SubscribeTales From The Front – The Market on July 12, 2009
July 13, 2009
Since so much of what we read about the real estate market is looking at it nationally, or statewide, it is easy to forget that real estate is local. In fact, it is probably the only product that still is local.
Here in Los Altos, the market has really picked up starting in early May. Consumer confidence came back as the stock market rallied, the sun came out, flowers bloomed and sellers got more realistic about pricing. Buyers responded by buying up homes faster than they are coming on the market, mopping up inventory.
In June, there were more homes in contract in Santa Clara County than were for sale. The majority are under $500K, but the buying frenzy has moved into the mid-priced homes up to $1.5M. Buyers are finding themselves in multiple offer situations in some cases, with a homes in Los Altos and Palo Alto occassionally receiving over ten offers. . . . What year is it again?!?
Even this new market activity is being regulated by loan availability. I wish I could remember the name of the banker who said that “the lending pendulum has swung to stupid” last week. He is in Nebraska and was saying he can’t do loans now that his father would have happily done in the 1950’s. Home buyers in the dreaded jumbo market are having to provide tremendous documentation and larger down payments, which are softening the market with inflection points at $1.5M (20% down), and $2M (25% down). Over $2M, you need to bring $600,000 in cash, which is a decent chunk of change, especially if you are in the tech industry these days.
Yesterday, I had the pleasure of spending the afternoon at this lovely home in Oak Valley in Cupertino. It is a beautiful home with views and a sparkling pool, priced at $2,348,000. That is at the top of the Cupertino market, but upper-mid range for south Los Altos, which the neighborhood borders. I had plenty of company, as there were a lot of visitors, most of whom are in the market to buy a home, not looking for decorating ideas. The majority had seen the house online, so they knew the size and price before driving over.
Forecasts for the fall market are varying, at best. So don’t believe what you read in the papers, check with your local Realtor. Hopefully, rates will stay low, and we will see inventory continue to be absorbed.
Stay tuned, and thanks for reading . . .
Mortgage Mania 25 – Now What?
November 14, 2008
Henry giveth, and Henry taketh away . . .
When Treasury Secretary, Henry Paulson asked Congress for $750 Billion (yes, that’s with a B) financial bailout package, the justification was to buy up distressed mortgage assets so that banks would start lending again, and hopefully the epidemic of foreclosures sweeping the nation would be stalled.
The new plan doesn’t include that, of course, which has led to everyone asking, now what?
Lately, I have been holding open houses in Palo Alto pretty regularly, and almost everyone coming in asks me the same question: How is the Market? We discuss the market trends of homes taking longer to sell, increasing numbers of price reductions, the importance of pricing and preparation, etc.
The big shift we are seeing now is the effect of the stock market crash last month. Much of the wealth in Silicon Valley is tied to the stock market (options, grants, etc.). It’s how we pay our executives and employees, reward performance (bonuses), and fuel the venture capital engine. When the market drops over 30%, suddenly, potential home buyers are faced with the prospect of selling stock that is devalued by 30% to pull together the down payment on a home that is priced 5 – 10% off its high (typical Palo Alto home, your results may vary). That is pretty tough to justify, and in many cases potential buyers don’t have enough in their portfolios any more to cover the 20 – 30% down needed for that typical Palo Alto home.
So, we are seeing a bunch of Buyers exiting the market, while the inventory of homes for sale in Palo Alto is about double what it was at this time last year. The result is a Buyer’s Market. Good news if you are a Buyer, bad news if you are a Seller.
Many people in Palo Alto don’t NEED to sell their homes. They may be retired and wanting to move to a smaller home or relocate, or they may be a growing family needing more space. With the exceptions of people relocating out of the area, moving into retirement homes, or those who are selling for financial reasons, many sellers can afford to wait for the market to turn in their favor.
In the short-term, I predict that we will see the inventory of homes for sale drop, even more than the usual seasonality, as potential sellers wait out the market. The big threat to sales and prices is interest rates rising. Remember, that if the rate on a loan goes from 6% to 7%, the payment goes up about 15%. That is a big hit when you are talking about $1M loans, and a economy falling into recession.
For the longer term outlook, I’ll defer to this article that was recently in Money magazine that discusses how the credit crisis nationally is affecting ALL real estate, even here in Palo Alto. We Realtors love to say “All Real Estate is Local”, which is great unless the money to buy that local real estate is affected but national events. This time around, the events are international.
Be sure to follow the links above to see the latest market data for Palo Alto and the surrounding communities, but you may want to fix a drink first. Or, you can register to receive updates on the market in local communities delivered to your email weekly at: www.REMarketReports.com
Thanks for reading . . .
