• Home
• About
• Properties For Sale By City
  • Atherton
  • Los Altos
  • Menlo Park
  • Mountain View
  • Palo Alto
  • Other Cities
• Housing Price Trends

Subscribe

The Silicon Valley Market Report for February 2010

So far 2010 is off to a roaring start, with multiple offers again becoming commonplace, and highly qualified buyers lining up in some cases to present strong offers for well-priced, desirable properties.

As a couple of data points, our listing for a three bedroom home at 842 Sycamore Drive in Palo Alto, an entry-level home priced at $949,000, received 14 offers and sold for over $1,100,000. A similar property nearby on Greer received 12 offers the same week and sold for just under $1,100,000 vs. a list price of $979,000.

This market imbalance of large demand chasing limited supply isn’t limited to the entry level, homes in Los Altos and Palo Alto listed between $1.5M and $2M are receiving multiple offers as well, and even our office listing at 75 Coronado in Los Altos priced at $3,995,000 has been getting more interest lately.

As we begin to see more homes coming on the market as we move through the spring, I expect to see the market cool as the supply of homes for sale catches up with demand, and buyers have more choices. In the meantime, the Sellers seem to have the advantage if they have homes that are attractive to mainstream buyers.

That $45,000,000 estate on Stonebrook Drive in Los Altos Hills is a great example, as it is now an $28,000,000 estate. Do I hear $15,000,000?

In summary our current market continues to be driven by the following conditions:

• Low inventory of desirable homes for sale that are well priced
• Buyers motivated & feeling like they will miss out with limited selection
• Fears of rising interest rates are driving motivation to buy now
• Realization by buyers that they can’t buy for 20% below list now. Most sales in $1M – $2M are 10% under to 10% over list.

Opportunities:

• Interest rates are currently at historic lows
• The government is buying down conforming rates under $729,750 through March 2010, which holds down jumbo rates as well
• Consumer confidence is picking up – I’m seeing new cars more often, and new car sales are an indicator of increasing consumer confidence which leads to a strengthening economy, as consumer spending is the largest component of our economy

Threats:

• Government buydowns of conforming loans are scheduled to end in March which will lead to rising interest rates on conforming and jumbo loans
• Forecasted loan resets on commercial property in 2011. You can’t refi empty office buildings and vacancies are up
• Lots of buyers rushed to purchase before the tax credit expired December 1,2009 – Will this leave a hole in demand in early 2010? Not so far . . .
• Unemployment is 10% locally, and there is limited job growth forecasted for the next year.

In the threat department, I’ll refer again to this report from Bloomberg last month, which is especially relevant in our area:

Homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S. rate. This brings the rate of default for these considerable loans up to a skyrocketing level of 12 percent as of September, compared with 6.3 percent on loans less than $250,000 and 7.4 percent on all U.S. mortgages. This is quite a jump from the year prior where the rate for default on the $1 million dollar plus mortgages as only 4.7 percent.

In contrast to these ominous reports and Threats, we are seeing strong upwards trends across our area in our Market Action Index, that catch all indicator based on prices, inventory, and time on the market. We are even seeing the MAI climb toward parity in the lower price ranges in markets like Palo Alto and Mountain View.

On to the numbers:

Atherton:

The Average Price of a Single Family Home in Atherton is $6,124,821 with a range of $1,150,000 to $14,900,000. 25% (versus 33% last month) of the homes in Atherton have had price reductions, and the average number of Days on Market is 270 days versus 272 last month. It remains a Strong Buyer’s Market in Atherton, although the Market Action Index has been trending upward over the last quarter.

Los Altos:

Currently, the Average Price of a Single Family Home in Los Altos is $2,165,536, with a range of $995,000 to $4,995,000. 25% (down from 39% last month) of the homes in Los Altos have had price reductions, and the average number of Days on Market has fallen to 165 days versus 172 last month.

Los Altos Hills:

In Los Altos Hills, the Average Price of a Single Family Home is $4,983,866, with a range of $944,900 to $28,500,000. 30% (down from 33% last month) of the homes in Los Altos Hills have had price reductions, as Sellers are learning that the market has shifted, and the average number of Days on Market has declined to 247 days from 261 days last month.

