Where we see market weakness

This graph illustrates what we call our Market Action Index in the 95030 zip code (Los Gatos, California). I'll have a more detailed post on the methodology of this metric in the future, but for now consider it an indicator of supply and demand for single-family residential homes in a community. The hotter a market (i.e. demand levels are high relative to available supply or "inventory"), the higher the Market Action Index. A number above 30 indicates a "Seller's Market" because inventory is really tight. Below 30 indicates a "Buyer's Market."

We break the data into market quartiles (where Quartile 1 is the highest priced 25% of the homes listed in this zip code, Quartile 4 is the lowest priced 25% and so on) because this is where the analysis gets really interesting.

You can see from the chart that the top half of the Los Gatos market is sitting in generally weak demand conditions and has been for most of the year. What you can't see from this chart is that all of Los Gatos is in the upper half of the Silicon Valley metro area.

So here's a snapshot of next-door-neighbor Campbell, zip code 95008 (a significantly less expensive town.)

Notice two things one this chart: We see a general drift to a cooler market from mid-summer but also notice that we're still in very tight market conditions - a "Seller's Market" so prices are not dropping. If we get a prolonged stretch of "Buyer's Market" conditions, then we'd expect prices to correct downwards.

So the take-away here is that we do indeed see market weakness in to the high-end of the market and we're quite possibly at the transition point for general market prices to start weakening, but we're not there yet.

also FYI:

n for 95030 is 53 and median price for the zip is $1,800,000

n for 95008 is 60 and median price for the zip is $755,000 (a bargain! I'll take two!)