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Chinese and New York Stocks Tumble; Whither Palo Alto Real Estate Prices?

The big financial news today is the sell-off on Wall Street, sparked apparently by an even larger plunge on the Chinese stock market (New York Times article; link won’t work forever.)

New York real estate blogger Douglas Heddings over at True Gotham believes it will have a positive effect on the New York real estate market.

What about here in the Bay Area, specifically the famous and pricey town of Palo Alto: What effect will the Chinese sell-off have on Palo Alto real estate prices?
Beyond the obvious fact that the Chinese economy is completely intertwined with the American one, there’s an even more important, and local, aspect to the question: Chinese buyers are a significant portion of the local real estate market — 25% or more – and that market has been booming of late, to the continued astonishment — perhaps even chagrin — of the perma-bears. Consider the following chart of Palo Alto’s 7-day rolling median prices. (Data courtesy of the good folks at Altos Research.)

Not by any means being an expert on the Chinese stock market, or, for that matter, on Chinese housing spending patterns, I’ll hedge my bets by using the old economists ‘ two-handed prediction trick:

On the one hand…If this drop continues, wealthy Chinese may find themselves with less income to buy properties here in Palo Alto, drying up some of the demand.
On the other hand…If this drop continues, wealthy Chinese may want to get their money out of China in a hurry, and perhaps some of that money will find its way here.

Having pinged some friends with far more insight into this than I, the going consensus so far is that it’s unlikely to have a negative effect, but for different reasons than above:

• The smart Chinese money is already well-diversified out of the country
• Not much of the downpayment that Chinese buyers use to buy homes in Palo Alto actually comes from their wealth in China

Any other thoughts?

Tags: Palo Alto, Real estate

Online Amber Alert

Alerted by John Harper, I wanted to get the word out about a recently-gone-missing teenager.

Quoting John:

Tonya has been missing since last Sunday, February 18. Tonya is sixteen, a junior at Monte Vista and was last seen getting on Bart in Walnut Creek, destination Berkley. Any info call Contra Costa Sheriff’s Office (925) 646-2441

Tags: Real estate

Yikes! Get these sellers a stager!

More and more home sellers and Realtors are recognizing the necessity of investing in home staging before placing a property on the market – but apparently not everyone has been clued in! Sometimes people balk at the thought of putting money towards staging, but these pictures of actual properties for sale across the nation prove that it’s an investment well worth making!

• Hmmm… living room or Elks Lodge? The way this room is presented makes you look for the banquet tables!

• Less is not always more. These sellers would be better off having nothing in the room.

• Outdoor spaces need stagers, too! This patio needs staging to show what a great entertaining spot this is.

• I could write an entire blog about this one (maybe I will!)! Dirty laundry? Child? Seriously, folks, never put children or family members in listing photos.

• Your refrigerator magnets and knickknacks are fine conversation starters while you’re living in your house – but a stager would have told these sellers to lose them for selling. You want potential buyers talking about the house, not your stuff!

And last, but certainly not least…

• Unless this is a toy store for sale, this room is the perfect example of why sellers need professional stagers. I wouldn’t be surprised to see price tags on the bears!

Tags: bad-listing-photos, home-stager, home-staging, Real estate, Staging

Introducing Another New Contributor — Ann O’Connell

I’m pleased to announce that another real estate blogger is joining the crew. Her name is Ann O’Connell and, like me, she is a corporate refugee, having tired of life as a lawyer. Unlike me, she has fabulous taste in and a love for home decorating, and decided to pursue the life of a stager.

Please join me in welcoming Ann O’Connell!

Tags: Real estate

Glenn Kelman and Russell Shaw: Flip Sides of the Same Coin? (AKA The Genius and the Tension in Redfin’s Business Model)

Apart from both being in the real estate business, what could these two polar opposites — Glenn Kelman, Redfin CEO and industry maverick, and Russell Shaw, mega-producing Phoenix Realtor — have in common? On the surface — nothing, especially when you consider that Russell has been in the business for more years (29, I believe) than Glenn has months (about 13).

Here’s one thing they do have in common: they both aim to move a lot (and I mean a lot!) of real estate. Russell and his team currently sell about 400 homes per year but they’re aiming for 2000. The number of transactions Redfin has had is not public, but however many it is, they certainly also have ambitious expansion plans, including a future foray into Chicago, Boston, and D.C.

How do you do this many transactions? How do you scale any business, for that matter? It’s simple (but not easy): you find ways to outsource and you find ways to become more efficient. And here’s the other thing they have in common: they’ve both found ways to do these things…Russell primarily on the listing side, and Glenn primarily on the buying side.

Russell has apparently built his business the traditional way most large-scale brokers have, by leveraging the natural advantages of the listing agent in this business. You get a listing, put up a yard sign, toss it in the MLS, throw a couple ads in the paper, do an open house or two (or, more likely, get some other agent to cover for you)…and then have dozens of other area agents (your competitors) show the property to their clients and (hopefully) find a buyer for you. Sweet deal. Because of the way the real estate industry is structured, one listing agent can handle perhaps 10 or 12 listings at a time, and if you hire an excellent assistant that number can easily double.

