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900 University Ave, Palo Alto: Attention, Madam Secretary Rice: We Have The Perfect Home For You After January 20, 2008

Ms. Condoleezza Rice
Secretary of State

Kevin Boer, 3 Oceans Real Estate
Chris Iverson, Ventoux Real Estate

Dear Madam Secretary,

We understand based on recent news events (include Mr. Obama’s pre-emptive European victory lap), and on the harsh constitutional reality that your present employer will soon no longer be needing your services, that you may soon be looking for a new residence, perhaps near to your past employer Stanford University.

It seems, in fact, that Mr. Bush has already begun his own search, so there may be some urgency to this matter.

Allow us to suggest a residence suitable for a person of your experience and discerning taste: the Squire House at 900 University Ave in Palo Alto. This property is currently on the market, listed by the local Alain Pinel triumvirate Carol, Rosemary, and Nicole, for only $12.5M.

First of all, this home is a leisurely 20 minute walk down University Ave straight into the heart of the Stanford Campus:

Secondly, the facade of the home may well remind you of a similar grand mansion on the East Coast, one in which you have spent a considerable amount of time in the last 8 years:

(Image courtesy of 900UniversityAvenue.com)

Thirdly, the home is over 6000 square feet, and has a lot size of nearly one acre. This will provide ample room for all your entertainment, parking, and security needs.

Should you wish to view this property, have your people call our people, and we’ll make it happen.

Best regards,

Mssrs. Boer & Iverson

P.S. Some of your colleagues may be in a similar situation. We are happy to provide them with good references for real estate professionals in their home towns.

Mr. Paulson, for instance, may return to Manhattan to work for Goldman Sachs. May I recommend Mr. Noah Rosenblatt as the ideal discrete broker to assist him.

Should Mr. Gates return to his former employer, I recommend he contact Ms. Lani Anglin, who, though based in Austin, not College Station, would be a stellar pick.

If Mr. Gutierrez finds the siren song of Miami irresistible, I highly recommend Mr. Kevin Tomlinson.

Perhaps you could also relay to Senator McCain that, should he decide to retire, the right person to contact is Mr. James Wexler, one of the best real estate brokers in the Phoenix area. We understand this move might happen this year, or in 2012 or even 2016; Mr. Wexler is patient and will be awaiting his call.

Update:

Curtis Van Carter, who sells real estate in Napa Valley, claims he’s trying to nab another high-profile soon-to-be-unemployed individual, none other than “W” himself. Apparently, said individual, while in Napa Valley on a fund-raising expedition, took a little side trip to see a certain castle. Alas, it’s not even for sale, and spouse Laura found it cold and uninviting.

At the other end of the spectrum, Los Altos Realtor Joanne Fraser suggests Condi may have to settle for a $1.6M Los Altos home because Stanford profs only make $175K per year. I completely disagree. First, she’d be the Provost, not a mere professor, which means her salary would easily be $250K. Secondly, I’ve heard she may be getting help for the down payment. Finally, there are rumors of a book deal in the works!

Tags: Condi Rice, Palo Alto, Real estate, Secretary of State, Stanford

From The “I Missed That Class Where We Talked About ‘Place Value’” Department: Palo Alto Per-sq-ft Prices Drop Precipitously Down From $75,000

In a former life, I was a middle school math teacher. In the Peace Corps. In Botswana. I distinctly remember spending a number of days teaching about the importance of place value in numbers — you know, the concept that decimal points and zeros aren’t just decorations. .32 and 3.2 and 32 and 320 are distinctly different.

As far as I know, none of my former students are Realtors in Palo Alto. Which might explain this juicy little chart from our friends at Altos Research:

Note the drop in per-sq-ft prices a few years ago, from $75,000 per sq ft down to perhaps only a thousand bucks a sq ft. Then, a massive run-up back to over $20,000. Then back down again. Kind of like a scary roller-coaster ride.

Even during the incredible run-up in real estate prices, trust me, we were never at $75,000 per sq ft! The explanation for that chart? Simple: Every now and then a listing makes it onto the MLS with a misplaced decimal or zero. A $2,000,000 home gets listed for $200,000 (these mistakes are typically corrected quite quickly when the listing agent gets 100 phone calls in the first hour from agents wanting to make offers.) Then a $700,000 home gets listed for $7,000,000. (These mistakes take longer to correct. The agent wonders why nobody comes for the open house, then figures it out.)

Then there’s the square foot mistake, where a $1,600,000 home (price entered correctly) gets its floor space shrunk from 2000 sq ft (correct) to 2 sq ft (incorrect.) Voila! This home now costs $800,000 per sq ft! A few of these in the same week, and poof! Up goes that average!

