Fall Real Estate 2006

Publication Date: Friday, October 13, 2006

What goes up, must go where?
Home prices are holding steady, but taking longer to sell

by Carol Blitzer

Second guessing the local real estate market has become a more popular parlor game than anticipating oil futures this year, as sellers are holding back their listings for fear that the market has "topped out" and buyers are faced with lower inventory and fewer choices -- at the same high prices.

It's not that there's nothing on the market. Or, that low inventory is a new thing.

"If people don't think prices are increasing, there's less on the market," said Alan Loveless, an agent with Coldwell Banker, Palo Alto. He's got two or three clients who are choosing to wait until spring to sell their homes.

But he's really not concerned. "It's Palo Alto. There's always a demand. Prices will level, but they won't go down."

At an open house for a charming Victorian on the edge of Crescent Park in early September, Loveless noted that 45 people had scoped out the hardwood floors and redone kitchen the day before, as well as another 20 so far that day. An early sale of the house had fallen through when the buyer lost a California job offer, and the house only recently came back on the market -- this time with its price lowered to $1,799,000.

Real estate agents don't appear to be worried in Mountain View either.

In the first half of 2006, half the sales in Mountain View went over the asking price (up to $217,000 over); 38 percent sold for under the asking price (up to $250,000 under); and 12 percent went for the asking price, according to Rick Ebster, an agent with Intero in Los Gatos, who was manning a Mountain View open house over Labor Day weekend.

"There are hot pockets" in Santa Clara County, he said.

"All my listings under $1.4 million sold with multiple offers, except for one that was near a very busy street," said Hanna Shacham, a Coldwell Banker Palo Alto agent. "Properties that don't show as well or have some challenges...are lingering on the market and seeing price reductions, but do eventually sell."

At the higher end, properties traditionally are on the market longer. "As usual, the high end of the market ($3+ million) is experiencing the biggest shift. However, even premium properties at the upper end are still selling relatively quickly," she said.

She pointed to a strong market in Atherton, where she had several recent transactions. "The bottom line is that there are still lots of motivated buyers and plenty of money in Silicon Valley."

Terri Kerwin, a Realtor/broker with Kerwin & Associates, Menlo Park, said Menlo Park is a really strong market. "Prices have flattened; I haven't seen a lot of decline," she said.

"This whole bubble thing -- when it pops, it goes away. This will never happen in the real estate market," she said, adding that a lot of wealth stays nearby with homeowners either leaving money to their children or helping them buy houses in the area.

A quick perusal of REInfoLink showed her that low inventory is a bit of a misnomer: Although there are fewer homes on the market than in the heyday of 2003, there were more in Atherton, Menlo Park, Palo Alto and Mountain View during the first half of this year.

Strategizing a market that's more rational -- that is, favoring neither buyer nor seller -- calls for a change of thinking on everyone's part.

Well-presented, possibly staged homes in good locations -- walkable to downtown? In a good school district? -- that are priced conservatively are pulling in multiple offers (real estate agent Lea Eisen Nilsson, with Coldwell Banker, Palo Alto, pointed to a $1.1 million teardown on Emerson in Midtown that drew four offers).

"There is a 'window of opportunity' after a house is placed on the market that lasts around two to three weeks," said Cristina Page, a Realtor with Cashin Co., Palo Alto. "After that time, if it is not sold, it is overpriced and buyers and agents are not interested anymore."

If the seller is truly motivated, the price will be reduced, she added.

When she sees a house she perceives as overpriced, Page said she would counsel her buying clients to make a lower offer, "which would be representing the real price for that home."

"For buyers, it's no longer taboo to go in less than asking price," noted Eric Fischer-Colbrie, an agent with Intero, Los Altos.

Although there have been fears of a "bubble bursting" for the past year or so, prices have only historically dipped twice in the past 100 years, Loveless said, pointing to immediately after the '89 earthquake and the '01 dot-com bust. "The problem is the market goes steadily up, and sellers are used to a lively market. It's leveling off, not getting that extra 10 percent," he added.

"Everybody's always frightened they're buying at the top of the market. ...They want to think they're getting a deal. You have to say, this is a perfect place for you to live -- the schools you want, the location you want," Loveless said.

"Historically, at the worst times, prices went down 20 to 30 percent and after four to six years they caught back up and doubled again," Fischer-Colbrie said.

Cristina Page agrees: "Those who are buying now and staying in their homes for more than five years are going to see appreciation on their homes," just not the double digits seen in the last few years.

"We are seeing much less 'emotional' home buying. Those who are focused on the long term are not overly concerned about buying at the top of the market," Shacham added.

Asst. Editor Carol Blitzer can be e-mailed at cblitzer@paweekly.com.