Home Buying in Palo Alto>Question Details

94402, Other/Just Looking in San Mateo, CA

Want to buy a 3000 sqft home in Palo Alto. Should I wait until next year?

Asked by 94402, San Mateo, CA Wed Aug 11, 2010

There appear to be very few sales for homes in this size and price range. Seems to me they will continue to drop...Anyone disagree?

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102
HI marcy,
Forgot to mention that you are correct. Most of palo alto properties are funded with stock. This is simply another argument that the housing stock is overvalued. The QQQQ hasn't moved materially in the past 10 years.

Yet housing has doubled.

It is not clear to me how housing valuations can be mantained long term facing decreasing equity availability. Also interest rates also influence equity valuations. They tend to put downward pressure on stocks.

Even though most home buyers here don't rely on mortgage financing, they do rely on stock. If rates go up, stocks go down, having a more direct negative effect of buyers' liquidity and ability to purchase a home.
4 votes Thank Flag Link Sun Aug 15, 2010
I think one of the things that got lost in the last ten years is the concept of purchasing a home to build equity by paying off the loan. This is an important concept and one of the reasons that I think real estate is a great investment for the long term. If you buy a home and pay it off you then own your home. You can use it to live in mortgage free, rent it out for cash flow, or give it to your heirs. When looking at whether or not to buy you should look at real estate as an asset that is not liquid. If this asset appreciates that is wonderful, if it doesn't, but you pay it off you still have something of value. While we may not see years of 40% appreciation in the future of Palo Alto real estate, we are still living in one of the most desireable parts of world with great weather, Stanford University, silicon valley, great access to transportation, and wonderful schools. And, there is virtually no place left to build in Palo Alto. There are several new communities now, but this growth spurt is about to end. While I maintain that homes over 3 million have probably not hit bottom, I also think that homes under 2 million that can be paid off, or at least paid down with mortgages that include payment on the principle, will in the long run be a good asset to hold, as well as wonderful place to live.

Marcy
Web Reference: http://www.marcymoyer.com
2 votes Thank Flag Link Sat Aug 28, 2010
Interesting chart from First Republic. I think that the strength of biotech, cell phone and pda devices, google, apple, and location based apps will help support the market in general in Palo Alto and have some help in the over 2.5 million market. I still think that segment has not hit bottom yet, but I have no strong opinion yet as to how much or how long this will last. I think the under 2.5 million market is still showing some signs of strength and will propbably have a more sustained leveling over time. Just my opinon.
Marcy
Web Reference: http://www.marcymoyer.com
2 votes Thank Flag Link Wed Aug 25, 2010
Trackme,
I was actually the listing agent for 154 Bryant in 2008. At the time the buyers bought it they wanted to be in that particular spot in Palo Alto. The house was in very poor condition but they were ok with that because they wanted that location. They made an offer before it went onto MLS for 1.080 and my client took it. This was at the end of 2007 and it closed escrow in 2008. I have not spoken to the buyers since then as I did not represent them, but I guess they decided to tear the house down and build a new one and for what ever reason they decided not to do that. If they had purchased at the end of 2008 instead of the beginning my client would have been lucky to get a million for it. With today's lending standards that house is probably not eligible for a loan and I think that even with the million dollar market improving in Palo Alto over the last 6 months it has not increased in value since the market crash. As for the corelation betwen interest rates and housing prices, you are right that it is not simple. Many of the homes here are either purchased outright, or downpayment dependent on the stock market. When the stock market is high, housing prices go up. INterest rates in 2000 were around 8% but Palo Alto home prices went up 40%, not because of easy lending money or low interest rates, but because of the stock money.
Marcy
Web Reference: http://www.marcymoyer.com
2 votes Thank Flag Link Sat Aug 14, 2010
Bryan, you know you're right about the stats on Trulia being off -- no way the median price for 94301 ever hit the indicated 518K. But, again, your stats comparing '09 to '10 median prices, etc. just aren't very useful. It is all about the timing of the mix of sales, obviously. Heck, I can find stats showing the median price actually went down 14% y-o-y last month: http://www.mercurynews.com/real-estate-news/ci_15829318 I am curious, though, why you gave numbers comparing 09' to 10' since your point below was that sales and median prices rose in '09.

What is meaningful to people actually looking to buy (well, me at least), are paired sales. For example, those kindly provided by Marcy for the 2008-2010 period in question (e.g. 260 Wilton, flat '09-'10; 3217 Greer, down 7% '08-'10). They show the actual change in market value of specific properties. If you've got more paired sales (for properties that haven't been remodeled, expanded, etc.), let's see them.
1 vote Thank Flag Link Mon Aug 30, 2010
Hi John,

Here are the stats showing the improvement in Palo Alto specifically.