You outsource much of the work to get a home sold to your competitors (for which you compensate them through the “co-broke”) and you increase efficiency by specializing within your team. Russell, for instance, appears to have 12 people on his team. Two of them are “listing specialists” — which I presume means their job is to go on as many listing presentations as humanly possible. They’re really good at it, and every listing they get, they probably hand it over to the “seller consultant” and “listings manager.”

Russell’s team also has three “buyer specialists.” Their job is (duh!) to service the buyers. But here’s the rub: achieving scale on the buy side is much more difficult. A really good full-time buyer’s agent, whose job is nothing but previewing homes and then showing them to the buyers, can perhaps handle 4-5 concurrent clients — and that’s a stretch.

Enter Glenn Kelman and Redfin. If listers can outsource a good portion of work to other agents, why can’t buyer agents also outsource? They can, and Redfin does — to its clients and to its competitors. The buyers themselves do much of the work that a traditional buyers’ agent would do — namely, keeping up with the MLS and viewing homes at open houses, in exchange for which they get compensated by getting a piece of the commission. The sellers’ agents, on the other hand are enlisted (often against their will) to show the properties when there isn’t an open house, in exchange for which their compensation is…absolutely nothing (except avoiding appearing on the “hall of shame.”) Now the buyers’ agent’s job is mostly at the back-end — consummating the transaction — and, voila! now you can scale the business. A Redfin buyers’ agent can probably handle as many concurrent clients as a smoothly running listing agent can: around 10 or 12.

Therein lies both the genius and the tension in Redfin’s business model. The genius is in recognizing that the Internet makes it possible for buyers to do a chunk of the work themselves, but the tension comes about when Redfin — without any compensation — outsources another chunk of work to its competitors.

The other problem is whether Redfin will ever achieve enough profitability to cover the costs of its smart programmers. We’d need more numbers to figure out exactly how many transactions Redfin will have to do in order to go cash-flow positive, but whatever that number is, it’s got to be pretty big.

Tags: Business of real estate, Glenn Kelman, Real estate, Redfin, Russell Shaw

Today’s Palo Alto and Menlo Park Properties: A Guard Tower to Ward off Marauding Athertonians

What better way to spend a balmy, sunny, spring day than viewing the new crop of homes to hit the market in Palo Alto? Come along for the ride as we explore the inventory, which, per our friends at Altos Research, is still tight, but improving.

First up was a stray Menlo Park property — “stray” because Menlo Park properties are normally on broker tour on Tuesdays, not Fridays — namely, 1026 Menlo Oaks in the Menlo Oaks/Flood Park neighborhood of Menlo Park. A retired fireman’s residence, this classic old 3/2 home sits on a 9000 sq ft lot, a size more commonly found south of Bay Road than north of it. The listing agent, Jeanne Wangsness of Coldwell Banker, has it listed at $1,047,000, and in this market it’s anybody’s guess what the winning bid will be, despite how close it is to the charming sounds of highway 101. Look at it this way: you’re paying $100,000 for the home, another $2000 for the quaint (but gas-burning) stove, and $945000 for the land.

From there it was on to Palo Alto and 2297 St. Francis, listed by local Coldwell Banker superstar Brendan Leary. Tragically close to highway 101 and Embarcadero — and priced accordingly at $925,000 — is a definite candidate for the cute award, with 2 bedrooms, 2 bathrooms and 1120 square feet. Detracting from its charm, however, is a somewhat unkempt back yard.

After popping by Intero Real Estate’s Lana Raltson’s listing at 290 Iris Way in Palo Alto, I mosied on over to see fellow Alain Pinel-er Arti Miglani’s listing at 3055 Stelling. Showing my softer side, I took time to coo over an adorable little 8-month baby whose mother was busy looking over the property. Listed at just under $1.2M, this 3/2 Eichler home has been well-looked after and nicely remodelled, maintaining some of the original charm. Typical of this style home, there is a partial wall separating the kitchen from the living area, but the kitchen has been redone with tasteful tiles, cabinetry, and appliances, and is well lit from both the large windows and door leading outside and the track lighting. Arti had thoughtfully provided a coffee cart service — a wonderful way to keep Realtors lingering longer at the property.

Then it was two quick stops at 3934 Nelson (Pat Miller, Alain Pinel) and 2590 Bryant (Tim Anderson, also Alain Pinel) — the latter a small home on a big yard, whose nearly-certain fate is to be torn down and built into a McMansion like the one currently being built 2 houses down.

Today’s pièce de résistance was definitely the last property I saw: 345 Lincoln Ave, a grand century-old Professorville home listed by the Carol/Rosemary/Nicole team (again — Alain Pinel!) For just under $5M, you get a 21000 sq ft lot (pretty rare in Palo Alto), an elegant 4000+ sq ft home, 6 (or more) bedrooms, two stories plus an attic — and thought I can’t speak for the listing agents, they would probably be happy to throw in a GPS so you can find your way around. The nicest touch of this property was undoubtedly the “guard tower” perched above the back of the house, extending up to a four-story house, surrounded by a wall of glass. A perfect place for a sundowner or a late afternoon nap, one imagines this tower would have been perfect for spying on those marauding Athertonians in the old days before peace broke out between the two neighboring towns.

345 Lincoln Ave, Palo Alto, CA 94301