The housing market in San Jose, California, has been cooling over time and prices have recently flattened. The trends imply a weakening market, according to Kristen Evans, an analyst for Altos Research LLC. “Despite the consistent decrease in the Market Action Index (MAI), we're in a ‘Seller's Market’ where significant demand leaves little inventory available.”
In her executive summary, she profiles the housing market in San Jose, the most populous city within Silicon Valley and the largest city in Northern California. With a growing population in one of the most affluent locations in the country, the median list price of a residential property is $739,250, according to Evans.
The City of San Jose municipal government has compiled a large amount of information about the current San Jose housing market. One notable trend is that record housing cost increases currently make San José 87 percent more expensive to live in than anywhere else in the U.S. The city has the strongest rental market in U.S. due to its booming local economy.
In addition, the city experienced moderate increase in median prices and housing inventory during the first quarter of 2014. More than 670 multi-family residential permits were issued during the first quarter of 2014. Looking ahead, it ranks fourth nationally for expected 2014 rental growth.
“The market seems to have paused around this current plateau. The MAI is a good leading indicator for the durability of this trend,” Evans said.
The report explained that the MAI answers the question "How's the Market?" by measuring the current rate of sale versus the amount of the inventory. An index above 30 implies Seller's Market conditions. Below 30, conditions favor the buyer.
“If the MAI begins to climb, prices will likely follow suit. If the MAI drops consistently or falls into the Buyer's zone, watch for downward pressure on prices,” said Evans. “The MAI has been trending down lately, while inventory and days-on-market are climbing. The trends imply a weakening market.”
In her report, Evans divides the San Jose housing market into quartiles where each quartile is 25 percent of homes ordered by price. The two most expensive quartiles break down as follows: the top quartile has a median price of $1,398,000 with an average age of 20 years and the upper/second quartile has a median price of $847,000 with an average age of 46 years.
Notably, even the two lowest quartiles still have hefty price tags: the lower/third quartile has a median price of $666,844 with an average age of 46 years and the bottom/fourth quartile has a median price of $500,000 with an average age of 54 years.