It’s way too early to call it a seller insurrection, but by some measures homesellers are making headway toward leveling the playing field in San Jose’s longtime buyer’s market.
The exclusive Market Action Index from Alto Research answers the questions “How’s the market?” by measuring the current rate of sale versus the amount of inventory; any value under 30 represents a buyer’s market.
As you might suspect, the gauge has remained well below that mark in San Jose and most of its zip codes for nearly all of the past four years – or, since the real-estate bubble burst.
It’s still in strong buyer’s market territory, but the MAI has recovered in the city and three randomly selected zip codes that I follow most closely – 95120, 95125 and 95126 – from the 11-to-17 range early last October to the 18-24 range now (See graph).
It’s not impossible that some of these zips will actually hit seller’s territory at some point this summer. But don’t look for prices to suddenly skyrocket as a result. As discussed in a number of recent posts, more factors than simple supply-and-demand are driving the ongoing buyer’s market – chief among them the continuing overhang of foreclosures and short sales and their effect on the value of non-distressed homes.
But, together with the current 6-year low in active inventory in the area, the climbing MAI could set the stage for at least a modest advance in prices in coming months.
The wild card in that scenario is interest rates. Contrary to popular belief, buyers don’t buy when interest rates are dropping, nor do they necessarily move when rates have remained low for a long period, as they have now. However, an unexpected spike or even a a string of incremental mortgage rate advances during the peak selling season could unleash a torrent of buyers worried bout missing the boat.
And the investor market for mortgage-back securities has been sending signals that this scenario might well play out beginning in mid-spring.
I don’t think that would be a terrible thing. In my view, a more balanced market is a healthier market. And if rising prices do prompt more sellers to come into the market, that would benefit buyers as well, since one of the hurdles they face right now is actually finding the home they want with so little available inventory.
Tags: Almaden Valley Real Estate, Buying a Home in San Jose, Rose Garden, San Jose housing market, San Jose Real Estate, Willow Glen
