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.
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
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
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.
If you are going to sell, sell now.
If you are going to buy, be cautious.
2008 has thankfully come to an end. The real estate meltdown has finally hit the Bay Area – hard! I just tallied the announced layoffs by Bay Area companies with 75 or more employees since 9-1-08: 13,366 folks have been given pink slips, so far. And that doesn’t include all the layoffs at smaller companies, independent contractors, and the self-employed who are out of work. Yikes!
A Dec 31 Bloomberg News articleby Matthew Benjamin outlines just how nasty ’08 has been: worst job loss since WWII; worst stock market and housing market since the Depression; record setting Holiday spending slump; record volume of mortgage forclosures. He states, “The National Bureau of Economic Research this month determined the U.S. economy had been contracting for 12 months, already the longest downturn in a generation, with no end in sight.”
What’s the good news for 2009? Record low interest rates! Affordable home prices in the best neighborhoods (well, affordable for some, anyway).
Buyers: Here’s your chance – don’t miss it!
Sellers: You’d better price it right!
A front page article in Sunday’s SF Chronicle about the residential real estate market in San Francisco applies equally to the Peninsula.
Home values are falling and buyers are striking terrific deals with sellers who want or need to sell.
Jeff Stricker and Steve TenBroeck