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.
It has become clear to us that South Peninsula homes peaked in value sometime during the fall of 2007. However, it is extremely difficult to determine how far home values have fallen in a particular neighborhood.
The various media report current sale prices for a large geographic area, usually by county. Movement in median sales prices is not an accurate barometer, as it simply reflects what price range happens to be selling. And we also know that different types of homes depreciate at different rates.
For example, high-value homes generally fall first and fastest as they represent discretionary purchases. Homes with issues (noise, traffic, etc.) depreciate faster than those without issues.
The most accurate approach to assessing increases or decreases in a particular neighborhood is to find nearby homes which have sold and then re-sold a year or two later. If the home has not been significantly altered, this can give a true measure of the movement in value from the first sale to the second.
Through our analysis we are estimating that, so far, there has been a 10-25% drop in home values from the peak in our area, depending on the particulars as outlined above.
Jeff Stricker & Steve TenBroeck
Home values on the South Peninsula hold up best in economic downturns and are the first to recover. Desirability and a limited supply of homes for sale are two of many reasons. As 20+ year Realtor veterans in communities from Menlo Park through Los Altos (including Palo Alto, Los Altos Hills, Atherton, Portola Valley, and Mountain View), we know this to be true. This proved to be the case in the downturns of 1980-84, 1989-93, and 2000-03. While the average home in the Bay Area is down 40% from 2007, we are just now beginning to see prices decline, locally. And while homes in our area have held up well in value, so far, we are not immune to the current economic downturn. We expect local home values to fall at least 10% next year, on average, due to local layoffs and a higher number of homes for sale. Homes with “issues” (traffic noise, bad floor plans, etc.) will fall the most in value. Homes without issues will fall less. Our current advice to sellers: If you are planning on selling next year do so as early as possible!
Jeff Stricker & Steve TenBroeck
The number of Days on Market (DOM) is frequently used to determine whether a market is running hot or cold. Not a good idea! The average Days on Market only includes those homes that sell – and sales are off substantially. If it included all the homes on the market, DOM would be increasing dramatically.
The number often moves in a counter-intuitive direction, too. Currently, for example, the number of Days on Market is dropping as the market is now cooling. Just about the only homes that are selling currently are the so-called “pick-of-the-litter” homes. They will always sell quickly, if priced well, in any market. Read the rest of this entry »
Today’s elections will determine the course of our country for the next 4 years, but we believe there is but one direction for mortgage rates.
The world economy is currently being flooded with paper currency to shorten the recession by stimulating spending. Although effective, this will certainly cause inflation and higher long-term interest rates.
It is our strong recommendation to all buyers (other than all-cash buyers) to buy before rates go up. Remember, mortgage rates have only been below 7% in 12 of the last 45 years. Rates were over 8% as recently as 2001.
Buy the best quality (good area, no issues) to minimize any short term downturn in the home’s value. And get a mortgage that has a minumum of 5 years of fixed interest rate.
October sales of homes in most peninsula communities are running approximately 50% of normal, compared with last month and October 2007. So, the question is, should one sell now or wait for the possibility of a better market next year?
There are too many factors that could make the market worse for sellers next year. We recommend selling now. These factors include the possibility of more competitive listings, a deepening recession, higher interest rates, local employee layoffs, and falling real estate prices. It could easily take 5 to 7 years for values to return to current levels.
If you anticipate selling in the near future, do not wait. Sell now.