Real estate sales in palo alto in '08

Asked by Marco, Palo Alto, CA Mon Apr 28, 2008

I've been collecting sales data on palo alto both on DataQuick and through the county office. As listed on the 4/26/ edition of the mercury news, it indicates that zip codes 94301 and 94306 have dropped 38.4 and 43.5% respectively with respect to last years sales during the same time period.
Yet if you check with any realtor or here on trulia, you will be told that real estate is flat to up 6-8% over the same time period.
Both sources cannot be correct, and I would like to find out the reason for the discrepency.

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Frank Diaz’s answer
Frank Diaz, Agent, Honolulu, HI
Mon Apr 28, 2008
Interesting question. I wasn't aware of DataQuick as a resource. Thanks for the tip.
http://www.mercurynews.com/realestatenews/ci_9064268
http://dqnews.com/News/California/Bay-Area/RRBay080313.aspx
http://dqnews.com/News/California/Bay-Area/RRBay080417.aspx
There does seem to be a mismatch. In their website is shows prices relatively flat, but the Merc shows much larger changes. Hmm...
1 vote
Roland Barcos, Agent, San Jose, CA
Wed May 14, 2008
Hi Marco - I understand your concern about the disparity of data available from different sources, but you seem to be focusing on the MLS as the culprit. Nothing could be further from the truth. Every transaction on the MLS can be verified by a legal contract and all deeds are recorded with the county.
In Santa Clara County, MLSlistings, Inc. has very strict rules for reporting and sales. Members are required to obey MLS Rules and Regulations which are contained in a 44-page document. MLSlistings, Inc. disciplines or bars real estate agents who abuse those rules.
Deeds are public records, and services such as DataQuick and Metroscan compile this information and sell it for a fee, but are not liable for the accuracy.
Newspapers such as the Mercury News and websites such as Zillow and Trulia are in the “info-tainment” business and get there revenue from advertising. They access and present bits of information from a variety of sources, including DataQuick, but are not bound by any legal or ethical requirement to provide data that is complete or accurate. Zillow is notoriously inaccurate and what you see online from all of these sites is nothing more than online gossip.
Concerning 1068 University, the home was sold for $3.1 mil. on 7/19/07 and closed escrow on 9/12/07. As for checks and balances, this is on public record and you can check it at the county recorders office.
Finally, I don’t understand the blanket statement that Palo Alto real estate is overvalued in this price range. It’s true that values fluctuate and some people may overpay while others get a bargain, but there is no evidence that prices are way out of line or due for a steep decline. Obviously, there were 51 people in 2007 that confirm this view, and there are another 15 so far in ’08.
I hope this clarification is sufficient, but if you or anyone else needs further verification, you are invited to come to my office to allow me to substantiate everything said here.

Roland
0 votes
Kevin Boer, , Palo Alto, CA
Tue May 13, 2008
Thanks Marco. I'll look into the discrepancy. The MLS has pretty stiff fines for agents who consummate a transaction and don't record the details; the rationale behind them trying to do that is usually that the sellers don't want their neighbors to know what the sales price was. I'm scratching my head trying to figure out what the rationale would be for posting fake sales -- unless there is some kind of giant conspiracy going on in Palo Alto. Unlikely. There's bound to be a more rational reason, but I simply don't know what that reason is right now. I'll look into this and post my answer here.
0 votes
Marco, Home Buyer, Palo Alto, CA
Tue May 13, 2008
Hi Kevin

You can use the dataquick service directly or access the same database through either http://www.paloaltoonline.com or http://www.mercurynews.com/realestate by using their search engines.

The following are the results listed in the latter for sales from '06 to today with price > $3M:

11/15/2007 3814 Quail Drive PALO ALTO CA 94303 $3,469,500
11/2/2007 4121 Old Trace Road PALO ALTO CA 94306 $3,245,000
8/29/2007 424 Seneca Street PALO ALTO CA 94301 $3,268,000
8/23/2007 3077 Country Club Court PALO ALTO CA 94304 $3,650,000
6/1/2007 2051 Emerson Street PALO ALTO CA 94301 $5,200,000
4/12/2007 935 Ramona Street #B PALO ALTO CA 94301 $3,300,500
8/31/2006 1437 Hamilton Avenue PALO ALTO CA 94301
8/2/2006 4155 Old Trace Road PALO ALTO CA 94306

If you check in the MLS you will get 51 sales for '07 alone.

