Earlier this summer, I wrote two blogs that presented different reasons why this may or may not be the top of the market.
In conclusion, I wrote,
We can mull over the data and ponder the possibilities, but the bottom line is the same as always: Nobody will know where the top of the market is until it’s over. “
Things move quickly here on the Peninsula and a few short months later, we may have our answer to the Top of the Market question.
First, let’s catch up on what’s been going on.
Layoffs in the Technology Sector
Once thought of as invincible Unicorns, (start-ups worth $1 billion or more) several high-flying tech companies are now laying off employees. Included in this group are Twitter, Snapchat, One Kings Lane, Intuit, and other lesser known names such as Flipagram and Zomato. Anyone hear a popping sound? Could these be the first signs of a tech bubble burst? http://www.businessinsider.com/silicon-valleys-denial-is-over-everybody-thinks-were-in-a-bubble-2015-10
Uncertainty in US Stock Market
Summer of 2015 was a roller coaster ride for the US stock market. One day stocks were up, and the next day, they were down hundreds of points. In six days alone, over $2.1 trillion was erased. As I write this, the market is up again, but that little taste of volatility may be the warning bell that we are in for more unrest and declines.
Correction in the Chinese Stock Market
When I wrote my last blog, the Chinese stock market was down 12% from its high on June 12. In August, the Shanghai main share index lost 8.49% of its value. The market has regained a bit of its losses, but is still far from its high. There is a LOT of uncertainty in the Asian markets and nobody knows how this will affect the U.S. economy or our local real estate market since there is so much foreign investment here.
What’s going on in our local market?
We have definitely seen a slowing down from the frenzy of the past few years. As I look at the MLS listings, I notice daily price reductions all over the Peninsula, which would have been a rarity just a year ago. The price reductions generally aren’t huge–$50K-$200K, which is not a large percentage based on the list price of the properties. It’s still a seller’s market, in part because there is such low inventory, but it’s not the craziness of the bidding wars of just a few months ago.
Mostly homes are closing around list price. A few are closing below. There aren’t as many multiple offers. Listing prices are catching up to market prices and prices are stabilizing.
Attractive homes, especially new homes, in a good location are in high demand and sell quickly. The properties that aren’t selling are the ones that have something wrong with them—an odd floor plan, a busy street or a cheap remodel. But only a year ago, even those homes were selling fast and demanding premium prices.
For comparison, in June, the median sold price in Menlo Park was $2,150,000 with a Days on Market (DOM) of 15. In September the price was $2,200,000, with a DOM of 35. The price change is not significant, but the doubling of the time it takes to sell a house may be telling.
Have we hit the peak of the market? It looks like it. Only time will tell. Maybe the market will continue its surge. After all, in Silicon Valley, the land of the Unicorns, anything is possible.