Q1 2009 vs. Q1 2010
2 Homes sold vs. 7 homes sold
$3.163M list price vs. $3.25M list price
$3.074 sale price vs. $3.11M sale price

Q2 2009 vs. Q2 2010
13 homes sold vs. 14 homes sold
$2.98M list price vs. $3.478M list price
$3.043M sale price vs. $3.5M sale price

Even accounting for the fact that the size of the average home sold in Q2 2009 was almost 10% larger than the average home sold in 2010, the market is still trending up. The number of units sold is also trending up, as I've said before.

Sales dropped off when the meltdown was in full steam. 2009 was actually a recovery year but the media was telling a different story.
1 vote Thank Flag Link Mon Aug 30, 2010
If you think they are going lower.. then wait.

If not... then make a Moove..
1 vote Thank Flag Link Mon Aug 30, 2010
Well, I suppose I hope you're right Marcy since we're in the under $2.5M range and considering when to upgrade. I am worried, though, that Silicon Valley and Palo Alto in particular, really are different from other markets due to the fact that the tech bubble was a unique, one time phenomenon. Compare below, for example, the First Republic Chart with broader US housing index from the Economist (also based on Case-Shiller). See how there's a massive run-up in the late 90's in the First Republic Chart, but not in the broader US index? That's the tech bubble -- the utterly unprecedented wealth created here through booming option grants and the booming-er equity market, neither of which will likely occur in our lifetime again. Sheesh, I've scared myself silly now :-)

BTW, try playing with the Economist chart -- it is interactive and quite interesting to compare the US to, say, Japan, Canada and Spain.


http://www.firstrepublic.com/lend/residential/prestigeindex/…


http://www.economist.com/node/14438245?story_id=14438245
1 vote Thank Flag Link Thu Aug 26, 2010
Here's a link to an interesting graph of an index for high-end homes (averaging $2.5M) in the Bay Area. The description of the index suggests it is based on paired sales of high end homes tracked by the broader Case Shiller index. Readers can decide for themselves where prices are going, but I'll note that this index suggests that prices at the high end have declined to 2004-2005 levels. This is roughly consistent with the paired sales Marcy and Matt have put together below for Palo Alto. Looks like we're about 2/3rd the way through the "liquidity bubble" of the 2000s. The question this graph really raises, though, is what about the even larger tech bubble. What is to keep prices to keep declining to the late 1990s level?

http://www.firstrepublic.com/lend/residential/prestigeindex/…
1 vote Thank Flag Link Wed Aug 25, 2010
It depends upon what you want to do. If you want to get a rock-bottom interest rate, then sooner than later is the best time to tie down a property. It is hard or impossible to time the market. No one knows what your local market will be. If they know, keep them and invite them to dinner!
1 vote Thank Flag Link Tue Aug 24, 2010
I've lived here almost 20 years. I remember the first housing bubble created from the tech boom from the mid-90s until 2001. Rather than deflate after the tech market tanked in 2001, it grew even larger with the liquidity bubble. The liquidity bubble burst and now we're only down to 2004-2005 prices. There are virtually no IPOs now. M&A activity is struggling. Google's got a paunch. The biggest technological innovation seems to be, um, Facebook. And homeowners no longer have the equity to leverage themselves in to an even bigger housing investment.

The other shoe has yet to drop. Wait.
1 vote Thank Flag Link Mon Aug 23, 2010
Exactly, Marcy. The whole point here is to do an apples to apples paired sale analysis - sort of a microcosm of the Case-Shiller index.

IMHO, even a fairly small sample is a very useful indicator of the overall market because even though there are just a few actual transactions, you can be sure that the buyers in each case looked and priced many houses.
1 vote Thank Flag Link Sun Aug 22, 2010
I excluded the ones that were purchased, torn down, and built new, and one that was substantially remodeled because the question had to do with comparing the same house, not 2 different houses at the same address.
Marcy
Web Reference: http://www.marcymoyer.com
1 vote Thank Flag Link Sun Aug 22, 2010
Marcy, thanks for that data. It is very interesting.

