|Fall Real Estate 2002
That was then, this is now
Slightly lower prices, longer time on the market
are the new signs of the times
by Bill D'Agostino
Last year, home buyers were thwarted with rapidly rising house prices, and little time to make up their minds as they competed with other wannabe buyers.
The sellers were ecstatic.
This year, homes are on the market longer, are selling for less than their neighbor's, and are facing stronger competition from communities around the Bay Area.
Sellers are less ecstatic as they learn they need to lower their prices in order to be competitive with the inventory, which agents say doubled in the last few months.
And, no one knows where the bottom lies.
All in all, it's quite a change from a year ago when prices continued to rise past unheard of levels and buyers were the ones feeling frustrated.
"Last year was not the reality of the world. We have to take last year and we have to discount it out," according to Ethel Green, a real estate agent for Seville Contempo in Los Altos.
Green noted that it's not all bad news for sellers: Average home prices in Santa Clara County are still well above 1999, even if they are no longer at the same high as in 2000.
"It's a compromising market and a negotiating market," Green said.
According to Arvada Darnell of Coldwell Banker in Palo Alto, sellers are "now seeing the reality as it's shaking out in the job market and in the economy... I now have sellers who are more willing to lower their prices, to face longer marketing time periods, and to not make it so much like it's my fault or the fault of the Realtors."
Jim Byrnes, of Alain Pinel in Menlo Park, said that on average, only homes with "exceedingly great values" can now expect multiple offers.
The mentality of sellers has also changed when it comes to the listed price. Last year, a seller would expect to get offers well above the list price. "Now what you're seeing is that homes are selling for list price or below," Byrnes said.
All of this is good news for buyers who no longer have to jump quickly for the first home that looks good and can expect to pay less, especially for homes in the higher price ranges.
Byrnes noted that homes in areas that saw the most increase over the last few years, in Atherton and Menlo Park for instance, have dropped the most.
In Atherton, for instance, where homes sold for an average of $4.4 million in 2000, the average sale price in 2001 (through July) has dropped 21 percent to $3.4 million for a single-family home. This summer, prices fell even more rapidly.
Mountain View, by contrast, where homes averaged $730,000 in 2000, has actually seen a 3.8 percent increase for 2001 (largely because of a strong January). Yet, single-family homes in Mountain View were dropping this summer.
Palo Alto, (with its) "combination of the university and great schools and the great downtown" hasn't been as hard hit, Byrnes said. "It's gone down but it hasn't gone down as much as adjacent areas."
Most Realtors, while noting that conditions have improved for buyers, stopped short of calling it a "buyer's market," instead saying that it's the kind of market where both sides can walk away happy under the right conditions.
"It's a more normal market. Yes, supply is up and demand isn't as strong," said Maureen Hamner of Coldwell Banker in Menlo Park, "but I'm seeing a lot more buyers in the last two months. People are seeing that they can sell their homes first and then buy."
So is now really the time to buy or will the market continue to drop? Opinions among real estate agents range widely over whether the market has hit bottom, or, if it hasn't, when it will.
Byrnes guessed "probably February of 2002" will be when the market finally hits its low point, but Pam Blackman of Seville Contempo, Los Altos, is advising her clients with homes to sell to be ready to wait as long as three to five years until prices rise again to better levels.
Still, Blackman warned that her "crystal ball is broken."
"A lot of buyers are sitting on the sidelines," noted Gloria Darke, of Alain Pinel in Menlo Park. "They don't feel like the market has reached the bottom yet. Personally, if I had the money, I would be buying everything I could right now."
"I think it's an excellent market for buyers," Darnell agreed. "I think any buyer who is in a position to buy and chooses to wait should have their head examined."
But with concerns over the stock market still lingering and some people worried about their job stability, who are the current buyers?
"People that are buying now are people that have been locked out of the market for the last few years," said Darnell. "I've had more young first-time buyers so far in this year than I've had in any other year."
In addition to being younger and less experienced, new buyers are using different techniques to enter the market.
In 2000, buyers most often used stocks or stock options to make their purchases, according to Steve Bellumori of Seville Contempo, Menlo Park. This year, he said that buyers are using their salaries or money from the sale of their homes to buy their new estates.
Despite all the volatility, Bellumori is optimistic about the market. He believes that the combination of increased inventory, eager buyers ready and willing to jump in, and lower prices will coalesce into "some pretty active months in the fall."