Los Altos & Palo Alto Real Estate Insight

Archive for the 'Commentary' Category

Dont Miss Lowest Interest Rates in Two Generations!

Our friend, Tim Palacios, at Opes Advisors writes in an email economic update today,

“The Tale of 2010 will be depend upon the Federal Reserve Actions, period!  Interest rates will determine how this year goes for mortgages, homeowners and equity markets.  And those specific fed actions and how the marketplace reacts to those actions, are very, very hard to anticipate. 

In all of previous cycles we’ve experienced in this business, when there is a major shift in federal reserve interest rate policy, it is always more abrupt than I ever anticipate and it always catches me and everyone else off guard, even when we know it is coming…. 

As we all know, the feds will stop buying mortgages this year and the private sector must step in.  This probably means (with some volatility) that rates will go up by 1 to 1.25% over the year.  We have already seen an increase since Thanksgiving week of around 25 bps.  The severity of this will depend on the whether we reach stabilization of housing values…

The FOMC will NOT raise short term interest rates for the year, however, will probably have to change their language in their comments.  Our gut feeling is that the moment the Fed changes any one of its words, it’s going to be a very unpleasant experience, because the marketplace has very little patience and a very big imagination. ”

If you haven’t already, Tim recommends that you refi to today’s attractive rates as soon as possible.

Topics: Commentary, For Buyers      Comments Off

2009 Real Estate Market Improved for Sellers

By the end of December 2009 sales were up 7% in Los Altos and up 8% in Palo Alto over 2008. Inventory of homes for sale on December 31st 2009 were down by 30% in Los Altos and down by 32% in Palo Alto as compared to a year earlier.

As consumer confidence and the jobs outlook continues to improve here in the San Francisco Bay Area, we expect this strengthening trend to continue.

Topics: Commentary, For Buyers      Comments Off

Will Market Favor Buyers or Sellers in 2010?

2009 began as a great market for buyers in the Palo Alto / Los Altos area with values declining. It ended however strongly in favor of sellers with values rising once again.

We have found that the best leading indicator of which way the teeter totter leans is the Conference Board’s Consumer Confidence Survey. Keep an eye on this index to successfully predict which way the real estate market will move in 2010.

Topics: Commentary, For Buyers, For Sellers      Comments Off

Are People Leaving the Area? – The Doggie wants to Stay

“A drop in the number of people looking for work … some of them may be packing their bags and leaving town to look for jobs elsewhere,” from an article on Oct 16th Mercury News got our attention.

While unemployment rates are up in the area, are people really leaving Silicon Valley? Sure, the traffic seems to be lighter on the freeways.  But after checking in with the wisdom of Los Altos and Palo Alto realtor water cooler, there isn’t an abnormal increase of clients selling their homes and moving away.

On the apartment rental front, you’d expect occupancy rates to plunge if there were more people leaving the area right now.  Yet, according to RealFacts which tracks apartment trends, occupancy rates are down slightly in Santa Clara County (94.5% Q3 2009 vs 95.6% a year earlier) and the overall trend for the Bay area is staying relatively flat.  So, yes, maybe a few people are leaving, but this isn’t significant enough to call it a trend in our opinion.  Check out the full story in the Mercury News.

One reason people might be staying is rental rates are plunging from a year ago.  What also might be happening is more home owners are becoming renters.  According to the real restate water cooler, some clients are selling now while the market is strong and will be renting for awhile.

This is good news for Fido.  “The quickest way for landlords with vacant units to find tenants is to accept pets,“  according to Ron Stern, owner and CEO of rental-finding service Bay Rentals as reported in the Mercury News.

Weigh-in, are people leaving the area? If so, what are the primary reasons?

- Steve TenBroeck

Topics: Commentary      Comments Off

Sam Zell & “The Donald” Call a Bottom for Residential Real Estate

Real estate legend Sam Zell believes that residential real estate is bottoming. 

He believes the supply-demand ratio is causing the bottom to be formed as low interest rates, formation of new households, and an uptick in consumer confidence have increased demand.  Zell is famous for having called tops and bottoms in the past.  At one time his company was the largest holder of commercial property in the U.S. but now he owns none. 

In a more general vane, Donald Trump agrees, having recently told the Associated Press that “real estate is a great investment right now”. 

Locally, we believe prices have a ways to fall (10-15%) before bottoming.  However, record low interest rates make this a great time to buy and hold local real estate for the long term.

Jeff and Steve

Topics: Commentary      Comments Off