George, come on. We are not morons, and far from generating sales leads with your self-serving "don't wait to pull the trigger" infomercial, you've nicely distinguished yourself from agents who post here that I find credible. To wit: The vertical axis on the chart you provided starts at 20, not zero, so tiny upward movements above 20 look huge. This is a classic huckster's distortion that any first year econ student learns about. Moreover, the very website for the index says "A value above 30 indicates demand is relatively robust, we call that a Seller's Market. Below 30 is a Buyer's Market. When markets fall persistently into Buyer's territory prices will likely follow." Even the 52-week high of 24.5 on you chart was well below this 30 target and the current level is even further down from that. But if you don't believe my views, here's what the index site itself concludes about the data: "This month’s housing data confirms what we’ve been saying for some time: the mini-”boom” of this spring was created by seasonal demand, with some extra help from pressure to meet deadlines for capitalizing on tax credits. Now that those are gone, buyer activity has all but come to a standstill."

George, people value and reward straightforward advice and loath being "sold". Something to think about.
1 vote Thank Flag Link Sun Aug 22, 2010
VBP,
I found 2 over 3 million, not 2 over 3000 sq feet. It is just a different way of looking at things. Since Mathew did the 3000 square feet + resales I thought I would go back to homes under a million for my next analysis. I will do the 1-2 million after this, and then 2-3 million dollar sales.

So: Since 2005 there have been 5 homes that have sold twice:

144 Tasso 2006 sold for $1,250,000 2009 sold for $1,000,000 as a short sale
260 Wilton 12.24.09 $903,000 8.21.10 905,000
537 Driscol 2006 884,030 5/15/10 952000
3217 Greer 2/29/08 1018000 3/29/10 950000
525 Embarcadero 6/15/05 765000 6/30/10 865000

Marcy
Web Reference: http://www.marcymoyer.com
1 vote Thank Flag Link Sat Aug 21, 2010
Hey Trulia! You'd get much better discussions here and more traffic if you introduce a way for reads to rank postings here up or down, as done at many other websites. Or even better, when a posting gets enough down hits it is compressed away into oblivion so readers have to click on it to access it. There are just a lot of postings (by both agents and disgruntled buyers) here that don't necessarily violate the community guidelines, but add nothing to the conversation. See for example, Mary's post below (which she repeats elsewhere over and over) as well as posts by J. Mario Preza, Chris Jensen, Peggy Ramirez. Let the community police this stuff!

Will someone please flag this post so that the moderator reads it.
1 vote Thank Flag Link Fri Aug 20, 2010
Trackme,
Thanks for your kind words! This morning I looked at all the homes that sold over 3 million in the last year. I checked to see when the last sale on that home was. There were 21 sales over 3 million. Of those only one hd a resale between 2005 and 2010 and one had one from 2004 to 2010. Several were purchased in 2005-2008 and then torn down and rebuilt so that does not count, and one had a complete remodel so I did not count that one either.

510 Lincoln sold for $3,600,000 in 2004 and $4,200,000 in 2010.

1485 Bryon sold for $3,375,000 in Sept of 2005 and $3,270,000.

I will do the other price ranges over the next few days.

marcy
Web Reference: http://www.marcymoyer.com
1 vote Thank Flag Link Thu Aug 19, 2010
Thanks Pa home buyer. I get the theory for why lower interest rates should positively impact housing prices (and visa versa). But without actual evidence of lower interest rates being correlated with higher housing prices (and visa versa), I'm not so confident the theory proves correct in the real world. Obviously it doesn't work over the mid-term, since over the last 3 years interest rates have declined from around 6.5% to 4.5% for a 30 yr fixed, while housing prices have also declined in both real and nominal terms. It also doesn't seem to work over the long term either -- the relevant graph on the Schiller site you linked doesn't show any correlation over the last hundred years either.

I don't claim any special insight, but my guess is that it is too simplistic to just mechanically link the two variables interest rates and housing prices, i.e., interest rates do affect prices, but there other factors at play that can overwhelm or contradict this.

Marcy thanks for the correction. You had me scratching my head a bit. Your explanation of the lousy market above 3M has the ring of truth to it. The friends of mine who talk most convincingly about buying or upgrading in PA are lawyers and accountants -- people with substantial income, but not the jackpot winnings of the optionees who strike it big and can afford to plunk down the cash for a $3M plus house.
1 vote Thank Flag Link Sun Aug 15, 2010
correction on 154 bryant, it sold at 1.18 mot 1.08. sorry for the typo.