Menlo Park:

This month, the Average Price of a Single Family Home in Menlo Park is $1,491,797 with a range of $190,000 to $6,495,000 (The $225,225 is in East Menlo Park, the bottom of the Menlo Park market is about $800,000). 27% (up from 24% last month) of the homes in Menlo Park have had price reductions, and the average number of Days on Market has risen to 163 days versus 150 last month.

Palo Alto:

In Palo Alto the Average Price of a Single Family Home is $2,270,343, with a range of $750,000 to $23,950,000. 20% (versus 34% last month) of the homes in Palo Alto have had price reductions, and the average number of Days on Market has fallen to 158 from 179 last month.

If you know of anyone who would appreciate having this market information delivered to them monthly, please forward this message to them, or CLICK HERE to send an email with your cities of interest. If you are a data junkie, you can receive these reports weekly, just register at: www.REMarketReports.com to select the markets and reports you would like to receive.

If I can answer any questions for you regarding the market, please contact me directly at: 650-450-0450.

Thanks for reading . . .

Tales From the Front 1/31/2010 – The Return of the Tulips

I have been patting myself on the back over the results of my contrarian marketing of 842 Sycamore Drive in Palo Alto.

It sold in a week with 14 offers, when the average Days on Market for a home in that area and price range is about 100.

Part of my contrarian marketing was to put it on the market during January, before the “traditional” beginning of the spring market, which is the week after SuperBowl Sunday. With the recent sales activity, I’m expecting a number of homes to come on the market starting in mid-February, as most agent “hold” listings until then. I have confirmed this with a number of my colleagues who are big “listing agents” meaning they hang signs in front of a lot of houses. (Most of my work is with Buyers).

Another house on Greer in the same neighborhood on and price range (listed at $979,000), received 12 offers and sold for very near what Sycamore did. Both homes had over 100 visitors to the open houses and the offers landed in the same ranges.

One question that came up immediately was “These are so similar, I wonder how many buyers are writing offers on both homes?” I haven’t been able to confirm anything, but I have a sneaking suspicion that the same 12 – 15 people were writing offers on both of these homes.

If this is the case, then the entry level market in Palo Alto is like a game of musical chairs. The same 12 – 15 people are going around writing offers on homes, and with every sale one drops out. After 12 rounds or so, they all have homes and the market stops.

So, when the conventional wisdom listings hit the market in February, there will be a flood of inventory, and choices, so the number of offers per home will likely drop off as buyers have more choices and less of a feeling of scarcity. In the case of the homes mentioned above, that would have resulted in a loss of thousands of dollars in proceeds to the sellers, but great news for the buyers of those homes.

This is all speculation now, but worth keeping an eye on over the coming months as we wait to see if the market is returning, or if we are seeing a short-term blip driven by a very limited supply in shortage to a relatively limited demand.

Thanks for reading . . .

Economic Forecast, Extending the Tax Credit and the Golden Window for Buyers

On October 12, I attended a SILVAR sponsored economic update and forecasting presentation by CAR EVP Joel Singer, and I thought you might find the following summary and comments beneficial:

