Whether you are a first time buyer or seller, or have been through multiple transactions, you might be surprised by how quickly the real estate market changes in Los Altos, Palo Alto and surrounding communities. You need hard-hitting historical data, current market analysis, and insider experience to stay informed and succeed in these real estate markets.
As a service to their clients, Jeff Stricker and Steve TenBroeck of Alain Pinel Realtors provide regular market analysis and commentary. You are invited to read the entries below, add your comments, ask questions or contact them directly.
In an article by James Temple in the Business Section of today’s SF Chronicle titled, “Forecaster sees woes in state, US” , Ken Rosen (chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley) is quoted as saying, “…now is a good time to buy a home for those with long-term plans to live there and a solid job, thanks to a combination of low prices, favorable interest rates…”
He continued, “I would not wait two or three years. Interest rates are going to be much higher with all the money we’re printing”
He must have read our April 6th blog!
Jeff and Steve
Articles like Friday’s San Jose Mercury News article on plunging home values will surely cause many buyers to put their plans on hold. If they are looking to buy in one of our better areas, that could be a mistake.
With record low interest rates and prices back to roughly the 2004 levels, opportunities abound for courageous home buyers. The trade up market (typically $1.2m to $2.2m) has been particularly hard hit by the sudden change in lending guidelines. This is the price range where the most of the better buys exist.
For the past twenty years buyers have easily been able to buy first and sell later as most banks only required buyers to qualify on the new mortgage, not both – but no more. In addition, buyers could take out 10% of their new purchase price from their existing home, via a credit line, buy the new home with 10% down, get a second loan of 10% plus a normal 80% first mortgage, then pay off the 10% second when they sold their original home – but no more.
Now, unless buyers are willing to sell first and move twice, the best way to trade up is the old fashioned way: by buying contingently upon the sale of their current home.
Agents, buyers, and sellers all have to relearn this buying technique. Until they do, demand is low and great deals are available in the “trade up” price ranges.
Jeff and Steve
Home buyers better not wait until inflation kicks in! Prices of assets, loans, goods, and services are all likely to rise quickly once the economy recovers. With nearly two trillion dollars in circulation (according to a recent Federal Reserve Economic Data graph), inflation is going to be extremely challenging for the Fed to contain. As a result, interest rates and home values are likely to spike in the years ahead. Now, however, rates are at 50-year lows and home prices have dropped significantly. It’s a great opportunity!
Jeff and Steve
The Conference Board released their “Employment Trends Index” yesterday and it is declining faster than at any time since the 1974 recession. The decline suggests there will be considerable job losses for the next several months.
This further supports our January forecast that local home values will decline for all of 2009. Real estate values will reach a bottom 6-9 months after the economy bottoms. And we do not expect the economy to bottom anytime soon.
If you are contemplating selling your home, do so soon. Or plan to wait 4-7 years to sell at today’s prices! If you are thinking of purchasing a home, make sure you have solid advice on how to best take advantage of the current “buyers’ market”.
Jeff Stricker & Steve TenBroeck
Low interest rates and low home prices, coupled with reduced retirement accounts, are causing many to consider a real estate investment plan. Throw in the mistrust caused by numerous financial scandals, plus the easy-to-understand basics of rental real estate, and it looks even more attractive.
It is pretty difficult for a property manager to “cook the books” when an owner reviews rents and loan expenses each month. Additionally, the advantages of leverage in increasing one’s net worth can’t be ignored.
Invest $100k in the stock market and when it doubles in value you’ll have $200k equity (timeframe? your guess is as good as mine). Invest $100k in a $300k investment property and when it doubles you’ll have $400k of equity (600k-200k loan). The key is to have a “break-even” or a “positive” cash flow. You’ll then have the staying power to wait for the value to double.
Over the last few decades, you had to go to Texas and other similar areas to achieve a good rental cash flow. Now you can find those opportunities in Northern California and even here in the Bay Area!
This is a great time to start buying investment property, perhaps one every year or two, thereby dollar cost averaging into the eventual real estate recovery.