I rember listening to an economist is 1998 or 1999 predicitng the stock market would hit 10,000 by 2000. Some people were skeptical, but it did hit 10,000 and above that year. Even bigger to our area was teh NASDQ hitting 5K. While the dow has been hovering aroun 10K all year, the NASDQ is no where near 5K making most pople who work here have less available cash. I know I sound like a briken record, but homes purchased with salaries and a down payment have risen in value this year, but the upper end homes, over 3 million are not worth as much now as they were in 2000, let alone in 2008. Things are better than at the end of 2008, but not much, and there is no indication of sutained growth in this segment yet, to me.

marcy
Web Reference: http://www.marcymoyer.com
1 vote Thank Flag Link Sun Aug 15, 2010
hi trackme,

For a quick read here is a link in investopedia
http://www.investopedia.com/articles/mortgages-real-estate/0…
with an excerpt

"Most retail investors, especially homeowners, focus on changing mortgage rates because they have a direct influence on real estate prices. However, interest rates also affect the availability of capital and the demand for investment. These capital flows influence the supply and demand for property and, as a result, they affect property prices. In addition, interest rates also affect returns on substitute investments, and prices change to stay in line with the inherent risk in real estate investments. These changes in required rates of return for real estate also vary during periods of destabilization in the credit markets. As investors foresee increased variability in future rates or increase in risk, risk premiums widen, putting increased downward pressure on property prices."

For an in depth discussion try "Irrational Exuberance" by Roberto Schiller. It is a great read. There are many studies that show interest rates and home prices are inversely correlated. Bear in mind that rates tend to rise in inflationary enviroments. Home prices also tend to rise in inflationary environment, but the point is that REAL home values drop as the cost of capital increases.
1 vote Thank Flag Link Sat Aug 14, 2010
HI grace,

You seem unclear on how interest rates affect home prices. When rates go up, home prices come down. Your whole argument about home ownerships costs going up with rates is simply flawed. The fact that homes rates are at historic lows is an argument NOT to buy. Besides, I am guessing anyone considering a 3K sqft home in palo alto is also not sensitive to interest rates. Thus 94402 you are better off waiting to next year.
Grace you also claim homes more than $2M have gone up 28% since '08? I actually spit out my coffee when I read this. Do you have any data to support this contrarian view? I don't think any realtor here agrees with you.
1 vote Thank Flag Link Sat Aug 14, 2010
I say sit tight. I live in Palo Alto and daily pass by nearly a half dozen homes in that range that sat on the market for months over the last year or two. They all ended up being rented, and in fact just a few days ago it looks like one of them (on Parkinson, among several there) just got a second round of tenants moving in. The owners who can afford to optimistically wait out the downturn are the same class of people who sat tight during the tech collapse and watched the value of their stock options slide to zero. Except no one is going to reprice their houses like their options were repriced.
1 vote Thank Flag Link Thu Aug 12, 2010
Yes, wait until next year. The number of sales of homes in that size and price range is very small. Yes, they will continue to drop. Don't let anyone try to convince you otherwise. Median and average prices are deceiving when the sample size is small. A temporary uptick in prices is not a reason to buy. Prices will head lower again before they head back up.
0 votes Thank Flag Link Wed Sep 15, 2010
Hi, the answer is yes, but take your time but I would advise you to do a couple of things. First, I'm a Certified Licensed Appraiser as well as a Realtor and I have access to many different databases than most real estate agents and buyers have access to. I can tell you that it's important to use good search tools. Don't go to any website. Feel free to call me and I can set you up with a service, no hastles. Anyhow, if you haven't owned a home in the last 3 years, make sure you speak to someone regarding down payment assistance programs and first time home buyer programs. If they tell you it's just FHA or the 10K from California, they're either telling you a lie or they're just plain ignorant. Unfortunately, most of the time it's ignorance. Most cities if not counties have programs. The problem is that most don't want to deal with the programs because they don't want to deal with the paperwork or they don't know how or they're not approved. I find it my job to find what program is available and who offers it. I figure, if you were my brother, I'd help you get 80K in free assistance or whatever the amount may be. It's more work and takes longer to get paid, but the client referrals are worth it.
0 votes Thank Flag Link Wed Sep 15, 2010
Yes, Mk. Just like how the price went up when the rates were artificially down.

Even now, Fed is reluctant to raise the rates to reality because of the fear of deeper recession.

Houses in 5-6M+ have gone down 30-40% and so have the houses in the low end market. There is no reason house prices in the 1.5-3M range will hold..

Of course I don't know the future for sure. Theory can be unlike reality. It all depends on buyer/seller behavior and rationality...
0 votes Thank Flag Link Tue Sep 14, 2010
" I know interest rates will go up and naturally price will go down." ??
0 votes Thank Flag Link Fri Sep 10, 2010
Hi Matthew,

I understand historical data is not a guarantee of future performance. But your data proved that most agents were wrong. The data showed that Palo Alto is not an exception. Majority of people who bought during that period lost Money.

