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.
The Anderson Center for Economic Research at Chapman University reported last week that consumer confidence has “…collapsed in California” to the lowest level since the index began in 2002. One component of the index, future spending plans, had the greatest drop, year over year.
We believe that this is a clear sign that the inventory of homes on the market will likely rise significantly, moving the SF Peninsula real estate market into a “balanced” or perhaps even a “buyer’s” market.
The question now is, “When?” We believe the answer is, “Soon!”
Almost every time we are hired to sell a home, a friend or neighbor of the seller indicates they would like to buy it or that they know someone who does. Sometimes these friends and neighbors have good intentions, and sometimes not. It is impossible to know what market value is to determine a fair sales price until the home is actually marketed.
We strongly suggest that owners have all interested parties submit their offer on a specific day after the home is fully marketed. The home can then be sold to any party the seller chooses, at fair market value.
FYI, we have never in over 20 years of selling homes had one of these “interested” parties submit an offer, confirming that they were only interested in getting the home at a bargain price. It is amazing how successful these bargain-hunting buyers are at enlisting well meaning neighbors to find unsuspecting sellers for them. We wonder how many sellers have fallen for this ploy.
We have been commenting on the steep decline in U.S. consumer confidence. But our local real estate market on the south SF Peninsula is holding up nicely – why?
Ans: The local job market has been stable. As long as it remains so, local home buyers will continue to buy. Watch for layoff notices, if any, in the near future as a sign the local market may weaken.
On Sunday 4/27, the SF Chronicle ran a short piece on tips for sellers: SFGate Article that I thought was to the point and well done. See if you agree.
At the end of April we can report that:
1. Consumer Confidence continues to fall nationally Consumer Confidence Index – The Conference Board
2. The number of home sales in our market area is at the lowest level since 2001
3. Values however are holding steady because the quantity of homes for sale is also at a very low level (but rising in Menlo Park)
4. Interest rates are still extremely attractive, but likely to rise soon due to inflation worries
5. The Silicon Valley economy remains upbeat
Consumer confidence (Consumer Confidence Index – The Conference Board) continues to be an accurate leading indicator of what’s in store for the local real estate market. It was reported today that consumer confidence is currently at a 25-year low. Looking at the numbers from the first quarter of 2008, the public’s lack of confidence is clearly reflected in the extremely low number of home sales.
For this article, we will focus on two cities: Palo Alto and Los Altos [Please note: If you’d like Q1 data for your town, simply send us an email]. In Palo Alto, there were 65 single family home sales in the first quarter of this year – the 10-year Q1 average: 97 sales. That is the lowest number of home sales in Palo Alto on record. In Los Altos, there were 46 sales (tying the lowest number on record in ’01) – the 10-year average: 71.
However, average prices have not fallen, so far. The reason is that pick-of-the-litter homes are still garnering multiple offers and are still selling over the asking price. On the other hand, homes with perceivable “issues” (poor location, bad floor plan, etc.) have had to reduce their asking prices to obtain offers. So far, these two factors have been canceling each other out. The average percentage of list price received by sellers in Q1 of ’08 was 100% in both Palo Alto and Los Altos.
Sales prices are still well above last year’s. The Q1 – 2008 median sales price in Palo Alto ($1.62m) is up 7% from ’07. The Q1 – 2008 median sales price in Los Altos ($1.89m) is up 15% from ’07!
Days-On-Market (DOM) is another statistic that most of us watch closely, as an indicator of market trends. However, it can often be counter-intuitive. As market demand picks up, homes that have been sitting unsold start to sell, thereby lengthening the average DOM. Conversely, as the market cools, only the best-priced homes attract buyer attention and they typically sell quickly, thereby shortening the average DOM. This year, as one would expect, the average Days-On-Market is shorter than in it was ’07. The average DOM in Los Altos in ’08 was 31 vs. 65 in ’07. In Palo Alto: 20 vs. 43 in ’07.
For Q2, the big questions will be:
- Will the inventory of homes for sale rise?
- Will Buyers continue to hold off on purchasing homes?
- Will interest rates begin to rise as inflation takes hold?
- Will the median sales price begin to fall?
We’ll find out very soon.