• As we all know financing is the primary key to housing stability, and Singer is 100% confident that both tax credits and the $729,750 conforming limits will be extended into 2010—both of which are keys to continued recovery
  • 40% of first-time buyers for 2009 bought because of the tax credit
  • The Feds are on track to extend the credit, maybe even improve it, so let’s keep our fingers’ crossed
  • The CA State Senate already approved the extension of the state $10,000 tax credit, and it should pass Assembly this week—yeah!
  • Food for thought: before the competition increases due to formalizing the tax credits, first-timers should make their move sooner than later
• The move-up market here is the most impacted, but will improve as financing does; as such, he feels as though there will be some level of government involvement to stimulate the secondary market for non-conforming loans
  • Right now, inventory levels for $750k-$1mm are at 6.1 months, which is healthy; inventory levels for $1mm+ are at 12.8 months, which signals a clear buyers’ market
  • With government support, non-conforming lending will ease, but not necessarily cause rates to be lower—current margins are already at all-time highs primarily due to risk—by stabilizing the system and improving liquidity, risk is reduced, savings rates increase and rates remain about the same
• Futures point to a Fed funds rate rise of .500% to .750% and conforming 30-year fixed mortgages at 5.6% in Q2 2010
  • As such, this gives anyone needing a conforming loan about 5 months before both rates and prices are up significantly
  • And if you missed the headline on September 24th about the Fed easing their policy of keeping mortgage rates low, you’ll want to know that they are almost cutting in HALF the  the effort– $14B versus $25B
• The overall number of homes/units sold next year will be down, but that’s only because we had a record number of units sell already this year—foreclosures will be DOWN relatively significantly
  • Activity will still be high and it’s likely the $1mm+ segment that will provide buyers with the best value
  • The “second wave” of foreclosures due to rate adjustments is a farce—many people, like myself, are looking forward to loans adjusting at lower rates, which is precisely what the majority of those loans will do
• 2010 will be a growth year with GDP expected at about 1.9%
  • Great news for the economy, but growth causes higher prices and higher rates—
• The population of CA will grow another 1.1%, so that’s about $370,000
  • We’ve added about 600k people per year since 2000, and about 500k babies are born in CA each year, so I guess that means there will be more demand on housing, which is also good news
• Unemployment may be 12% in CA, but that number is tied mostly to construction-related industries. 
  • With High Tech, Finance, Exports and Travel all on the rise for the Bay Area, our property values and local economy should benefit significantly

The Latest on Rates and Activity

Even with the incredible rates that continue to drive the refinance market, over 50% of the transactions that we closed in September were purchase transactions.  Also of importance is the fact that of those purchase transactions, 35% were financed using “JUMBO” loans!   Jumbo 30-year fixed loans are running about 5.75% and that jumbo 5/1’s are around 4.50%.  And if you have a $417k conforming loan, 5/1’s are available at 3.75%!!

According to the MBAA, last week’s applications were down, but the four week moving average is up, along with interest rates (albeit slightly).  We’re seeing the opposite effect locally, but it’s likely due to the many move-up buyers looking to take advantage of the $1mm+ market through Winter.

Is it just me, or does it genuinely feel like the golden window of opportunity for buyers right now..?

A great success story for us lately included funding a loan for a borrower who had a 63% debt-to-income ratio.  We have also bridged three separate transactions that allowed buyers to move up without having to sell their current home first.  And finally, we improved a client’s credit score by 100 points and saved them over $8,000 by having an erroneous collection removed from their credit record.  So even with all the news headlining the challenges in the mortgage world, at least some great success stories continue to be made.

Right Along With the Grunge Look, the Housing Crisis is Over

Yes, for those of you gents who still may be holding on to the rather relaxed “grunge” look from the 1990’s, I’ve got a newsflash for you: grunge, along with the current housing crisis, is over.  

Articles about the housing crisis ending have been few and buried in their respective periodical, my favorite of which was in TIME magazine back in February titled, “Ignore the Headlines“.  But now we have the Wall Street Journal. claiming that the trough was reached in April with an article from May 6, “The Housing Crisis is Over“.

I agreed with Peter Lynch back in February.., and it’s becoming more an more apparent that the longer prospective home-buyers sit on the fence, the more expensive that home purchase will become.  And this is not just because I believe that home prices will rise, it’s also because I believe that both long and short term interest rates will rise.  The 10-year Treasury Note, for example, is up over 1/2% since the middle of March, and the 10-year Treasury Note is a decent barometer to use when you want to know what the trend in long term mortgage rates have been.

That written, if you really want to continue with the grunge look, might I suggest saving it for your next camping trip?

As always, kindly consult with your trusted real estate, tax and mortgage professional before seriously considering any home purchase.

Introducing The World’s Most Internet-Marketed Property: Come Along for the Ride!

I've been waiting for the right opportunity to really push the envelope of online real estate marketing, and, well, it's here!

I'm working on a listing in San Francisco's Potrero Hill neighborhood that fits perfectly into this new online marketing world:  it's slick, chic, and contemporary, will likely attract a younger and web-savvy crowd of buyers, and the sellers simply love the idea of creating a buzz online.