Some agents like Marcy even manipulated her data by ridding of those ugly losses just so she can continue to feed into people's greed about buying houses. Other commission-hunger agents continue to preach about it's always being the best time to buy.

I am happier to wait and see. The only reason I am interested in Palo Alto is because of its schools. Somehow I am happy I opted the private school route in stead. I actually saved a lot of money and get better education for my kid doing that. Now, with the budget cut, I can even wait longer... I know interest rates will go up and naturally price will go down. If interest rates doesn't go up, that means economy will still be bad, in which case I do not have to worry about catching up with the price increases.
0 votes Thank Flag Link Fri Sep 10, 2010
Hi all.

Vbp: I want to make sure that everyone knows I don't (because I can't) speculate about where the housing market is going. I am not an economic forecaster and it is outside the scope of my license as a Broker. I can do whatever I can to get you the data so you can make the most informed decision.

Some agents have said that the median and average have risen in Palo Alto. I agree that this has occurred over that time period; however, it is much more complicated than that. The mix of homes sold at different prices and different quality of construction can easily skew the numbers and a one or two year rise is hardly a trend worth banking on.

The threat of high interest rates is very real. It could get tougher to qualify for a loan when the interest rates start rising (if it starts climbing to 10%+) and that can seriously affect your ability to buy a home. But just because interest rates rise doesn't mean it will be impossible to buy or sell a home. My parents bought in a local luxury market in the early 80s with a 18% interest rate on their loan. Many other people back then were doing seller financing, bridge loans, or assumable loans to get the deal done. Prices were pretty nice back then too.

Buying a home, whether it is your personal residence or an investment property (e.g. rental property), will always have a risk associated with it. That's unavoidable and no one knows whether the market will go up or down tomorrow. The decision to wait or buy now will get tougher when the perfect home happens to come on the market tomorrow - you will have to do some serious thinking.
Web Reference: http://www.atlistings.com
0 votes Thank Flag Link Wed Sep 8, 2010
I love the way agents always go on and on about how critical their local knowledge is in assessing their mystically unique "micro-market" yet still feel qualified to give advice no matter that the very particular inquiry above relates to property in another town, county or even across the country. See the responses below from AZ, MA, IL, Sonoma, LA, etc.
0 votes Thank Flag Link Wed Sep 8, 2010
Hi "Other". Your question requires a lot of stat analysis, mortgage opinion, and a very clear crystal ball. You are obviously interested in a safe investment, not just live in the property...that puts you at about 50% of the population that is still very worried about buying too soon before the market has reached it's bottom. The other 50% simply have a real need for a home that will meet their specifications as far as distance to/from work, schools, within budget, and social standing. To find a home in the 3000 sq ft size would be more unusual than usual. You might find that size in the Evergreen area where the homes are larger, mostly two story. You see, "Other" as much as I hate to sound like an attorney, I must say, "it depends." Let's say for instance, I was able to find the house that meets all your criteria, or 95% of that criteria, that was 2700 sq. ft in Palo Alto...literally the house of your dreams, would you decline it because of your worries about its' investment potential? Do you have any idea how difficult it is just to meet a client's criteria, to find a home that excites him, in the condition he wants, in the area he wants? Call 408-737-1695, we'll talk. Patricia
0 votes Thank Flag Link Tue Sep 7, 2010
Only if you are willing the risk of having a higher interest rate for your mortgage. Right now is the time to buy. It is an unprecendted combination of lower prices and very low interest rate.
0 votes Thank Flag Link Tue Sep 7, 2010
Hi,

If the prices are still dropping due to over supply in your area then you can either wait or find the house you really like and negotiate hard on the price. If you find a suitably motivated seller you could get yourself a really nice house that you want to live in.

One of the biggest questions is "what is your motivation for buying?". If you are plannig on living there for the long haul, 7+ years then compare the rent V own costs. Looking at historical trends we should be out of the slump by then. Also with rates as low as they are, if its affordable to you then this could a good time.
0 votes Thank Flag Link Tue Sep 7, 2010
Hi Matthew,

Just wonder if it's only you and me who think the price curve is going down. Your data suggested that majority (9 out of 14) lost money when they sold the house in Palo Alto. Biggest lost is 600K. What is everyone else talking about?
0 votes Thank Flag Link Mon Sep 6, 2010
Somehow Trackme I suspect you could come up with more data and interpret it much more accurately than many agents.
Here’s a web site with more info (you probably have been there already:-)
http://www.dqnews.com/Articles/2010/News/California/Bay-Area…

So here’s a “little” “short story”...

