Publication Date: Wednesday, March 13, 2002
Trickling up
Pent-up demand leads to multiple offers, rising prices

by Carol Blitzer

Some call it the trickle-up theory: First someone sells a $500,000 home and buys "up" to a $1 million home. The $1 million homeowner opts for $2 million, and so on. That's what Miles McCormick, an agent for Coldwell Banker in Menlo Park, calls a "normal market."

"In the last couple of years, some in tier two automatially got to move to the highest tier. That's not the case anymore," he said, noting that today's high end is fueled by professional people looking to move up.

After a slower 2001, with properties sitting for two to three months before selling at prices mostly below 2000, the market is already picking up for 2002.

"We sort of crossed the corner at New Year," said Paul Engel, a Coldwell Banker agent in Palo Alto. "A lot of people on the fence decided to move. Mortgage rates are down, money is available. They've sat and watched. . . . A lot of people came to the same conclusion at the same time."

With people entering the market who've been holding back often comes multiple offers.

"Our inventory is low and that's why we're seeing multiple offers," said Sheri Hughes, Fine Homes & Estates Seville Contempo, Los Altos. "History has shown that first quarter is the strongest quarter. It's supply and demand. They're fighting over the same houses."

Denise Monfette-Trollope, a Coldwell Banker agent in Palo Alto agreed, saying that just about every home she has sold recently has had multiple offers. Her prognosis for the coming months? "I think we are into a very good, stable, steady market."

Even with multiple offers becoming more common, most Realtors were taken by surprise when a four-bedroom, two-bath, 1,900-square-foot bungalow in Midtown Palo Alto attracted 39 offers, driving the $740,000 asking price to $1.152 million.

While sellers adore multiple offers -- and quick sales -- buyers are not anxious to go back to the scary days of 1999 and 2000 when it was common to find eight to 10 offers on a single home. Too often they were priced out.

That trend, however, seems to be coming back.

Carol MacCorkle, a Menlo Park Coldwell Banker agent, made an offer on behalf of a client in February that was 11 percent above the asking price -- and didn't get the house, which had three offers.

"We can't advise them in terms of price, but we have to show them reality. We're starting to see some comparable sales and can help them come up with fair market value. In a rising market, it's hard to target exactly where that is. . . . Last fall, we kept hearing, 'has the market hit bottom yet?' Now we can clearly say, prices have hit bottom and there's a bounce back up," she said.

Janet Dore, who works out of the same Coldwell Banker office, said in addition to multiple offers, agents are starting to set dates for offers to be presented, much like in 2000.

"We had packages ready for people to pick up. We give everyone a level playing field so each person can present an offer and the sellers can look at all the offers and decide what's best for them.

"We're seeing a frenzy up to about $1.5 million, and some frenzy under a million," she said.

With inventory low -- about 50 percent of last year at this time -- it's not surprising to find multiple offers and rising prices. In addition, the local economy seems to be picking up, despite the national recession, noted Art Scott of Coldwell Banker, Los Altos. "This may be a blip in Silicon Valley," he added.

Even in the hot Midpeninsula market, there are pockets of more or less activity. In East Palo Alto, for example, prices seem to be going down, in the 5 to 7 percent range, said Maria Prieto, a Palo Alto Coldwell Banker agent who specializes in East Palo Alto homes.

"The prices became inflated. They went up and up," she said, adding that the price correction had to come. She isn't seeing many multiple offers, and houses are sitting for two to three months on the market. "In 2000 they sold in a couple of weeks," she said.

Thirty to 40 percent of the buyers in East Palo Alto are first-time homebuyers; many others are investors, she said.

Chuck Atwell, of Alain Pinel Realtors in Los Altos, does a lot of business in Mountain View. There he finds that "prices are starting to go up, strictly a result of supply and demand, but going up from their lows."

"We may see 2000 prices again this year, probably 3 percent below 2000. We're already seeing a huge recovery. If our inventory doesn't at least quadruple by summer, we'll see a rough market for buyers and a good market for sellers," he said.

In the upscale Woodside and Portola Valley areas, those high-end homes have mostly hit bottom, said Scott Dancer, who works for Coldwell Banker's Woodside office. "Sellers have decided they're not going to go any lower. Prices last year made a big adjustment."

While multiple offers are common at the lower end -- say under $1 million -- they're rare when you get above $2 million, he said. But that doesn't account for pent-up demand.

"Last year, buyers went on the sidelines for a year, unsure, waiting for prices to go lower. This spring, we'll see prices firm up. We're not going to see a decline in the list price of properties, those that are priced fairly," he said.

"Last year it didn't matter how it was priced, there just weren't buyers. Most own another house on the Peninsula and have been wanting to move to a larger or smaller house, but they were afraid to move, fearful that they might be selling their property at the lowest possible price, that the stock market might snap back and prices go up radically. People don't think that will happen," he said.

For sellers, it's a very good time to list their houses, said Monica Corman of Alain Pinel in Menlo Park, again mentioning pent-up demand and some signs of real strength.

She points to real estate as a "reasonable investment. The stock market has been disappointing. Real estate is something you can see and touch and feel. It can be a very stable investment, certainly subject to downturns, but it has a stability to it."

E-mail Carol Blitzer at cblitzer@paweekly.com

Advice to buyers:

** "Get with a good buyer's agent, with experience representing buyers in multiple-offer situations. Negotiating becomes utmost. . . . Do your homework before you hit the market." -- Art Scott
** "Don't wait too long. If you can afford a house now, that's priced 20 to 40 percent lower than two years ago, don't hesitate. Look at cycles. . . . People who buy in 2002 will look back later and say 'it was a good time to buy.'" -- Scott Dancer
** "Ask how many buyers they've worked with in the past and their success rate in multiple-offer situations. ... You need an agent to be totally honest without sugar-coating." -- Chuck Atwell
** "If the house is there that you like and want, go forward and make an offer you're comfortable with." -- Sheri Hughes
** "Start making offers. Chances are (you) aren't going to connect on the first two or three things." -- Paul Engel
** "Take the plunge and go for what you want. Nobody knows what the future has in store for us." -- Denise Monfette-Trollope