Publication Date: Wednesday, April 7,
It's 2000 all over again
Low inventory, higher prices are driving the market
by Carol Blitzer
b-a-a-a-ck. "They" are buyers -- and whether it's an
uptick in the economy or election-year mania, they seem to have
an insatiable hunger for houses.
Since the beginning of 2004, inventory has been exceedingly
low -- about half of last year -- and buyers have had to compete
for the few houses available.
For sellers, this is good news: Multiple offers usually bring higher prices.
For buyers, it means making decisions quickly, often lining up financing in advance,
sometimes paying more than anticipated.
"Get your property on the market as soon as possible," advised
Bill Lewis, manager of Coldwell Banker's Woodside and Portola
Valley office. He
pointed to the lack of inventory, especially in certain price ranges, that
to the seller's advantage.
"Right now we're probably starting to get a few more high-end listings on
the market," he said, but noted that there wasn't much available in the
$1 to $1.2 million range. "Evaluating each city and looking for holes can
affect whether one would want to put a home on the market now or wait for a while," he
Since most homes are listed between mid-February and June, he suggested listing
a house earlier, when there is less competition. Everything seems to be selling
now, he noted, especially properties just put on the market and those that have
lowered their prices after being on the market for a while.
As for advice to buyers: "If you like it, grab it."
That's what Rani Fan, owner of Aspirin' Real Estate Investments in Menlo Park,
suggests to prospective homebuyers anxious to enter a market that's starting
to resemble the 2000 dot-com mania.
With interest rates low and inventory lower, houses in the $1 million to $1.4
million dollar range are whizzing off the Multiple Listing inventory in less
than two weeks, many at above the asking price.
"Since last September/October, the market has picked up dramatically. ...
Before September, the houses over $1 million just sat there
Toward the end of February there were nine homes on the market
in Los Altos in that range, she said. Only one -- which she thought
been on the market since December. The rest were on the market
less than a week. "Basically, there's no inventory," she
A year ago Alain Pinel agent Grace Wu had four listings in the
$1.5-$2 million range, which were languishing on the painfully
slow market and were eventually
pulled off. Three were put back on this year and all sold beyond
the asking price, she said.
"This year is really good. Last year people chopped down the price, asked
for discount. This year they are willing to pay," she said.
That's particularly good news for Wu, who's been marketing 14 new
homes on Glenbrook Court in the Green Acres neighborhood of Palo
Alto. Each sits on a lot ranging
from 7,200 square feet to a quarter acre, with 4,100 to 5,800 square
feet. Even at more than $2 million each, most were sold by the
end of the year. At the end
of February there were four left.
"Yesterday (in late February) we had close to 40 groups of people walk through
an open house," Wu said, noting that it's a whole new subdivision,
a rare entity in Palo Alto. Prospective buyers came from all around
out of the area.
Fan's advice to prospective homebuyers in this competitive market? "They
should know what they want. That's the key. The worst is to chase the market," she
But, she added, don't forget the fundamentals -- location and whether
it will be a good, long-term investment -- in the pressure to buy
"It feels like the buyers are very careful. I've seen some overbids, but
not like back in 2000," she added.
Coldwell Banker agent Maureen Hamner, who does a lot of work
in the $1-1.5 million range, is hopeful that a lot more sellers
between now and
May. "That will help a lot. There are quite a few buyers for
not enough homes right now, but I think that will change."
Alain Pinel's Sunny Dykwel, who was named Realtor of the Year by
her peers at the Palo Alto District of the Silicon Valley Association
of Realtors (SILVAR),
eagerly anticipates more inventory. She's been seeing multiple
offers -- one with 32 offers -- and rising prices for the past
"We're not really back to 2000 level, but we're getting close," she
said, adding that she won't even write an offer without the prospective
buyers having a pre-approval letter for financing.
But, with multiple mortgage programs available, she said, "we
can close in a week or two."
Buyers are more sophisticated these days, she added, and often
do much of their "home" work
on the Internet before they even contact her. "By the time we meet buyers,
they've already looked at the neighborhood, seen houses, and are ready to meet," she
said, noting that she sold three houses in December for people
she had met at open houses.
The Internet, she said, is "helping us do our job better."
At the lower end of the market, finding a home can still be a major
challenge. Dykwel is working with three buyers who are looking
in the $550,000-$600,000
range, between Mountain View and San Mateo.
At the end of February, she had only found four properties in
that range that were worth looking at. "There's not much to show them. When we do, we run
across multiple offers," she said.
Losing house after house because of multiple offers can be very
discouraging. The role of the agent is to help the buyers come
up with the right price -- and
to advise them when going over the asking price simply isn't worth
"It's really draining, as far as emotion," she said, "and
it's not fun for us, the agents. For the buyers, at the end of
it's 'wow, we have a home!' They really appreciate this work and the learning
Stepping back and taking a longer view, Coldwell Banker agent Brendan Leary
noted that the real-estate market has experienced a steady incline for the
years, with the exception of hiccups when investors bailed out
of the stock market or when the WorldCom/Enron debacle became public.
Whenever supply is down, multiple offers result. "That end of the market
has had a voracious appetite," he said.
At the higher end, "pricing has come back to reality so
we're seeing tremendous activity."
His Coldwell Banker colleague Tom LeMieux noted that the bulk of
sales in Atherton were in the $1 to $3 million range in 2003. Although
volume of sales was up by
18 percent, the actual median price fell 5 percent.
In Menlo Park, LeMieux found that prices held steady, with volume
up about 9 percent. About half the homes sold for $1 million or
less, and more than one-third
sold for over the asking price.
There's strong pressure on pricing to go up -- not 50 or 100
percent because it's limited by the buyer's ability to pay, noted
to new bank products that are more cash-flow sensitive, such
as interest-only products. "The
only way demand goes away is if people can't pay," he added.
"Glitches in the market have always been short run and the real estate market
has come back with great vigor after each of these aberrations," he said. "There's
still lots of money out there and people are willing to spend it."
Assistant editor Carol Blitzer can be reached
2003 sales of single-family homes
No. of sales
Days on market
Los Altos Hills
East Palo Alto
Completed sales information courtesy of SILVAR, Silicon Valley
Association of REALTORS