January 16th, 2008 · 7 Comments
Mark Twain, it seems, merely popularized, but did not actually coin the phrase Lies, Damn Lies, and Statistics. That honor belongs to none other than the British statesman Benjamin Disraeli, the first Earl of Beaconsfield, KG, PC, FRS. (With all these acronyms after his name, one wonders if he may have been the first Realtor!)
I’ve ranted not infrequently about how real estate is local, local, local. What nationwide, statewide, or countywide prices are doing may or may not reflect your city. The overall trends in your city may not be a good indicator of your particular neighborhood.
And that’s where Benjamin Disraeli’s famous quote come in. You can make numbers tell whatever story your bias prefers.
The story I’m about to tell is hyperlocal if ever there was one. If you’re not in this immediate area, the lesson for you is not in these specific numbers, but in the notion that you have to understand your local market.
Here, for instance, is a pretty bad story to tell, and it appears that the story, as told by the great numerical storytellers of Altos Research, is quite simple: home prices in Menlo Park are in freefall, with the median having dropped from an all-time high of $1.65M in mid-2005 to a current $875K-ish. 2007 prices have — apparently — dropped by 30%:
That story just doesn’t make sense to me, however. The marquee towns up and down the Peninsula — those with good schools and their associated high prices — have actually done quite well over the last year. Why would Menlo Park be any different?
Palo Alto: Median prices mostly up last year, with a retreat in the latter part of the year, and signs of another season upsurge upon us…
Los Altos: An incredible run-up in prices, again with a dip last year, and again with a sign of a revival this year…
Los Gatos: A rise last year, though not as much as the other towns, and a pullback in prices in the latter part of the year…
You get the picture. Why then is Menlo Park so different? Have prices really dropped by 30%?
The answer? Most emphatically not!
In fact, take a look at these numbers, pulled from our local MLS. Of the twelve Menlo Park neighborhoods, only two of them had median prices go down in 2007 — and then only by 2-3%. Other neighborhoods saw medians rise from 5.6% (Flood Park) to 35.6% (Alpine Road Area.) The following graph shows the percentage change in median prices from 2006 to 2007.
How can both of the following two facts be true?
- Median home prices in Menlo Park have dropped by 30%
- Median home prices in 10 of 12 Menlo Park neighborhoods have risen, while median home prices in the remaining 2 neighborhoods have fallen, but only modestly.
The answer, Mssrs. Disraeli and Twain, lies in a different statistic: the amount of inventory on the market. Take a look at the story told in this graph, which shows the number of homes sold per year by neighborhood:
The sheer amount of data in this graph, and its size, makes it hard to read. The key points: the number of home sales in Menlo Park in 2007 was just over 400 — significantly lower than the wild years of 1999, 2004, and 2005. The number of homes in the “East of US 101″ neighborhood — the least expensive one – however, increased dramatically. The average number of annual sales in that neighborhood is 36, but last year there were fully 69 — just about double — the number of sales. In the higher-priced neighborhoods, on the other hand, there were fewer sales than normal.
Another graph…this one showing how many sales typically happen in a year in each neighborhood, followed by how many sales happened in 2007:
The lowest-priced neighborhood — East of 101 — had a dramatic increase in the number of transactions; almost every other neighborhood — in particular the expensive ones had fewer sales.
So this, ladies gentlemen is the key story that Mssrs. Disraeli and Twain — not to mention my stats professors — would want us to understand:
- The median price of homes in Menlo Park has indeed dropped in 2007.
- The price of most individual homes in Menlo Park, however, has actually increased in 2007: that is, most homes were worth more at the end of 2007 than they were at the end of 2006.
- The anomoly between the above two points is explained simply by the mix of the homes that were sold: 2007 saw a much higher than normal proportion of less expensive homes.
Tags: Altos Research
, Flood Park
, Los Altos
, Los Gatos, Menlo Park
, Palo Alto
, Real estate
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Tags: Consumer · Industry · Menlo Park · Palo Alto
A few days ago I spoke about the effect a mythical local insect, Vendus Encourigitis, has on housing inventory patterns here in Silicon Valley. It quite dependably comes out in the early part of each year, spraying homeowners with pheromones that make the notion of selling their home completely irresistible, thus putting an end to the seasonal problem we have here of low inventory. A close cousin of said insect, Achetus Encourigitis, tends to come out shortly thereafter, encouraging buyers to compete with eachother to buy the new inventory and drive prices up.
To continue the allegory, we look at another creature, this time a real one, but again with an allegorical function in this tale. I speak of the lowly plankton, a tiny oceanic life form: in size, seemingly insubstantial, but in importance, great. The plankton, you see, is at the bottom of many aquatic food chains, and if it were for some reason to disappear, the effect would be disastrous for the creatures that depend on it for food, and for predators of the creatures that depend on the plankton, and so forth: a ripple effect ultimately reaching most aquatic life.
The plankton of local real estate is the humble first-time homebuyer in the lower priced areas such as Redwood City, East Palo Alto, Menlo Park east of 101, parts of Mountain View and San Jose, and so forth. These folks purchased their homes in the last few years, assuming (as we all did) that prices would continue to rise, and they could then “move up” into a ritzier neighborhood with the equity they had built up. A higher than normal percentage (for this area) of such purchases were made with sub-prime loans.
Fast forward to 2008…these markets are hurting, some of them quite badly.
