June 10, 2009

I am returning to the old form of communications. We have moved offices, the phone lines are in, but not the internet. My laptop at home has a problem accessing the Blog. This will have to do.

Big TWO WEEKS, homes went pending all over the area. Sounds like the return of the past market with those who were waiting for a bottom, or those who could not wait any longer jumping in. The big change was the price per square foot paid. Three weeks and more ago, buyers were getting big discounts for last year. Menlo Park saw the larger homes of 3000+ square feet going down below $600 per square foot. West Menlo and Allied Arts were down to the mid $700 per square foot. And then, pop went the weasel. What caused the pop and what happened?

The big POP was how quickly homes went pending. Multiple offers were not uncommon. In Palo Alto on Middlefield a home went off above list with 7 offers above and one offer below. Multiple offers were not uncommon in Menlo Park. There were over bids too!

What these homes sell at will be the big question on all buyers and their agent's minds.

What caused the run? I think two things caused the run. School ended and those parents who wanted to enroll their children in Oak Knoll and Hillview want in early. From what I have heard form listing agents, the offers were all cash. The other cause could be the jump in mortgage rates in the past two weeks. We saw rates move into the 5.5% to 6% range from the 4.5% to 5% range. If buyers had a locked in rated they jumped in once they rates increased, rather than lose the lowest rates in history.

Here is how the stats run:

Atherton 10 pending
Portola Valley 8 pending
Woodside 11 pending
Menlo Park (west of 101) 42 pending
Palo Alto 60 pending
Redwood City (over $800,000) 32 pending

All it tells me from the statistics and my experience with buyers is that we have seen the end of the wait and see group. New listings are returning to the $900 range in Menlo Park. Palo Alto is picking up along with Menlo Park. Redwood City is seeing great activity outside of the REO, Short Sale, and Foreclosure market.

We have some time to see what the FED will do on interest rates. If home sales/pending sales continue to move along with rates in mid 5's to low 6's. We may not see the FED buying bonds in the after market to drive down rates. If pending and sales slow down, the FED is a buyer and rates will come down.

Buyers have finally gotten smart about price versus rates. If you have a 4.5% loan it is cheaper than have a 5.5% loan and a lower price. Go figure it yourself. $500,000 with a 1% savings is $5000 per month, per year $60,000. Over the life over three times the original mortgage. Waiting for the bell to ring at the bottom will cost you in mortgage rates.