How is the Real Estate Flipping Business in San Jose?

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Tuesday, September 5. 2006

With my posts about San Jose median home prices for our Inkling market, I've been trying to uncover a different interesting tidbit about the San Jose real estate market each week. This week is a fun one: Flipping. Buy-low and quickly sell high.

First things first: This week the median price in San Jose inched down again to $748,000. If you look at the 90-day rolling average of home prices in San Jose (the chart is always at the right side of this blog page) you'll see a clear crest, although prices are not falling through the floor. Inventory is stable the last few months.

But that brings us to today's market tidbit. We've introduced, for all our researched markets, three new stats.

Percent of homes with price reductions
Percent of homes relisted to reset the property's Days On Market (first touched on in this post)
percent of homes being flipped.

Cool, huh? This last one is fun. (I need to get out more, I know.) We're defining a "flip" as a property coming back on the market within 90-days at a higher price. You can argue this definition of course, because some flippers lose money. But in our stats, those properties will get captured as price reductions.

So how are these three indicators of market activity looking in San Jose this week?

42% of homes on the market in San Jose have had their price decreased
21% have been relisted merely to reset the Days On Market
4% are currently being flipped.

In our paid research, we can actually break out how the properties at the high end of the market are faring with reductions and flips vs. those at the low end. Some of our investor/developer clients really dig this insight. Currently 4% of properties on the market right now in San Jose were bought earlier in the year at a lower cost. So these are developer spec remodels, basically. Given the current trend of price reductions, I'm going to assume that the price increases are a function of improved property, not just time. I see this as a good trend. Massive home improvement of the past decade is an often overlooked factor contributing to rising prices. So often we want attribute price appreciation to the Housing Bubble, we forget that properties change.

I'm actually a huge fan of remodeling for real estate investment in Silicon
Valley. When you can get $400-$800/square foot, why not add a space at
$250 per? (Median price per square foot in San Jose is $476 this week, in case
you're wondering). So even in a declining market, we should have some
amount of flipping happening in Silicon Valley. Although a pure flip
would be one without any improvements in the meantime, I suppose.

Links:

Inkling Markets

San Jose research

Posted by Mike Simonsen in Bay Area real estate, California real estate, fun, House Prices, Housing and Real Estate Trends, Housing Bubble, Housing Market, Real Estate Market, Real Estate Prices, real estate research, Silicon Valley real estate at 16:37 | Comments (2) | Trackbacks (2)

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Crackdown on Relisting Homes
A few weeks ago, we introduced in our paid research three new statistics tracking the percentage of properties in a market that have been priced-reduced, re-listed, or flipped. Re-listing is the tactic used by agents to re-introduce a property to the ma

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Tracked: Sep 21, 20:05

Comments

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Have always loved your stats and your commentary; they help me stay on top of the market!

On your second new stat, you'll be happy to know that REIL (the MLS provider in Santa Clara & San Mateo and other nearby counties) has recently tightened their re-listing policy, making it a lot more difficult to re-list simply to reset the "days on market" (DOM) counter.

That trick, of course, doesn't fool MLS hawks -- agents and the general public who monitor the MLS closely. It does, however, wreak havoc with any market analysis based on DOM.

Also not getting out much

I've commented on REIL's new policy in my blog.
http://kevinboer.blogspot.com/2006/09/mls-relistings.html

#1 Kevin (Link) on 2006-09-05 18:58

I've heard that Kevin. I think it's the right move too. It'll be interesting to see how this number changes over time and versus other markets. I can imagine that some properties will move into a phantom listing state for a month and come back on the market. Fortunately we'll capture these in our relist stat.

In my last post on the subject I noted the marketing bene's you get when you re-list. I wonder what impact it'll have on the email-push services... they'll have fewer "new" listings.

#2 mike (Link) on 2006-09-05 19:52

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#3 Jamie on 2006-09-06 11:51

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