While real estate markets may be local and some highly “microcosmic” our/agents use of the term is a gross misrepresentation of he statement.
Yes, real estate is a local market....tied closely to surrounding markets within “the market” effected by local and global conditions.
We are currently on the down-side of the “real estate roller coaster graph”
Are we even in the trough yet? Because we will likely be there for a long time...years.

I appreciate the info Marcy and others are sharing it helps to have those pieces when making up the larger picture.

Let me add this piece of info .
In 2006 I had taken a listing out of my area (for a current client).
It was in Salinas Ca (Smart money magazine had called it one of the most overvalued “markets” in the country in a 2005 article)
While Salinas it seemed had stalled at the top of “the ride” now facing a steep drop...


At that point in time properties were still selling with multiple offers on the west side of Gilroy...Average homes in a highly rated school system having sold in the 200k range in the mid 1990’s now selling in the high 700k

2007 - Everyone said that “our market was different” and it was....it took another year before we all had our arms up in the air riding down. Same Gilroy house now in the 400’s

“But” everyone said...” silicon valley is different” and no matter how it was explained or evidenced to the contrary almost all of the agents you would have had contact with were in complete and total denial. We can now see how “different” those markets were.
It wasn’t until coming upon discussions in Zillow/Patrick that I was able to find some voices of reason.

Trackme, if you want to purchase a home I am sure you will find the reasons to do so.
You (unlike too many) will be making an incredibly informed decision.
Take this time (and you have plenty) to find an excellent agent to work with.
After your purchase...don’t look back...enjoy your home.

All the best,
Tanya
0 votes Thank Flag Link Mon Sep 6, 2010
Keep in mind that interest rates are very low. Home prices are low. I'm hearing from lenders that tax regulations are changing in January 2011. I would buy before the end of the year.
0 votes Thank Flag Link Wed Sep 1, 2010
Trackme2

What I said is that the median and average prices rose in 2009. That's true. Q1 median/average was $1.28M and $1.45M and the Q4 median/average was $1.37 and $1.55M.

The peak in Palo Alto was actually in 2007. Here's the last 5 years stats:

Yeear / AVG / MED
2005 $1.54M / $1.3M
2006 $1.52M / $1.345M
2007 $1.87M / $1.555M
2008 $1.76M / $1.55M
2009 $1.52M / $1.33M

Based on Q1 and Q2 performance the market is on track to go close to 2008 levels. I doubt it'll match but who knows.
0 votes Thank Flag Link Wed Sep 1, 2010
Bryan, providing median sales data for 08 vs 09 ain't an "in-depth analysis" and presumably you looked at this data when you made your assertion below that the median price in Palo Alto rose in 2009. Nah, you just put that out there without actually checking, didn't ya? No worries, mate -- as I've said I don't place much stock it that stat anyway.

I do place stock in paired sales, but see your sticking to your guns that we should throw out such data when it contradicts your belief (sans data) that the market rose.

The nice thing about Trulia is that unlike referrals, meet -and-greets and the like, you can really get a sense of the approach of the realtors who participate here. I appreciate the time you've taken to post.
0 votes Thank Flag Link Tue Aug 31, 2010
It depends on your area as far as any more reductions are concerned. Even if there is a slight drop in the prices over the next year it is still a fantastic time to buy. The interest rates are so low that what you will pa yin the long run may be significantly higher if you do wait....you may essentially pay less for the home but, make up for that with a higher mortgage payment and interest rate in a year.
Web Reference: http://www.sellyourden.com
0 votes Thank Flag Link Tue Aug 31, 2010
Trackme2

I'll do in-depth breakdowns for a client but not a public forum such as this.

As for why there are variances, I didn't say they were because of agents or marketing. I said those could be factors. If the overall market rises and a few don't, there must be some other factor, we just don't know what it is. However, those homes are not indicative of a trend because the rest of the market rose.

Thanks for letting me know what you're looking for. However, if you'd work with an agent with access to all the data you'd probably have everything you need in a short while. As for the insights, there have been a lot of good ones on here. Anyone who knows this market, has real buyers and sellers, networks with other high-end agents, and has seen the best and worst will tell you we're cautiously trending up. It's rapidly becoming a balanced market and will remain so for a long time. The days of irrational appreciation are gone for a long time.
0 votes Thank Flag Link Mon Aug 30, 2010
Bryan, humor me why don't you, and provide your MLS data for 08 vs 09. The best data I have (from Zillow) shows a peak of median prices at the end of 08, contrary to your assertion. But anyway given your background in analytics (do tell), again I don't get why you'd think pushing this metric (or even worse, the average price) is terribly helpful in gauging the market right now. Even the Mercury News and the NAR talk about how the mix of sales renders these metrics misleading. Are you cherry-picking your data? Hmmm?