East Palo Alto’s inventory, for instance, has been marching steadily and worryingly upwards since early 2007…
…and prices have been going in the opposite — and expected — direction:
When inventory is over three times what it was a year ago, and prices have dropped by over 15%, the market basically freezes. Deflation does what it always does: makes the bargain-hunters decide to continue salivating just a bit more, because surely those prices are going to continue going down! Homes sell more slowly, prices continue downwards…it’s a vicious spiral.
And the plankton who own these homes? Well, if they can’t sell, that means they can’t buy the $850K starter home in Flood Park…and that homeowner can’t buy the $1.1M home in Palo Alto…who in turn can’t upgrade to the $1.6M property in Los Altos he’s been salivating over…who in turn can’t move to a respectable venture-capitalist-ridden neighborhood in Atherton.
The sub-prime woes affecting the lower-end markets are bound to eventually impact Palo Alto and its kin — though probably not as much as this analogy makes it sound. Why? In this market, there are plankton at almost every price point, so homeowners looking to sell don’t necessarily need to wait for a $500K homeowner to be able to sell his home. For every East Menlo Park’ian who was planning to — but no longer can — move across the 101 to buy an $850K home, there’s a dual-income tech couple who’s looking for the same $850K as their first home. Higher up the food chain, newly minted Googlers represent the plankton of the Atherton market.
But make no mistake about it: the lower end markets here are hurting, and will continue to do so for a while.
For instance, Redwood City’s inventory, much like East Palo Alto’s, is more than triple where it was a year ago…
…and prices in the two lowest quartiles are not looking pretty:
, Flood Park
, Menlo Park
, Mountain View
, Palo Alto
, Real estate
, Redwood City
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Tags: Atherton · Consumer · East Palo Alto · Flood Park · Los Altos · Menlo Park · Mountain View · Palo Alto · Redwood City · San Jose
Alas, the Americans with Disabilities Act does not consider gluten-intolerance a protected condition, and thus I went hungry during today’s Menlo Park real estate tour, in which many homes offered tempting delicacies to lure us in.
Though the dearth of housing inventory remains an issue (see the 90-day rolling average chart to the left), the numbers have been increasing lately (per the 7-day rolling average chart on the right), and this was reflected in today’s tour which featured a surprising number of properties in the Willows.
But before stopping by the Willows I went to the Flood Park neighborhood sandwiched between Bay Rd and Highway 101 to see Corey Sijbrant’s listing at 1033 Ringwood, Menlo Park. Weighing in at $1,049,000, with 3 bedrooms, 2 bathrooms, and 1600 square feet, it’s been nicely done up and the master bedroom boasts a loft area, a touch I’ve always liked.
Moving on to the Willows, I started at 927 Arnold, a Tasha Standridge (Keller Williams) listing. This home is a classic “Timing is everything story.” On the market during last year’s doldrums, it just didn’t sell. Tasha wisely took it off the market, made some improvements, and now it shows even better than before and will doubtless sell within the week. With two stories, 4 bedrooms, 2 bathrooms, and about 1750 sq ft, this home is listed for only $990,000. A home that large in the Willows for under a million dollars? What gives? Simple — it’s unfortunately only a stone’s throw from Willow Rd and from highway 101. The sound barrier wall deflects a lot of the noise, but there’s still enough noise to make the property’s yard a poor choice for a yoga meditation session. Check it out this weekend during the Saturday and Sunday open house.
Next was this week’s winner of the “great spread” award: 212 Chester St from mother-and-daughter team Gloria and Caitlin Darke (Alain Pinel). I had to content myself with the healthy stuff there — celery sticks and carrots — and pass on the undoubtedly delicious, but tragically gluten-ridden, breaded chicken. Oh yes, the home itself…Priced at a whisker under $1.3M, the home has been significantly redone, boasts a large lot over 7300 sq ft, and has nearly 2000 sq ft of living space. See it for yourself during this weekend’s open house on both Saturday and Sunday.
Next up was Karen Izzo’s (Coldwell Banker) listing at 3 Cleland Place. Also open this Saturday and Sunday, this $1,200,000 “Charming Willows Bungalow” has a surprisingly large back yard — complete with a nostalgia-inducing tree swing — and 1410 square feet of living space, including 3 bedrooms and 1.5 bathrooms. Her Realtor treats included some much-needed coffee and some undoubtedly also delicious, but sadly be-glutenized muffins. I had to pass.
From there the next on my list was local Keller Williams superstar Miles McCormick’s listing at 336 Concord Drive. Miles was in the business and web-savvy early enough that he snagged the domain name “HomesOfThePeninsula.com”. At $786/sq ft, this 1520 square foot property will set you back just under $1.2M, and you’ll get not only a spectacular Willows location — with proximity to downtown Palo Alto — but also a very nicely done up 3 bedroom, 2 bath home. Again, delicious treats. Again, not for the gluten-intolerant Realtor. Oh yes, this home is also open on both Saturday and Sunday.
Tags: Alain Pinel Realtors
, Coldwell Banker
, Flood Park
, Home reviews
, Keller Williams
, Local information
, Menlo Park
, Miles McCormick, Open houses
, Real estate
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Tags: Alain Pinel Realtors · Coldwell Banker · Consumer · Flood Park · Home reviews · Keller Williams · Local information · Menlo Park · Miles McCormick · Open houses · Real estate · Willows
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