We said it before a good many times but let’s say it again, just because we all like so much the sound of it: 2012 was a pretty good year in the real estate business! After 5 years or so of misery, we finally made an upswing turn in the 4th quarter of 2011 and trotted all year long at a pace that many pessimistic Realtors thought they would never see again. If 2011 was the end of the end, 2012 was indeed a new beginning. How long will it last? Before the crisis, it was typical to assume that a cycle, whether good or bad, would last about 3 years. Then we learned with pain the definition of “new normal”…. Some want to believe that the upswing will last as long as the downswing. Wishful- thinking. Most would be happy with a cozy 3 year warm-up, but who would bet on it? Going forward, it is more reasonable to assume that we are going to ride this economy like brand-new drivers who push the brake pedal and the accelerator at the same time, jerking the passengers back and forth.
Before we hastily call 2013 the “Renaissance,” a “Boom year,” the “End of the beginning,” or the “Beginning of the end,” let’s look at the year we just left behind and learn the lessons that will drive the trends.
For this exercise, I will put the projector on the California Silicon Valley (mostly Santa Clara & San Mateo Counties), which led the real estate business out of the dark days and started a growth momentum which progressively spread between the two coasts.
Numbers don’t lie: the mid-range market, or bread-and-butter as it is often called, was on fire last year. The distressed sales, at the low end, have shrunk big time and the true luxury market made a timid reappearance, but everything in the middle (roughly $600,000 to $2,500,000 depending on the location) came and went like in the heydays of the late 90’s or around 2004. Too bad we did not have enough of the stuff to satisfy all buyers-to-be.
In Santa Clara County, year-over-year, sales units edged up 7.3% and the sales volume jumped 22%, fueled by an average price increase of 13.7%. Similar photo in San Mateo County that caught fire a few months later: sales were up 11.8% and the volume up 20.9%, thanks to an appreciation of 8.2%. When the mid-range market is hot, those which benefit the most of course are those towns which enjoy a high median price (in the neighborhood of $2M). Palo Alto, Menlo Park and Los Altos, in the mid-Peninsula, prove the point with respectively 16.1%, 13.5% and 12.6% increases in average sales price, as per MLS).
The luxury market came alive mid-year and, as we went deeper into summer, fall & winter, a new flurry of multi-million dollar properties surfaced, as if suddenly freed from the ice. Many sold and just as many are still active on the market waiting for wealthy buyers who, too, resurface from a 5 year winter. Atherton, one of the most –if not the most- expensive towns in the US, got a lot of wind last year and promises to be a great market in the first half of 2013, and probably well beyond. In 2012, unit sales jumped 18.5% in relation to the year before, and the volume of sales jumped an amazing 37.6%! The average price, at $4M, is likely to appear “small” compared to what it promises to be at the end of this year! As it is, it shows a 16.1% appreciation over 2011.
I am willing to bet that all markets which enjoyed a significant revival and price appreciation last year will enjoy a similar ride this year, especially if Washington does not make too much mess in the months to come. The segment of the market which should get 1st prize for improvement is the top end. Trophy homes are back! Buyers & Sellers beware!