We're passing on the normal full-color ads in traditional local media like the San Francisco Chronicle, the San Jose Mercury News, and we'll be spending that money online instead.  To hedge our bets, we will be placing open house display ads in print media.

I'll be collaborating with several real estate online marketing companies to promote this property.  They'll be showing me — and, by extension, my readers — how to get the full benefit of their products.  I intend to chronicle our adventures here and invite you to follow along.  If you have some ideas, feel free to join in!

I'll announce the first collaborator tomorrow.

In the meantime, as part of our adventures, let's see how high this site currently ranks for the search, "San Francisco Potrero Hill Real Estate" — I suspect it won't be that good, since I've never written about Potrero Hill before!

Sure enough, on Google, Yahoo, and MSN, I'm nowhere to be found, not even in the top 100. 

Google: 

 

Yahoo: 

 

MSN:

Multiple Offers Up Again: Chiropractors Still in Business

Previously I reported that buyers appear to be more patient, less ready to pile on, and generally doing their best to avoid “buyer whiplash.”

Turns out that was a blip in market activity for perhaps a week or ten days.  Feeding frenzies seem to be now be back in force.  Last week clients of mine were one of 21 — twenty one!! — offers on a property.  Alas, we didn’t get it.  Rumor has it that the winning buyer threw in a Hawaii vacation, naming rights for their next child, and a promise to run up and down the street naked on every anniversary of the sale, waving a banner singing the praises of the seller.

Looks like chiropractors in this area will continue to see a steady stream of business.

Real Estate Buyers, Tired of Whiplash, Becoming More Sophisticated

The Spring sellers’ market here in the Bay Area’s Peninsula continues unabated, with no rest in sight for buyers.  Multiple offers are still de jour on many sales in the area, with most listings selling for more than the list price.

This week marks a growing trend that could perhaps be called “buyer’s revenge.”  Tired of the constant whiplash inflicted on them by sellers hosting an offer presentation rodeo and then squeezing out every drop of blood they can (wow — three unrelated metaphors in one sentence!), buyers are backing off and becoming a bit more patient.

Anecdotes abound this week about properties that had a dozen offer “maybes” turn into only two real offers.  On some other transactions there were more offers — say, 6 to 10 — but the final price was only a few percentage points above the list.

Buyers seem to be getting more patient, more sophisticated, more value conscious.  They realize that if they pile on during a listing presentation and drive the price of a property up by 20%, that sets the benchmark on the next properties they bid on.

Anyone else seeing this?

(Image courtesy of www.necksurgery.com)

What can a stager do for me? Part 1 of a 4-part series

By now, most of us have seen those HGTV shows where a staging team bursts into a property, and, in a whirlwind, transforms it into a buyer’s paradise in a matter of what appears to be a few hours. Usually the premise is either: a) stage this property for sale on a miniscule budget or b) stage this property for sale – the sky’s the limit! But these shows fail to reveal all of the behind-the-scenes labor and preparation put into staging a house. Let’s face it – loading inventory into trucks just doesn’t make for good TV. So I’ve written this four-part blog series to introduce you to what the “typical” stager looks like, along with the services generally performed by stagers. There are, of course, exceptions and variations on what I’m writing, and I’d love to hear what others’ experiences have been with stagers.

So, what does the “typical” staging business look like? Generally, it is a team of one or two staging professionals who do a good deal of the work themselves. Not all stagers have a team of movers, painters and handypersons at their command – although most will be more than happy to recommend such people to their clients. Some stagers do have full-time employees, although many will simply hire assistants and movers as jobs demand. I even know of stagers who bring in their family members and friends as free labor to keep their costs down.

Stagers are often happy to recommend what a client should do as far as remodeling is concerned, but I do not know of many who would handle a job like this themselves. If you are a seller and believe that your property needs major structural remodeling before sale, you should contact a contractor or an interior designer for these things, and call in the stager to put the finishing touches on the property before sale.

