Jeff Stricker & Steve Tenbroeck
Alain Pinel
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Welcome

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.

Got a Job?

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

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Time to Establish a Real Estate Investment plan?

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.

 

Jeff Stricker

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A "Great Depression 2.0" Update

Before you sink deeper into this depressing depression we’re in, consider these two pertinent points:

1.  If you live in SF Bay Area, be glad – be very glad!   According to an article in this morning’s SJ Mercury, 39% of the total domestic VC investments were made in the SF Bay Area region in 2008.  That was 11 Billion dollars worth, by the way.  Naturally the total dollar amount will be much smaller this year, but we will undoubtedly get the lion’s share  of VC capital again.

2.  Potential home buyers are (understandably) extremely nervous at the moment.  We hope that by offering some long-term perspective, it might ease some of that buying anxiety. 

Over the years since WWII, the housing market on the SF Peninsula has generally followed the business cycle which has ebbed and flowed in 7 to 10 year cycles.  Starting from the previous market top, the local housing cycle typically moves like this:  2 to 3 years of depreciation (down 20-30%); then 1.5 to 2 years flat; then 1.5 to 2 years of appreciation (values get back to previous high); then 3 years of appreciation (typically 25%/yr – homes in the better areas will have doubled in value from the previous high!). 

The best time to buy is during the downturn.  It’s emotionally hard to do, but a buyer has all the advantages on their side: a large selection to pick from, the ability to negotiate the best price and terms, plus good interest rates.  We have seen that when ones buys during the downturn is much less important in the long run than what one buys.  Product selection will trump timing at this point in the cycle.  A buyer should look for a home with the least number of un-remediable defects.

Is now a good time to buy?  Yes!  One makes money by buying low and selling high, right?  That means buying when others are selling and selling when others are buying.  This is clearly the time to buy.   But it will take more than money.  It will take courage.

Jeff Stricker & Steve TenBroeck

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What Consumer Confidence?

The Conference Board announced the lowest level of consumer confidence on record for the month of December and now once again for January.  Little wonder- if all of your assets are falling, job security is non-existent, and Washington seems broken what is there to be confident about?  Let’s hope the new administration and Congress can begin putting the pieces together for a recovery to begin later this year.   Continued low mortgage interest rates will motivate entry level home shoppers and investors to buy, thereby absorbing the last round of foreclosures before a broader housing recovery begins to takes hold, hopefully by 2010.

Jeff Stricker & Steve TenBroeck

Topics: For Sellers, Mortgage News      Comments Off on What Consumer Confidence?

97% of US Housing Market to Deline in Value

The Private Mortgage Insurance Company (PMI) released its winter 2009 Economic and Real Estate Trends report which includes a risk index of where property values are heading. The index currently predicts that in 97% of 381 U.S. market areas prices will be lower by 2011. We agree. The economic and housing decline is happening in two phases. The first phase was mass foreclosures due to sub-prime mortgages. The second phase currently under way is mass foreclosures due to the severe recession caused by phase one. We do not subscribe to the forecast that economy will be turning around by summer 2009.

Therefore:
If you are going to sell, sell now.
If you are going to buy, be cautious.
Jeff Stricker

Topics: For Buyers      Comments Off on 97% of US Housing Market to Deline in Value