When I mentioned this to my wife, she decided to take the initiative to check all the MLS records in the santa clara office directly to confirm all the MLS sales. I'll post here results next week.

Although not conclusive, some of the sales look suspicious based on zillow data. Take 1068 university which is listed on the mls as sold on 7/19/2007 for 3.1M. Zillow has no record of the sale and lists an estimated value of 2,335,500. More telling is that there is an owner's estimate listing improvements made to the property raising its value to 2,467,287. He updated this information on february of this year. Given that he listed improvements presumably to raise the valuation of the property, it would be fair to assume he would have corrected the fact that he paid 3.1M for the property in july of last year.

With this in mind, what are the checks and balances that the mls follows to ensure all posted sales in fact took place?

James is right in that even if a fraction of the sales on the MLS turn out to have never taken place, palo alto is clearly overvalued in this price range.
0 votes
Kevin Boer, , Palo Alto, CA
Mon May 12, 2008
It's extremely unlikely the 45 seemingly additional sales in the MLS are fictitious. To maintain such a conspiracy would involve four parties to each transaction keeping up appearances that the property sold when it fact it did not -- the buyer, the buyer's agent, the seller, and the seller's agent.

Still, the mystery remains and I'd love to get to the bottom of it. If Marco, the original questioner, is still reading this thread, could you let us know the following:

a) Where on DataQuick.com you ran the search. (I may be overlooking it, but I went there and it wasn't immediately obvious where the search feature was.)
b) What data parameters you were using? Was it all of 2007? Was it 2008 year to date?
0 votes
James Smythe, Home Seller, Palo Alto, CA
Mon May 12, 2008
It seems disturbing that the MLS gives such a different picture of Palo Alto compared to santa clara county records. Presumably most of the current listings and home valuations are based on the MLS and not directly on records. If the MLS is overstating sales by a factor >8, the 12 homes listed here on trulia for more than 3M are likely to be worth much less than asking price.
Specifically you quoted the property 2051 emerson as being the highest sale last year with a verifiable record at 5.2M. There are seven houses listed for more, one listed at 14.75M, that technically have no verifiable comparable sales.

Is this discrepancy true of other cities and counties besides palo alto/santa clara county?

More importantly how can this discrepancy exist in the first place?

If 45 sales in the MLS are ficticious, they should be removed.
0 votes
Kevin Boer, , Palo Alto, CA
Fri May 9, 2008
Marco -- Another answer for you. There are often discrepancies between MLS records and Data Quick records, which draw, I believe, from county records. However, I don't usually see discrepancies as large as the one you're pointing out, in which the MLS shows 51 transactions in particular date and price range, while Data Quick only shows 6.

