Has the Real Estate Market Bottomed?

• New home sales in nation jump 11%
• Existing Home Sales increase 7.2% the 1st time in 5 years existing home sales have increased 4 months in a row!
• Silicon Valley unemployment rates edges lower at 11.8%
• Inventory of homes decline in past 30 days

It seems as if the newspapers have finally gotten the message that people started to buy homes. I was beginning to think that the only thing that could be reported was what was being franchised in the New York Times or other out of the area news organizations. We began to see the log jam of inventory bust in March and continue through until May and June. Thos sellers who were holding on since October and November 2008 finally threw in the towel and dropped their listing prices. Buyers stepped up and many of them cash buyers or at least those with great credit and substantial balance sheets.

On quarter does not make a year. Very much like the stock market where “give ups” were registered with prices dropping below intrinsic value, or book value, there is a rebound. Right now will that rebound be tempered with new selling or walk away to watch attitude.

The key element her is UNEMPOLYMENT. While I read about how the Golden State and our area will grow in population over the next 10-20 years, which does not help today. On the long term home prices will appreciate from demand. But more people are worried about home prices dropping further. I think that attitude needs to be addressed.

A home is a not something that you trade around at the local market. For some reason too many people became enamored with real estate as a wealth generator. That is certainly the case in income property and probably is a stronger case today than ever before. Too many used their home as a savings account. They drew on it like it was their stock portfolio and or a money market account. It is not! Wall Street and bankers alike convinced us that it was easy to get a HELOC with a credit card and don’t worry, we will refinance you later at a better rate. This attitude caused many over extensions in debt and over extension in housing suitability. The result is a clean out. Just like the stock market when values drop below book value other companies come in to buy the weaker and the vulnerable, so is the case in real estate. The unfortunate fact is that too many people bought into the song that really was taken. It did not matter if they were immigrants, English as a second language or middle to low class citizens; the high end and the well educated were taken too! How can you argue with a Wharton School of Business, Harvard MBA, and Stanford MBA when they tell you the statistical probability of the event in highly improbable. That only a Black Swan will cause such an event. HUH?? Black Swan? Highly improbable? What are they talking about? The average Joe relies on the educated and those in power to lead them right. They were lead wrong! Lies, unrealistic estimates, a system based upon return above all were the down fall of what has occurred. How long will it take to cure? I still go by 10 years before we return to where we were in 2007.

Will that make real estate a bad investment? It is like saying having children will be a good investment. The average child will cost the parent $250,000 per my wife and her news station. That is not an investment that is a life decision based upon giving, love and understanding. That what a home is, love, life style and sharing.

I believe you can buy at less than list and I believe that homes can be bought below appraised value. Why, because I recently helped families to so. My Partner Jim Massey and I are proud to help families in Silicon Valley find the Family Home they can raise a family in. We are proud to help those families negotiate the difficulties of financing, architects and builders.

What happened the past 30 days in our area?

Menlo Park:
Inventory: 72
Pending:12
Pending contingencies removed:11
Sold: 17

Portola Valley:
Inventory: 27
Pending:2
Pending contingencies removed:6
Sold: 5

Woodside:
Inventory: 52
Pending:2
Pending contingencies removed:1
Sold: 5

Atherton:
Inventory: 40
Pending:5
Pending contingencies removed:6
Sold: 6

Palo Alto:
Inventory: 93
Pending:21
Pending contingencies removed:28
Sold: 28


July 28th report as a comparison...

Menlo Park:
Inventory: 90
Pending:10
Pending contingencies removed:13
Sold: 58

Portola Valley:
Inventory: 33
Pending:5
Pending contingencies removed:1
Sold: 6

Woodside:
Inventory: 57
Pending:2
Pending contingencies removed:5
Sold: 3

Atherton:
Inventory: 37
Pending:3
Pending contingencies removed:10
Sold: 25

Palo Alto:
Inventory: 117
Pending:13
Pending contingencies removed:25
Sold: 27

As you can see from above we had a slow down in Menlo Park in the SOLD category, inventory has declined. Portola Valley is still slow with a slight decline in inventory, probably taking them off the market until later. Woodside is a ditto for Portola Valley. Atherton slowed down, but what was noticeable here the over $5 million kept on going. Good for the high end buyers to note that value can be gotten. Palo Alto has finally slowed down and the sales are dropping off and the inventory pulling back simply from taking off the market. The high end here is dead. Sales of over $3 million are non-existent.

The good news is that jumbo loans are improving. We had two sales that went through very quickly, les than 20 days from removal of contingencies until close of escrow. US Trust and Schwab are the players here. For those of you who are looking for trust worthy jumbo lenders we have referrals for you.