market begins to cool, as it always does this time of year, hot spots—exceptional homes, highly-sought after neighborhoods with little inventory—will still exist.  Anyone who thinks he or she can relax now, and start bidding on homes like it's a buyer's market, will most likely be sorely disappointed.

The other trend I uncovered is that average days on market (DOM) in virtually every market has declined sharply over the past month or two.  Normally DOM is an excellent indicator of buyer urgency, but in this case I think it's less an indication of hyper buyers and more a sign that the old pre-boom inventory, over-priced by the standards of the pre-boom market, has finally been cleared out.  A longer DOM can be an indication of the first stage of a market recovery.  The price increases of early this year finally made these homes attractive to buyers.  They sold, but their long DOM inflated the market's average.  But over the past few months homes haven't been hanging around long, and the lower DOM reflects this.

Now let's look at what prices have done since Q1 2008 and, of even greater interest, what they've done since the market recovered.     

You definitely get the idea, but this handy table will help you.

Palo Alto's outsized gain since 2011 gets your attention, but that gain should come with a small asterisk.  Palo Alto prices were hammered by the stock market downturn of mid-2011, but bounced back nicely, by some 12%, in late 2011.  And by another 8% or so this year.  And I'm convinced that even these gains understate the rise in value of what might loosely be called "trophy properties".  If that phrase makes you think sprawling estates in the hills, then you're either a Russian venture capitalist or an old dot-commer, because today's trophies are often new or substantially remodeled homes in Palo Alto's best neighborhoods.

There's no doubt that the Palo Alto SFR market marches to its own drummer.  Check out that nice rally in early 2010, when everything else was just bumping along or worse.  And while early 2011 was kind to a handful of local markets, it was downright generous to Palo Alto. 

The only other market to exceed its previous, early 2008, peak, Cupertino, has had a relatively relaxed ride since then.  Downturns have been less severe, upturns less thrilling, but it's gotten to the same place just the same.  Why?  Name-brand schools, known for their rigorous curriculum. 

Los Altos is also known for its schools, but I've found that it doesn't have the rep for pushing students hard that resonates with so many of today's buyers, and its real estate market is still in negative territory—although a 3.6% deficit doesn't take long to erase.  Mountain View townhomes' extremely credible showing since 2008, during a downturn that walloped virtually every other CID market, might be surprising unless you've worked in that market over the years.  Because if you have, you know that very few markets are as hot as a hot Mountain View townhome market.

A final note:  I've arranged the chart above in descending order of sales price per sq.ft. as of Q1 2008.  It's graphic proof of the beating the more affordable end of local real estate took during the downturn, and how relatively slow it's been to recover.

Next, let's look at average days on market (DOM).  A chart with all twelve markets has so many squiggly lines it's unintelligible, so I've divided them into Santa Clara County SFR, San Mateo County SFR, and condos and townhomes in both counties.   

Note that three of the four Santa Clara County markets above are moving even faster this year than at their previous peak in early 2008.  And that's saying something.

San Mateo County has moved more sedately over the past four years, with San Carlos, the relatively affordable City of Good Living, setting the pace until recently.  Now Burlingame is red hot.  East of 101, the SFR markets of East Palo Alto and Menlo Park's Belle Haven, shows the most improvement, although almost anything would be an improvement over its disastrous 2007 and 2008.

Finally, the condo/townhome market.  Only Mountain View townhomes are selling faster now than in early 2008, although most CID markets were already in trouble by then, and 28 days on market is a very credible performance.  In fact, Mountain View townhomes have weathered the downturn as well or better than many SFR markets.  San Mateo condos are the other side of the coin, briefly topping 100 DOM, and many other local condo markets have fared just as badly.  Condos are usually entry-level, and most were pumped up by an injection of subprime lending in the mid 2000s and then abruptly deflated by its withdrawal.

Any take-aways here?  Surprisingly, I don't think so.  Every boom is different, as is every bust.  If I'd done these charts in 2005 or 2002 you'd have seen a substantially different story, one in which the affordable end of the market came through in decent shape while the prestige cities took a 15 to 50% hit and Cupertino virtually disappeared as a real estate market.  If there is a take-away it's this:  buy what you like and can afford, when you can afford it.  Because trying to anticipate where the market will be X years down the road probably isn't going to work.        

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