The discrepancies that do exist are often due to home-owners who don't want their neighbors to know what their home sold for and so use various tricks to keep the county records from displaying that data. That may account for some of the discrepancy between 6 and 51, but certainly not all of it. I'll confess to being mystified at this stage.
0 votes
John Souerbry, Agent, Fairfield, CA
Fri May 9, 2008
Marco -
Both systems have their limitations. In many areas transactions not originally listed on the MLS don't show as sold on the MLS (such as For Sale By Owner and private deals that don't go through brokers). Systems that track sales using county records will be more accurate in terms of sale price and number of sales, but they lack the details that make the MLS such a great tool.
As a Palo Alto-based broker, I believe that the zip codes you mention are strong markets. Even if sales volume has slowed, values are strong and most properties continue to sell for more than the listed price. Keep in mind, however, that there are several "communities" within each of these zip codes. Demand and value can vary greatly from block to block. If you are doing an academic exercise with the data, you can probably get a reliable picture from using DataQuick and the MLS as sources. If you are considering a purchase, I recommend picking the neighborhoods you would consider and looking at historical transactions and current listings with a sharper focus.
0 votes
Roland Barcos, Agent, San Jose, CA
Tue Apr 29, 2008
Hi Marco,
Okay, now I get it. The main question now is, where are you getting the info that you call MLS and Data Quick? Both are paid services that have extensive customer support, so you could check with them if you are a paid subscriber. If you are using free public internet sites, the quality of the data varies widely. Let us know what sites you using and what parameters you apply. Are you searching all of Palo Alto or just certain zipcodes? Since you mentioned Alexis, I assume that you are searching back to 1/1/07. As a side note, be aware that we have experience 3 distinct market changes since that date.
Regarding Data Quick, my subscription allows me to do single property searches and then get a list of nearby comps, but not comprehensive market surveys. Again, where are you getting your Data Quick info?
Although it's been said before, I'll say again that the MLS is the most accurate and comprehensive data available of homes sold on the open market. Data Quick info is culled from county records and doesn't differentiate between open sales, private transfers, and gifts. Nor does Data Quick usually differentiate between single family residences and common interest developments (ie condos).
Finally, I've got to ask, do you plan to buy a home in the next few months?
Let me know if this info helps or not.

Take care,
Roland
0 votes
Marco, Home Buyer, Palo Alto, CA
Tue Apr 29, 2008
Hi roland,
Let me restate the question a different way. I am not wondering whether mediam price reported on a weekly basis is a reasonable way to value the market. My question is, if you look at the same data set provided by the MLS, you get a very different answer. IE what would the MLS say is the median price and number of sales is over the same time period?

In a similar vein, if you look in data quick for home sales > $3M in palo alto you obtain the following results (6 sales total):

11/15/2007 3814 Quail Drive PALO ALTO CA 94303 $3,469,500
11/2/2007 4121 Old Trace Road PALO ALTO CA 94306 $3,245,000
8/29/2007 424 Seneca Street PALO ALTO CA 94301 $3,268,000
8/23/2007 3077 Country Club Court PALO ALTO CA 94304 $3,650,000
6/1/2007 2051 Emerson Street PALO ALTO CA 94301 $5,200,000
4/12/2007 935 Ramona Street #B PALO ALTO CA 94301 $3,300,500

If you check in the mls over the same time period you will find 51 sales > $3M with a high of $19.5M for 3231 alexis drive. There is no record for the majority of these sales in santa clara county records.

Again my question is why?
0 votes
Roland Barcos, Agent, San Jose, CA
Tue Apr 29, 2008
Oops, sorry for the typo. The '08 median price should read $900k, not $950k.
Roland
0 votes
Roland Barcos, Agent, San Jose, CA
Tue Apr 29, 2008
Hi Marco - the numbers posted in the Mercury News are useless, as are most of the articles they write based on these numbers. It's not because the numbers themselves are false, but with faulty interpretation. The problem begins with confusion over what the median price represents and how it is calculated. It is simply the midpoint of the homes sold. Example: if 5 homes sell the first week of April '07 for $600K, $900k, $1 mil., $2 mil., and $2.5mil., the median would be $1 mil. Then in April '08, only 3 homes sell with prices of $875k, $900k, and $3 mil., so the median price is $950k. The Merc. would report prices down -10% and sales down -40%. While this may be factual, there are two reasons why this info is not useful: a very slow market provides too few data entries and weekly comparisons are too short of a time frame. This is not unique to Palo Alto. If you follow the Mercury News statistics weekly, it's not unusual to see many zipcodes that are down -30% one week and up +30% the next.
Median price is only a reliable measure of long term trends over wide areas. The key to proper valuation will not be found in the pages of the Mercury News and you can't arrive at the value of any individual home based on the median price of a zipcode.
I hope you find this, and my previous posting, useful in understanding the market.