I do agree with your underlying point that more paired sales give you a better sense of the overall market. Again, do you have any to share? How about for Los Altos or Los Altos Hills? Having said that, I disagree that those 6-8 homes selling twice within just a couple years are irrelevant or anomalous. Not only is it common sense to look at these, it is exactly the methodology used by Case-Shiller, which only excludes paired sales which are within 6 months of each other and actually gives lower weight to sales the further apart they are. Only a realtor would make the argument that differences between the two prices would be due to a "superstar realtor" or "marketing" and not market conditions!

As for what I'm looking for, well, it is two things: 1) as much basic paired sales data as I can get so I can judge where the market is now relative to the past and 2) some sober insights on what might influence prices going forward, not boilerplate realtor-babble.
0 votes Thank Flag Link Mon Aug 30, 2010
Trackme2

I only went back to '09 for convenience sake.

As for comparing identical properties, there is no statistical validity to comparing such a finite number of homes when compared to the rest of the market. From a data analysis perspective, those 6-8 homes selling twice are the exception, not the rule. Let's assume they increase or decrease more than the average (and note that I posted averages, not medians), those 6-8 homes are irrelevant.

What isn't accounted for in such an analysis is why the home sold for more or less. If it sold for less, did the seller just need to dump it? If it sold for more, was the agent a superstar? Were the circumstances a "perfect storm" of demand, price, and marketing - either good or bad? There's no way to know from the data provided.

The only figures that matter are the general market stats. If the trend is sales and prices moving up, it doesn't matter if a home sold a year ago for $2M and the year before for $1.9M. If the overall market is up from the last sale by 5%, you'll pay $2.05M because that's what the buyers and agents will see.

What I'm missing from all the questions you're asking is, what do you want? Are you trying to buy something to remodel, want to remodel an existing house, or buy something new? If I knew your objective, I could give you a much better answer on what constitutes a good investment - regardless of what the market is doing.
0 votes Thank Flag Link Mon Aug 30, 2010
John,

I don't know what data sources Redfin is using but the data I'm using is all straight from the MLS. What doesn't include "off market" sales which, ironically, would actually boost the numbers since those sales are typically at the higher end of the market.

I can't make a CY '09 vs. CY '10 comparison until 2010 is over. Comparing July/August of '09 to the last two months would be possible but the trend would be similar.
0 votes Thank Flag Link Mon Aug 30, 2010
hi brian,

I am not able to replicate your data when comparing '09 and '10 thus far. I see a price drop year over year of ~10% is $/sqft. What do you get when you compare the yearly data?

http://www.redfin.com/search#!lat=37.375758896262354&lon…
0 votes Thank Flag Link Mon Aug 30, 2010
Bryan,

Here are some suggestions:

1. Sell your home by Grace so that she can donate $1000 to a school.
2. Buy your home by Grace so that she can donate $1000 to a school.
3. You are smart for only comparing the Q1 and Q2 data. We all knew there were a small bounce back both locally and nationally this spring. Now you know the current PA market better than many of us including Mathew and Marcy. Your statement about the appreciation now is unusual.
4. Did you forget to compare the price/square foot?
0 votes Thank Flag Link Mon Aug 30, 2010
Hi Brian,

You state that sellers in the 2.5M+ range sell bit by bit as the market gets better. Do you have any data to show that homes are improving in this segment?

I have been following the market in this price range and don't see any credible evidence of appreciation. As you mentioned, sales in this range fell off a cliff.
0 votes Thank Flag Link Mon Aug 30, 2010
The stats in that link aren't accurate but unless I'm missing something they still show year-over-year increases across the board. If I do a quarter by quarter analysis of 2009 vs. 2010, the numbers are up.

Q1 2009 vs Q1 2010 for all of Palo Alto:
50 SFR units sold vs. 74
$1.45M vs. $1.56M (average selling price)
$1.28M vs. $1.43M (median selling price)

Q2 2009 vs. Q2 2010 for all of Palo Alto;
114 SFR units sold vs. 123
$1.56M vs. $1.68M (average selling price)
$1.37M vs. $1.47M (median selling price)

Q3 is still in process but you'll find similar results. Regardless of whether you believe the statistics are key variables or not, the fact is that the market is selling more homes at higher prices.

As for being affected by the stock market, my experience is that if you're a buyer in this price range you do not have the money designated for this purchase tied up in stock such that a 10% swing will make or break your decision. Most buyers in this price range are all or mostly cash.

