They key to spotting a market bottom is by following the home inventory levels of a specific market. Once the inventory of homes reaches a top and starts to declince that means the buyers are beginning to overtake the sellers, and hence supply and demand are changing. Here we take a look at the recent historical level of inventory in a few areas of the Santa Clara Valley.
Home inventory levels for Santa Clara have been climbing every year since 2005. Levels top off in the summer forming a plateau, typical of the real estate cycle we experience here in Santa Clara Valley. Every subsequent year the number of unsold homes have carries over increasing the number of homes for sale in Santa Clara. In 2007 we experienced a large increase of Inventory. As the average humber of homes increase, so does the average days on market, and prices begin to drop.
Sunnyvale’s home inventory performance is similar to Santa Clara. Again inventory levels rise, toping out in the summer and then falling in the Winter. Home inventory levels have remained fairly stable through 2005 and 2007, but in 2008 average inventory of homes in Sunnyvale stayed steady over the winter, and increased substantially in 2008.
Cupertino home inventory stayed stable in 2005 and 2006, and actually dropped in 2007. Again we notice the plateaus in the summer months followed by steep drops in the winter. Home inventory levels have returned to 2005 and 2006 highs.
If we look at Los Altos and Saratoga home inventory charts we see similar patternes to Cupertino. With average home inventory dropping in 2007 and increasing in 2008. This we can attribute to the higher end or luxury home market performance in 2007 which can be closely tied to the NASDAQ which also peaked in 2007.
Monitoring these inventory levels and when they start to change will be the first step in determining the real estate market bottom for the Santa Clara Valley.