Athol Kay has proved that, as a species, we Realtors aren’t that good at taking pictures. But for the love of God, people, can we please please please remember the importance of correctly-placed decimal points and zeros!

Tags: Altos Research, Palo Alto, realtors

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.

Tags: Consumer, For buyers, For sellers, Industry, Mortgage, Palo Alto, palo-alto-real-estate, Real estate, Real estate blogging, real-estate-market

Eliot Spitzer and Making Sense of the New Conforming Loan Limits

If you’re Eliot Spitzer, probably three feelings come to mind: panic, disorientation and regret.  But if you’re a potential home buyer in the Peninsula region of California, you have good reason to feel excited, encouraged and confident!  Why?  If you read my last post last month, you know that the conforming loan limits for many California Counties are going up and that means cheaper mortgage rates on loan amounts between $417,001 and $729,750.  Now that HUD has made it official that ALL bay Area counties qualify for the revised maximum conforming loan limit, that means potentially big savings on mortgages for qualified applicants looking to purchase single-unit properties up to $810,000 with as little as 10% down!

We’ve all heard the cliche, “the devil’s in the details”, so what are the latest requirements to obtain a conforming loans between $417,001 and $729, 750?  Since I’ll provide you with a link to Fannie Mae website and announcement , I’ll provide you with some highlights that I think are most relevant and let you read further at your leisure:

1. Single-unit properties only

2. Purchase and “limited cash out” transactions only (i.e. no greater than $2,000 going into your pocket upon settlement)

3. If primary residence purchase, up to 90% loan-to-value (”LTV”) allowed if fixed-rate program is selected–700 minimum FICO(R) required; 80% LTV if an adjustable-rate loan is selected–660 minimum FICO(R) required; if refinance

4. If second home or investment property purchase, maximum 60% LTV allowed with minimum 660 FICO(R) regardless of eligible loan program selected

5. If refinance, regardless of type of eligible mortgage program, up to 75% LTV allowed, plus subordinate financing allowed in addition up to 20% LTV–660 minimum FICO(R) required

     a. SPECIAL NOTE, consolidating existing first mortgage and subordinate mortgage into one loan NOT eligible AND six  months of “seasoning” (six payments made on existing mortgage) required to refinance!

6. Loans are eligible for origination NOW 

7. Eligible programs include 30-year fixed, 15-year fixed, LIBOR-based 5/1 ARM (amortized and interest-only payments allowed for this program)– more programs may become available

8. Sufficient employment, income and assets must be verified and each file will require manual underwriting– automated underwriting engines not allowed at this time

Again, I do encourage you to read the Fannie Mae announcement from the 6th of March for all the details, but the above are the top highlights.

So what will pricing look like on these “new” conforming mortgages?  Well, pricing has just recently been released by only a few institutions, but it looks like the 30-year fixed is running at about 6.375% and the 15-year fixed is running at about 6.25%.  The 5/1 ARM pricing is expected to be released next month.  What I do think is that pricing may actually get a little better in the short term as more institutions post pricing and auctions are successful with Fannie Mae and Freddie Mac. 

What’s right for you as a would be home buyer on the Peninsula?  That depends of course on your specific situation, and I do encourage you to consult with your trusted mortgage and financial consultant before placing an offer on a home or refinancing your mortgage.  What I can say is that the majority of our clients who are buying or refinancing today are selecting a jumbo 5-year ARM in the mid-5% range due to its balance of savings, security and flexibility.

Tags: Buyers, Consumer, For buyers, Home buying, Industry, Menlo Park, Mortgage, Mortgages, Mountain View, Palo Alto, palo-alto-real-estate, Real estate, Real estate blogging

Zillow Tells Tales Of Housing Woe … Meanwhile, Back At The Ranch, Multiple Offers Are Back In Vogue…An Object Lesson In “All Real Estate Is Local”

Embargoed for release until 9:00pm (hence the 9:01pm time stamp!) is the news that Zillow has just released their Q4 2007 analysis. It ain’t pretty.

Giant swathes of the country are bathed in the bright red color of price decreases and upside-down homeowners…here, for instance, is the national map of homes with negative equity. The bubblistas are gonna love this one!

Here’s how to interpret that map: 50% or more of the homes bought in 2007 in, say, Modesto are now worth less than what the owner still owes on the property. Sounds pretty grim, and it certainly is if you’re one of those homeowners…especially since we Californians have taken it as our God-given right to have property appreciate steadily year on year.

Here’s a map I’d like to see: the percent of homes bought in 2005, 2004, 2003…pretty much any year going back which are now “under water.” Instead of bloody red color so much loved by the bubblistas, we’d see a map bathed from sea to shining sea — including even the fabled fruited plains themselves — would be painted a joyful bright green, the color signifying “0% to 10%.” In fact, the map would have to be modified to show the precise number 0%.