Take care,
Roland
0 votes
Marco, Home Buyer, Palo Alto, CA
Tue Apr 29, 2008
Let me clarify my question: If you consider palo alto zip code 94301 only data quick shows the following:

Palo Alto 94301 median price $892,500 % change -38.4%, $/sqft $814 # of sales 16 % change # sales -27.3%

This does not include EPA sales activity.
0 votes
Roland Barcos, Agent, San Jose, CA
Mon Apr 28, 2008
Hi Marco - I think it may have been Mark Twain that said "There are lies, damn lies, and statistics."
The fact is that statistics cannot really lie, but the data becomes so convoluted and confusing that it's difficult to arrive at a rational conclusion. Truth and lies then become a matter of interpretation. So, as others have suggested, be really clear about what the statistic refers to: sales price or sales activity. Then understand the time frame involved: are they comparing a hot week last year at this time with a dead week this year? Also remember that statistics are only valid with a myriad of data entries over an extended period of time. I single data point can never represent a trend and statistical analysis cannot account for the person that pays $500k over what is considered fair market value simply because they fall in love with the house and can afford to pay it. Another factor to consider is that Data Quick reports all sales, regardless of whether they are SFR's or condos, or whether they were free market sales (MLS) or private transactions. If your aunt Gertie sells you her bungalow on Waverley for $800k, it really has no bearing on the fair market value of homes in the neighborhood. If it had been offered to everyone in a free and open market, the value would perhaps be double that.
Finally, be aware that traditional real estate analysis applies to homes and neighborhoods that more closely follow the reality of the vast majority of homeowners that work for a living and pay typical mortgages. In order make sense of what is going on the more affluent areas of Silicon Valley, you should probably pay more attention to the NASDAQ than the MLS. If you are a wage-earner, how do you expect to compete in market with people cashing in multi-million dollar stock options?
Since you say that you are a collector of sales data, I assume this has a more practical purpose than just collecting stamps or old bottle caps. In fact, from your previous posts, it seems that you wish to buy a home in the upscale areas of Palo Alto and Los Altos. Unless you have just cashed in a gazillion dollars of stock options, my suggestion to you is to get together with a reputable loan officer and come up with a realistic limit to what you can afford to pay and then enlist the help of a knowledgable real estate agent to find the best home that fits your needs at a price that you are willing to pay.
Best of luck to you,
Roland
0 votes
Keith Sorem, Agent, Glendale, CA
Mon Apr 28, 2008
Marco
I admire someone that looks at the facts. I would like to suggest you do a little more questioning.
First, when someone mentions sales, are they full transfers or not?
Second, are you looking a units or dollar volume
Third, are these closed sales? Some market indexes focus on listings in escrow (pending sales).

IMHO the best way would be to talk with a Realtor who has the same passion that you do and then fine tune the data. The key to good research is not only the data...it is the interpretation, and analyzing the data trend.
0 votes
Michael Barr…, Agent, Irvine, CA
Mon Apr 28, 2008
Yes when you collect data from many resources you will see differences. Dataquick can include condos whcih can thow the numbers way off. If you would like to know the real stats I can pull some reports for you and e-mail to you

Kind Regards
Michael Barron
Realtor
First Team Real Estate
The # 1 Independent Real Estate Company in CA
0 votes
Ali Moein, Agent, Saratoga, CA
Mon Apr 28, 2008
Marco,
There are many ways you can slice and dice data to show different figures. In order to get the clear and correct picture you'd need to know exactly what the data being presented is and how its sliced to show the final figure. There are many many questions that need to be answered to be able to answer your original concern. I'd be happy to send you a few spreadsheets with explicit, detailed information on the data. I'm sure once you see the whole picture you'll be able to come to a clear and concise conclusion.
Hope this helps,
Ali Moein
(408)439-5748
0 votes
Kevin Boer, , Palo Alto, CA
Mon Apr 28, 2008
We may be comparing apples to oranges. Was the Merc talking about a drop in
a) The number of sales
b) The average or median sales price

Do you have a url for the article in question?

Re. DataQuick -- See comments thread in this post:
http://3oceansrealestate.com/blog/palo-alto-real-estate-pric…

Data Quick confuses EPA and PA, and counts condos. Given the carnage east of 101, if you throw those numbers in the mix, then the figures you're quoting may be correct.
0 votes
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