Denial in Palo Alto
Palo Alto to 'Rebound' By Year-End, Say Local Realtors
sfgate.com
The Palo Alto real estate market may be resilient, but it isn't immune to the credit crisis -- the total number of Palo Alto homes sold fell 60 percent last quarter, year-over-year. And while high-end sales have held up alright, the mid- to low-end of the market isn't faring quite as well. As evidence: Sales of two-bedroom houses dropped 3 percent last quarter, and sales of three-bedroom houses dropped 8 percent. Meanwhile, sales of four-bedroom houses climbed 7 percent last quarter, year-over-year.
Palo Alto: Home of the "tall tree" and million-dollar bungalows.
Still, local real estate brokers and market watchers are surprisingly optimistic that the market will "rebound" by year's end, according to a Palo Alto Online report. At a community forum, Mark Duval, chief investment officer for Opes Advisors, predicted the market could turn around by the end of 2009.
"Long-term economic growth in the U.S. is positive," he reportedly said. "[It] will keep a premium for housing in this area."
We'd like to believe Mr. Duval, but given that some economists believe we could be in for the "longest recession since World War II," while the unemployment rate keeps soaring, we're somewhat skeptical. Even if Silicon Valley is the so-called "center of innovation", many of the largest local employers, such as Hewlett Packard, are cutting jobs faster than you can say "$1.7 billion charge," and that can't be good for the local real estate biz.
Posted By: Betsy Schiffman (Email) | January 29 2009 at 10:25 AM
Listed Under: Palo Alto | Comments (6) : Post Comment
Comments
What qualifies this man to speak and for you to quote him?
Posted By: wahwah | January 29 2009 at 10:36 AM
I've been tracking the PA market, and we're definitely in the "sellers in denial" phase in the $2-3M segment of the market (ridiculously enough, this is only mid- or mid/high-end in PA).
You've got a growing glut of houses in that range sitting there for months, despite some multi-hundred thousand $$ price cuts. Now that the banks have severely tightened up their lending, big jumbo mortgages are very hard to get. Combine that with all the economic pain and the plunging stock market, and it's no wonder that buyers have disappeared.
Realtors are up to their usual bs: claiming "we just got an offer today", taking houses off the market and then re-listing them so that the websites don't reveal how long they've remained unsold, and so on.
Many of these are brand new houses. If you do a little research, you see that would-be developers bought tear-downs for like $1M in 2006 & 2007 at the peak of the market and put down only 20% or so. They figured they'd leverage up, get a loan and build a big new house for another $1M, and then sell the thing for over $3M and make a tidy $1M profit with just $200K down. Some of these guys are realtors themselves and got caught up in the bubble hype.
Now they're on the hook for $2M in debt, and hemorrhaging $10-15K a month in interest, property tax, and so on.
Don't believe the realtors when they say things aren't so bad. These sellers are bleeding big time, and it's going to get worse.
Posted By: Jimborama | January 30 2009 at 10:13 AM
I have been closley watching and studying the bay area market for the past year. the local agents are totally in denial or clueless to the degree of credit tightening and over valuation of the homes. The housing boom is OVER. Free credit with nothing down and no verification for unqualified buyers is over. Stock options have vanished with the DOW slide.
The upper end of the market 2 million plus is soon to get hit. Do your research on the ARM default rates. These are the loans that people with good credit and good jobs took to buy a home that was just too expensive. This happened all over the bay and forced prices throught he roof. These loans will default at a rate of 30% over the next 2-3 years!!!
That 2 million doller home will be worth 800k in 24 months. Those uninformed buyers who are buying now may take years to regain the equity they are going to loose in the next 24 months.
Agents are protecting their turf. They will say anything they want. If you want the real truth call an bank and ask to prequal for a home in PA for 2 million and watch what happens!!!
They may be a home and there that sells, but for the majority of buyers this is a TERRIBLE time to buy.
Don't take my word for it. Go to Mr Mortgage and look at default rates on ARM's, realtytrac.com trends (spend $50) and see what you find.
Ya right, rebound by the end of the year????
I have some bean stock beans to sell you.
Posted By: crazycoach44 | January 30 2009 at 01:56 PM
crazycoach, thanks for the info on Mr Mortgage--it's a really interesting site.
I'm pretty sure the agents know how bad things are out there. They're just telling their clients that things are still rosy, because the agents and realty firms have a vested interest in high housing prices. As the bubble pops, their commissions dry up and buyers stay on the sidelines...they don't want to see that happen.
It's a real farce how realtors clamor to you trying to be your exclusive rep once they find out you're in the market. As a buying agent, you'd think their job is to help you get the best house at the lowest price, right? But no, they tell you how prices are fair now, this is only a temporary decline, and that it's time to buy buy buy!
Yeah, that's just what I need: to sign up someone to represent me who's going to try to get me to pay up bubble prices to delusional sellers in the midst of the biggest housing implosion in a generation.
Posted By: Jimborama | January 30 2009 at 02:40 PM
You can tell when a realtor is lying. Their lips move. You should never ever pay them 6% to sell your home. And if you are a buyer remember you are the one who pays. You can get another 5% reduction if you buy direct.
Posted By: dobbsj | February 01 2009 at 09:18 PM
Lets hope that the crisis continues for a few years so that some real pain hits the Palo Alto market. The blocks I know are a mixture of Prop 13 gargoyles, people who will never move and couldn't possibly afford current market rates or taxes, and transient newcomers who stay for a few years and then leave. Many of the people who can afford to pay mostly cash for a $2-3M house, the only way it works with current lending conditions, know that it is a big world and you can get a lot more almost anywhere else for your $2M. A few years of hard pain should bring a welcome dose of reality all around. Oh, and throw out Prop 13 already, please. We would have $800K houses in months not years.
Posted By: carlthered | February 02 2009 at 12:43 AM |