What I think holds people back from spending in this price range is the fact that this segment of the market is still a buyers market. Anything over $2M in this area is still a challenge to sell, just ask those of us who have had listings in this price range. It's easy to sell a home in the $1.5M range in PA, LA, etc because those buyers are shopping for schools, are usually trade-up buyers, and there are more buyers overall. There are fewer buyers in the $2.5M+ range and most don't have to buy.

So, they wait until they see the "perfect house" (with little regard for price) or wait for the "dare to be great" deal. Since fewer and fewer sellers are willing to sell at rock bottom prices and the "wave of foreclosures" some dream of has not happened, the inventory gets sold off bit by bit as the market continues to get better.

I think it'll be a long time before that price range becomes a sellers market. However, with declining inventory I expect that the "days on market" figures will continue to drop, inventory will drop, and we'll see a balanced market with slight price increases. When is anybody's guess but I'd say within the next year.

Ironically, the euphoria that drives some of that spending may be driven by the stock market. Not because the buyers have their money in it per se, but because some analysts expect record earnings next year and that might improve general market psychology.
0 votes Thank Flag Link Sun Aug 29, 2010
C'mon Bryan, you should know better than to point to stats for the median price or sales volume as "the key measures" of the market and no one who has the money to buy here needs me to explain why. And in any case, they didn't go up in Palo Alto or 94301: http://www.trulia.com/real_estate/94301-Palo_Alto/market-trends/

But I am curious about your observation that people in the higher end here aren't really affected by the stock market when it comes to real estate decisions. I know I sure am. If not the stock market (or financing) what do you think is holding people back now?
0 votes Thank Flag Link Sun Aug 29, 2010
I'm always a big fan of the Prestige Index and Case-Shiller because they're good at the broad strokes. However, you're asking a question about a specific area so neither really applies.

My question to anyone asking "How bad are prices in Palo Alto?" is this; Do you think Palo Alto did poorly in 2009?

Most of the "things are overpriced, don't buy now" crowd on Trulia will say that 2009 was a terrible year and Palo Alto dropped. They'd be wrong. The median price in Palo Alto rose in 2009. It was one of three luxury markets to do so, the others were Los Altos and Los Altos Hills. Sales have also risen. There have been a number of articles in the SJ Mercury this year pointing out how strong home sales have been in Palo Alto (and the rest of Silicon Valley).

Jeff Stricker made a good point, buy for the long term. There's no guarantee prices will rise next year. However, the trend is that home prices are moving up, but just slightly.

In Palo Alto over the last 20 months (to include all of 2009 and 2010 so far) there have been 86 homes sold with 3000 or more square feet. Most are a bit over 3000 and a small number are larger still. The profile for those sales is a home with 3,670 s.f. that lists for $2.804 million and sells for $2.728 million. The average days on market was 72 and the escrow was 29 days.

Where perception may be off is when listing agents price high to begin with and then drop the price to be more in line with the market to get the sale. It would be a mistake to confuse dropping the price of any or all homes with a sign that the market itself is dropping. The practice of overpricing homes and negotiating down is common in the high end. The key measures are whether or not the median and average prices are trending up, which they are.

I've sold a few homes in this price range just recently. While both buyers and sellers are somewhat cautious, the activity in the market is improving with most buyers buying with all cash or close to it. Financing is a small factor in this category, based on my experience. Stock market performance is a small factor as well. None of my clients has held back their decisions based on how the DOW is doing. Most know that we'll be trading between 10,000 and 11,000 for a while so the swings are not an issue.

If you need more detailed statistics, let me know. I have a background in analytics and am happy to help.
0 votes Thank Flag Link Sun Aug 29, 2010
Start looking now lightly. Prices are relative in that some sellers are more motivated than others. There are deals to be had. Waiting for the bottom you could miss a better deal. Be open and look to negotiate.
Web Reference: http://www.readybell.com
0 votes Thank Flag Link Sun Aug 29, 2010
Dear 94402,
You must decide if you want to wait for more inventory to choose from, or will you comprise and choose from whats out there now so you can take advantage of the low interest rates. As our economy stabilizes the interest rates will go up and we shouldn't just assume things are just going to get worst.
Good Luck and if Palo Alto, Ca doesn't suit you try Springfield, Illinois many beautiful homes over 3000sqft at very affordable prices. For instance 917 West Lake Shore Dr for 1.8million and that's on 30acres with its on pond. go to http://dorisjbailey.com and check it out.
Web Reference: http://dorisjbailey.com
0 votes Thank Flag Link Fri Aug 27, 2010
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