Some stagers carry inventory of their own, while others choose to rent furniture or only use the seller’s own furniture for staging. Those stagers who do own inventory often store it anywhere from an extra bedroom in their home to their own warehouse. One of the benefits of carrying inventory that stagers have capitalized on is the ability to stage with a specific style. For instance, some stagers specialize in Craftsman bungalows or modern high-rise condominiums.

A stager with a huge inventory and multiple employees is not necessarily any better than the solo stager whose assistant is her teenage son. Stagers perform a multitude of services – which will be discussed later in this series – and sellers should look for the stager who provides services which best meet their needs.

Rain or Shine — What’s your preference? Depends if You’re a Buyer or Seller…

After a long spell of unseasonal sunshine, it looks like the rain may be back.  The forecast for this weekend gives us nearly 50/50 odds of being rained out.

Here’s the question — if you’re active in the market right now, which would you prefer:  rain or shine?  I’d say it depends if you’re a buyer or seller.

If you’re a seller, you definitely want good weather.  Bright sunshine and balmy weather triggers the release of home buying pheromones and gets you lots of weekend open house traffic.  The more interest in your home, the better.

If you’re a buyer, especially a really committed one, you definitely want bad weather.  Cloudy, overcast days, and preferably rain definitely dampens home buyer enthusiasm and reduces competition for that home you’re after.

This may explain the unusually early spring buying season we’ve been experiencing.  We often get Seattle-type weather this time of year, with week after endless week of drizzing rain.  As soon as the rain stops, the spring buying season starts.  Last year the rain stopped late, and so the buyers came out late too.  This year the rain stopped early — or so we thought — and the last two weeks have seen pretty frantic activity.

If my theory is right, and this rain persists, the market may taper off and wait until the rain really ends for the season.

Just what exactly does the Lesotho Loti have to do with Palo Alto median prices?

Pat Kitano notes with his usual insight that spontaneity is both the joy and bane of blogging. In a rush of post-Martian Flu exuberance, I showed what looked to be a pretty neat correlation between the NASDAQ and Palo Alto median home prices. Alas, the spontaneity of that moment led me to not dig quite deep enough…

Enter reader Greg, whose facility with numbers and patterns has led to previous interesting discussions. He suggested running some regression analysis (for those who missed Stats 101, “regression analysis” is simply finding relationships between different groups of numbers.) I did that and came up — surprisingly — empty-handed: it turned out there was actually very little correlation, mathematically speaking, between the NASDAQ and Palo Alto median home prices. Puzzling, puzzling indeed, because the graph showed at least a rough correlation.

Greg ran a regression of his own comparing Palo Alto median home prices vs. the number of months since January 1997…and found a reasonably strong correlation, an R-squared value of 75% for those who care about such things.

Here’s a graph:

The wavy blue line indicates Palo Alto median home prices; the straight pink line is the prediction, based simply on the number of months since January 1997.

Fortunately, all was not lost, as it turns out that while the NASDAQ alone was not a very good predictor, adding it to the mix turned out to increase the accuracy of the predictions, resulting in an R-squared value of 85%. The chart:

Again, the blue line represents Palo Alto median home prices, while the pink line represents the predicted median home price, based on both the number of months since January 1997 and the NASDAQ.

What does this all mean? In a nutshell, this entire analysis proved what we all already know to be true: Palo Alto real estate prices in the last 10 years have tended to go up. The key predictor of prices is simply time; adding in other variables like the NASDAQ improves the predictive power, but the main indicator — by far — is simply that of time.

Which brings us back to the Lesotho Loti. Just for the fun of it, I ran one more regression, this time between Palo Alto median home prices and two variables: the number of months since January 1997, and the exchange rate between the US Dollar and the Lesotho Loti. (Yep, I’m the kind of person who “just for the fun of it” runs regressions. For other like-minded people, the R-squared for this regression was 75%.)

The graph:

So does this mean that the exchange rate of the US dollar vs. the Lesotho Loti is an accurate predictor of Palo Alto median home prices? Not at all…it simply means that adding in that variable doesn’t really detract from the predictive power of the time factor.

Geek out.

Next Page »

• Chat

• Market Stats

Copyright © 2008 3 Oceans Real Estate · Revolution News theme by Brian Gardner · San Francisco Commercial Real Estate · Log in