Moral of that story: I feel your pain, trust me. If you bought a home in 2007 in Modesto, and life circumstances force you to sell it in 2008…your life sucks. Absolutely. But what about those who can stick it out for 2, 3, perhaps 5 years that this market will remain sucky for much of the country? Life for them won’t suck. Absolutely.

Let’s examine San Mateo County. Zillow’s “Z-index” for the whole county shows a 5.5% drop — that’s right, a drop — quarter on quarter. Translation: If in 2007 Q3 you bought a hypothethical home that covered the entire county, that home’s value dropped by 5.5% by Q4 of 2007.

Sounds grim, right? Again, let’s look at the whole story…

Here’s a city-by-city heat map of price appreciation from Q4 2006 to Q4 2007 … and in this map, red is good (at least for homeowners; for perma-renters and bubblistas it gives heartburn.)

Interpretation:

Huge swathes of San Jose, the East Bay and further inland, plus some pockets of the Peninsula — like East Palo Alto and South San Francisco and Redwood City — are down, in some cases dramatically. Most of the Peninsula, however, saw price increases from 2006 to 2007; in particular, the marquee towns of Palo Alto, Menlo Park, Atherton, Cupertino, Los Gatos, and Saratoga saw prices go up 10% or more.

Folks, it’s a mixed message out there: a lot of the country is in pain. But just remember this, as always: Real estate is local, local, local. Just because prices in Vegas haven’t fallen doesn’t mean you should sell your particular home and live in a tent. You need to look at the price trends in your neighborhood.

Oh, and the “multiple offers” mentioned in the title? Here’s a small sampling of what the rumor mill says has happened in the last week…

• Saratoga — $1.8M - ish –> 15-20 offers (two incidents)
• San Carlos — $850K - ish –> Two properties sold with a combined 13 offers. (Hat tip to Arn Cenedella, a Menlo Park Realtor, for providing that particular juicy piece of gossip.)

Tags: Atherton, Consumer, Cupertino, East Palo Alto, Industry, Los Gatos, Menlo Park, Palo Alto, Redwood City, San Carlos, Saratoga, South San Francisco, Zillow

The Trees May Not Yet Have Leaves, But Buyers And Sellers Seem To Be Waking Up!

You heard it here first! A few weeks ago I posited that the Palo Alto market would soon see the standard Spring inventory bounce…before Spring itself.

And sho’ ’nuff…I see nary a leaf on a tree outside my window, but statistical and anecdotal signs of market activity picking up are legion.

Statistical evidence:

Charts from our friends the statistical geniuses at Altos research show the traditional early year inventory bounce happening in Palo Alto — Swiss-clock-like in regularity:

Anecdotal evidence:

• An escrow rep friend of mine says her order book is fuller than it’s been in six months.
• The manager of a mid-size local brokerage says his agents have been going on listing appointments, getting new listings, and writing offers at a much faster clip than in the last few months.
• At least one transaction in Palo Alto last week sold with multiple offers and sold for a substantial amount more than the list price.

Quotes:

Friend, fellow 3 oceans contributor, and Realtor Chris Iverson of The Ventoux Group says:

Listings are starting to increase, but slowly in Palo Alto. Mountain View and Los Altos seem to be off to a slower start this year than last as well.

I am seeing more activity from Buyer prospects since the beginning of the year, but a lot of them have gone back to a “wait and see” attitude following news of the potential increase in the conforming loan limit. That will have a significant effect for first-time buyers in areas like Mountain View and Sunnyvale, where $729,000 gets you a decent townhouse, or a house in Sunnyvale.

Jeff Klein at Absolute thinks it will take about 6 months from the conforming limit change for the resulting loans to be available to buyers, and for the impact on the market to be felt.

Colleen Foraker, of Alain Pinel Realtors in Palo Alto, says:

“We in the industry need to do a better job of educating sellers that this is actually a great time to sell.  Inventory is at a 10-year low, and we’d love more listings.  Problem is, sellers are reading the media, hearing that the market is up to no good, and deciding to wait it out.”

Steve TenBroeck, also of Alain Pinel, notes on his blog:

This past week was brutal!   Last Saturday & Sunday we had the most traffic ever to come through our open houses.  However, on Monday (MLK Day) foreign stock markets crashed.  On Tuesday the Fed dropped the Prime Rate by ¾ of a point.  And by Wednesday, according to several agents, local buyers were retracting their offers to purchase homes.  Then, at the end of the week, Congress came up with a plan to restore confidence and stability in the market.

