Realtors claim slowdown due to increase in supply of homes on
Gilroy – It may just be pausing to catch its breath, but the city’s housing market has slowed from a sprint to a light jog.
After climbing at a dizzying rate for more than a year, home prices in Gilroy have leveled off, and there are other signs that buyers are no longer shopping at the mercy of sellers.
“We’re in a more normal market,” said Shanna Boigon, government affairs representative of the Santa Clara County Realtors Association and a Morgan Hill Realtor. “There’s more balance in negotiations, where buyers and sellers negotiate what needs to be done. I think the craziness has stopped.”
But the craziness didn’t stop before the average home in Gilroy fetched $819,000, as it did in September. In January, the average home sold for $647,000. A year ago, it sold for $585,000.
Realtors say the biggest reason for the slowdown – prices held steady through the summer – is an increase in inventory. Simple supply and demand principles have given buyers more choices. One hundred and seven homes went on the market last month, compared to 63 a year ago. The average home is now on the market for more than a month before it sells. In January, it took just three weeks to move a house.”
“It’s nice for buyers because they have a little more choice,” said Susan Jacobson, a Realtor with Starritt Realtors. “Sellers need be less greedy and nicer to buyers. Maybe the days of arrogance are gone.”
Jacobson pinned the surge in inventory on concerns that the real estate market is on the verge of collapse. But even as sellers worry that prices are about to fall, Jacobson said the market forces pushing borderline buyers into expensive homes are still strong.
“It seems like if there’s a desire to buy, there’s a program out there,” Jacobson said, referring to favorable interest rates and popular interest-only loans and nothing-down options that leave buyers vulnerable to economic downturns.
“We are going to see more foreclosures,” she said. “If this levels off and you have a $650,00 loan, and you need to bail out, how are you going to even pay closing costs?”
No one will suggest, though, that real estate is anything but a great investment for a buyer who can truly afford it.
Boigon said reports of “doom and gloom” have been exaggerated, and Patty Filice, a broker associate with Intero Real Estate Services, said while the days of eye-popping annual returns may have passed, the wisdom of buying a home has not.
“I don’t think the return has to be 20 percent to be a good investment,” Roberts said. “A few percentage points a year is still a good return.”
Realtor Aytch “H” Roberts said the market’s future may be revealed over the winter, a traditionally slow time in real estate. Typically, housing inventory falls as the holidays approach and people avoid the stress of either buying or selling a home. If that doesn’t happen this year, it may be a sign that South County real estate is not following the usual cycle.
“There’s a pretty consistent cycle that tends to repeat itself,” Roberts said. “If we’re still seeing an increase [in inventory], it could mean that people are thinking it’s a good time to get it sold.”