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.
As the old Buffalo Springfield song goes: “What it is…ain’t exactly clear!”
The difference between this “slowdown” in the local real estate market and previous slowdowns is stunning!
When consumer confidence drops (and it is currently free-falling: Consumer Confidence Index – The Conference Board ), usually the number of homes for sale increases dramatically. That is what occurred during the slowdown of 2001 to 2003, ’90-’93, ’81-’83, and all the previous economic slowdowns that we know of. This time, however, something’s different, something has changed. Purchases have declined over the past few months, as we would expect during an economic slowdown, but the number of homes for sale has declined in our area, too.
Why? Why wouldn’t people want to sell when they know that values may decline in the near future?
We think there are a couple of new dynamics affecting potential sellers’ decisions as to whether or not to sell:
1. Since 2003, reverse mortgages have become more common, allowing folks to tap into their equity and (as the AARP puts it) “Age in Place”. Instead of moving into a retirement home when empty-nesters can no longer care for themselves, they can now afford to hire caretakers and stay in their homes. Therefore, fewer potential sellers.
2. With the current falling value of the dollar, why would anyone want to sell their real estate holdings and convert their equity to cash? Over the past six months, commodities have been the only consistent appreciating asset class (again, due to the declining value of the dollar) and what better commodity, over time, is there than real estate? Again, fewer potential sellers.
So, for these reasons, coupled with the property tax penalty in California when trading real estate, few want to sell. Only a small number of folks: those who may be trading up or down, those moving away for career reasons, and adult children selling the estates of their parents desire to sell – that’s about it.
And that’s not many, unfortunately, not in Palo Alto and surrounding towns!
While homes in other parts of the Bay Area are declining in value, most homes in our area are selling over the asking price, simply because buyers outnumber sellers. And we don’t expect to see this phenomenon changing anytime soon.
Does it pay to be a long-term owner of real estate in Santa Clara County? According to DataQuick statistics it does. Cumulative 10-year appreciation (1997-2007) for the county was 168% or an average of 11% annual appreciation. At that appreciation rate a property doubles in value every 7 years. Add in leverage and tax benefits and your return on cash invested would be off the chart. You might say better than Google-like returns! Jeff Stricker
Pricing high-end homes (over $2.5 million) is difficult at best, given the variability of the features of each home, buyers’ personal preferences, and subjectivity. Each home is usually unique in characteristics. The exact value to potential buyers of those characteristics is unknown. As a result, only approximations can be used to compare two high-end homes. This is why appraisers consider a 10% range of value to be “accurate” and the closest one can come to divining fair market value.Jeff Stricker
The official start of the spring home selling season began February 4 with the passing of the Super Bowl. There was an immediate increase in listing activity across many areas as typically happens each year. Low loan rates and more homes for sale equals a great opportunity for buyers. Please note: Product selection and the ability to hold 7-10 years are critical at this stage of the market cycle.Jeff Stricker
Accurate pricing of a home for sale has become important again. In red hot markets homes will receive multiple offers and the price will be bid up to market value. In a more balanced market multiple offers are not a certainty and a home can be sold for less than current market value. Of course, overpricing it will cause a home to sit and not sell in any market. Now, more than ever, pricing it right matters! Jeff Stricker