…

We continue to get calls from prospective home buyers who believe that it has become a “buyer’s market” in our area … The bottom line: demand for homes exceeds supply in this market place.  It was reported this week in the SF Chronicle that in 2007 the Bay Area added 54, 000 jobs.  It’s expected, they said, that at least 15,000 jobs will be added in 2008.  While the housing market nationally and in the wider region of the Bay Area may be the slowest since the Great Depression, the housing market from Menlo Park through Los Altos is very strong; homes sell quickly, often with multiple offers.

Tags: Altos Research, Buyers, Consumer, Industry, Palo Alto, Sellers

How NOT to Let Great Rates Hold Up Your Closing

I recently read a great post from Dan Green, a mortgage planner in Ohio, titled, “While Rates Are Low, Schedule Your Purchase Closing At Least 45 Days Out “, and I wanted to remind any potential home buyers searching within or around Palo Alto, CA that local sellers are still requiring a 30-day or less close. Thanks to our main man, Dr. Boer, for bringing this blog to my attention.

Dan does have some great points about turn times deteriorating, underwriters being more cautious and resources being slimmer. All of these concerns are valid and may press the close date on any transaction. Thus, it’s important to verify with whomever you select as your lender what the timetable looks like for your situation. As a general rule, purchase transactions are given higher priority than refinance transactions.

The reality is that we have worked on two transactions already this month where the close date was ten days or less from contract ratification. In fact, one call I received yesterday asked whether a month-end close would be possible for a client looking to buy a condo in Menlo Park. Yes, a one-week close is possible.

So how can you prepare, and whom can you trust to get your transaction done right and on time? I offer the following:

1. if you have a trusted mortgage lending source, double check to determine whether the institution makes direct lending decisions (usually a direct lender or a mortgage bank)

2. if your trusted source does not make direct decisions (usually a mortgage broker), request a realistic timetable to determine whether your loan will fund in the time required by the contract

3. ask your real estate professional for a referral to a lender that she or he trusts

No doubt, this is a fantastic time to be buying a home: there a some local values out there, rates are phenomenally low (have you seen that 5-year treasury lately, wow! And what a move by the Fed to lower another .75%..!) and our local economy is doing well (check out Iverson’s latest post for more on that subject). The flip side is that the inventory of available homes has not been very encouraging (only four new ones in Palo Alto on Friday– ouch).

My position has always been that you can’t go wrong with purchasing real estate in select areas of the peninsula, provided that your holding period is five years. And if you’re someone with a reliable real estate professional, a reliable lender, reasonable qualifications and a solid plan, you will likely see a nice bump to your net worth over the next five years by making a move sooner than later.

Tags: Menlo Park, Palo Alto, Real estate

Lies, Damn Lies, And Statistics: What Mark Twain and Benjamin Disraeli Would Say About Menlo Park’s Median Price Numbers

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, MLS, Palo Alto, Real estate

Waiting to Exhale - Again

Tomorrow (1/10/08) Ben Bernanke is scheduled to speak on his outlook on the economy, and the pundits are all expecting that by examining his comments repeatedly, reading tea leaves, and consulting their favorite oracle, they will be able to predict whether the US economy will slide into recession in 2008, and whether the Fed will cut interest rates again at their next meeting.

The stock market seems optimistic, with trading up today as investors shifted into sectors that are seen as resistant to recession and economic contraction. These are things that we spend on whether things are good or bad; food, medical care, gasoline and heating oil.

Some economists say we are already in recession because of a jump in unemployment in December coupled with little growth.

Nationally, I tend to agree with the doomsayers. Here in Palo Alto, Los Altos, Mountain View and Menlo Park however, we are still beneficiaries of the strong local economy. Local executives are still complaining that they can’t hire enough engineers, the housing market continues to be strong as we are seeing a net inflow of people, and minimal relative increase in housing (no more land), and we have a unique concentration of educational instituions, venture capital and innovation that enables Silicon Valley to continue to reinvent itself.

In summary - We will likely see a national recession in 2008 and 2009, with housing prices potentially falling by up to 30% in some areas where prices have been driven up by speculators/investors. The local real estate market will remain constrained by supply, so we will see fewer homes being sold, but prices will remain at current levels, or even continue to increase. Great news if you are planning to sell your home in Palo Alto, bad news if you want to buy in Palo Alto.

In the Central Valley this will sadly not be the case . . .

Stay tuned for a recap of tomorrow’s commentary by Fed Chairman Bernanke.

Thanks for reading.

Tags: 4---mortgage-mania, economy, Los Altos, Menlo Park, Palo Alto, palo alto economy, palo alto real estate market, Real estate, recession

Plankton, Vendus Encourigitis, and the Stratification of Market Activity in Silicon Valley

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:

Tags: Atherton, Flood Park, Google, Menlo Park, Mountain View, Palo Alto, Real estate, Redwood City

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