Monthly Archives: September 2011

Market Read

After a hot spring and blazing summer real estate rush, we have gone through our usual August doldrums. Now into the second week of September, we are waiting on our usual back-to-school flurry of deals, but they have not happened yet. Quite frankly, it looks like they might not happen at all. Buyers are rocked with indecision when faced with more than yesterday prices and zany financial news. Listing agents have the worry beads out. The big question in the real estate community is “What does it all mean?” My read? Time to buy.

You can go ahead and file my opinion in the real estate propaganda file if you want, but what I know is very different from what I read. What I read is that Greece is going to take us all down and the Euro issues haven’t even hit us yet. Congress is going to tank us all in order to assure the other party can’t claim success and the economy is heading into the dreaded double dip.

What I know, however, is that Facebook, Google and other significant local companies are in the throes of the largest hiring expansion (you can almost say binge) in their history. We at Dreyfus Properties are seeing these hired people relocating with our own eyes, as they show up at our open houses and call us to find them a home. Local rents are through the roof. I also know that inventory in our little micro-market is on the low side.

So I apply what I know to the classic residential real estate fundamentals. Those being:

  • Real estate trends and values, like politics, are local
  • Residential real estate values are strongly correlated with jobs.
  • The Will Rogers rule (“Buy land, they ain’t making any more of it”) should be appended to read “and especially on the San Francisco Peninsula.”

If I didn’t read the newspaper, I would think we were locked and loaded for a big jump in local housing prices. Oh, did I mention that interest rates are at an historic low? National gasoline on a coming local fire.  

The Inside Scoop

Palo Alto remains other-worldly even when compared to its immediate neighbors. 31% of Palo Alto’s August sales had multiple offers and 61% sold over list price. As a comparison, Menlo Park had 6% multiple offers and Los Altos 10%. The under $2,000,000 market is robust in most of our neighborhoods and the $2,000,000 to $4,000,000 is good. The over $4,000,000 part of the market saw a bit of a stall, not unusual for the vacation month of August. Demand remains intense for trophy properties in North Palo Alto, but buyers are definitely being patient on the big stuff in Atherton and Menlo Park, as the financial market’s volatility has made them question whether to get in now or hope the sellers get softer on their pricing. We currently see a build-up of buyers in the over $4,000,000 market that is not being matched by inventory. Buyers hoping for downward pressure on this market are likely to be caught in a game of musical chairs and could be left standing once a few big-ticket homes get snapped up.

South Palo Alto Second Quarter Market Stats and Commentary

South Palo Alto Neighborhoods:
Green Acres, Barron Park, South Palo Alto, Midtown, Ventura

Average Price: $1,381,665 (-2.7%)
Median Price: $1,293,000 (-0.5%)
Average Price per square foot: $786 (+6.8%)

As opposed to North Palo Alto, South Palo Alto showed a slight pull-back from same quarter numbers of 2010. Part of the reason is that North Palo Alto’s 2011 already happened in South Palo Alto in 2010. The higher end markets fall harder and generally take longer to recover, putting North Palo Alto a year behind. That being said, the absorption rate in South Palo Alto was 70%, a dramatic improvement over 46% a year ago. That fact, coupled with a 23% drop in inventory and dropping interests rates bodes well for the neighborhoods south of Oregon Expressway.

Barron Park
Barron Park continues its roll as the median sale price rose over 25% from the same quarter 2010. A drop in average price reflects the absence of spec homes in the neighborhood, but a corresponding 50% rise in homes under contract points to upside for Palo Alto’s rural gem.

Green Acres
The higher end of the neighborhood caught buyers attention as the average sale was up 19% compared to 3% for the median. Inventory remains on the seller’s side with a 54 day supply.

Green Gables
The little engine that could of the neighborhoods, Green Gables continues its steady rise since bottoming out in late 2009. Under contract increases of 61% and sale increases of 64% from the same quarter last year demonstrates the continued good health of its housing stock values.

Midtown
Another reliable performer, Midtown is the treasury bond of Palo Alto housing. A popular neighborhood with a relatively affordable housing stock, Midtown offers great value to those who want entry level housing and lots to build on. Accordingly, it notches another 3% rise in its steady climb.

South Palo Alto
Another steady performer, South Palo Alto shows a slight dip in price, but don’t be fooled. Plunging interest rates will help this housing stock a bunch. Expect a positive future.

Ventura
All is good in Palo Alto’s least expensive neighborhood. Back from the dead last year, Ventura has its eye on breaking the $1,000,000 mark for median sales price. Interest rates should help.

North Palo Alto Second Quarter Market Stats and Commentary

North Palo Alto Neighborhoods:
College, Old Palo Alto, Green Gables, Crescent Park, Community Center, Professorville, Downtown, Palo Alto Hills

Average Price: $2,135,423 (+4.8%)
Median Price: $1,870,000 (+0.3%)
Average Price per square foot: $881 (+4.3%)

Average price for North Palo Alto was up 5% from the same quarter of last year. The median, however, stayed roughly the same. The big story was buyers, and lots of them. The number of sales increased 50% quarter to quarter and inventory dropped 17%. Sales absorption, the number of homes listed for sale that sold, was a staggering 77% – the highest number seen in the last three years, and the end of what has been a steady upward trend since the first quarter of 2010.

College
A big drop in price for the College neighborhood that some see as a bounce off Facebook leaving the neighborhood. In reality, it’s just a massive drop in what’s for sale as absorption rates hit over 70%, the highest numbers seen in the past three years.

Old Palo Alto
One of the few red performers, Old Palo Alto showed a 13% reduction in the median and 5% reduction in the average sales price as sellers stuck to their prices and buyers waffled on paying them. However, a significant $8 million plus sale in the private market was not included in these stats and would have helped the reported numbers tremendously, so don’t feel too bad for those in Palo Alto’s priciest neighborhood.

Community Center
The number had to come down at some point, as Community Center was on a tear that threatened to price it out of the market. Don’t fret the 15% drop in prices from the previous quarter; there is a 7 day supply of houses in the neighborhood, so it’s still a big-time seller’s market.

Crescent Park
Crescent Park maintained its lofty increases from the spring. Inventory ticked up a bit as some seller’s got a little greedy on list prices.

Professorville
There was a break in Professorvile’s hot streak, as buyers try to figure out why it is that so many people want to live there. A thirteen day supply at least explains why the prices have gone on an upward joy-ride.

Downtown
Downtown finally busted open as it became seen as a bargain compared to the other walk-to-town neighborhoods of Professorville, Crescent Park and Community Center. The median sale price was up 38% from the year before and inventory continued to drop.

Palo Alto Hills
Numbers mean little in this low inventory neighborhood.  Still, several high-priced homes have struggled to find buyers.
 

Palo Alto Market Report & Commentary

The second quarter in Palo Alto fulfilled the early promise shown by the first. The average and median price rose 8% and 7% from the year before. More telling is that inventory dropped nearly 15%, while sales were up 34%. Multiple offers became part of the market again and a sense of urgency coursed through the buyer community. Neighborhood numbers should be taken as indicators, but not gospel, as they are compiled from very small sample sets. To help get a better bead on your neighborhood we also look at the performance of Palo Alto North and South in separate posts.