Publication Date: Friday, April 18, 2008
East Palo Alto housing sales in motion
Foreclosures, short sales create active, volatile market
Despite a downturn in the national housing scene -- and more difficulty getting loans -- homes in Palo Alto, Menlo Park and Mountain View are flying off the multiple-listing shelf. From listing to sale averages three weeks.
But just across U.S. Highway 101 and San Francisquito Creek, another scenario is playing out in East Palo Alto.
In early March, with 63 homes on the market in Palo Alto, 76 in Menlo Park and 52 in Mountain View, there were 146 in EPA -- a town half the size of its neighbors.
And rather than selling quickly, they were languishing closer to three months on average.
Unlike median home prices in its neighboring communities, East Palo Alto's is ratcheting down, albeit slowly.
Feeding into the floundering market is the number of foreclosures or short sales (where the bank agrees to reduce a loan so the home sale will cover the mortgage).
Fabiola Prieto, a real-estate agent with Coldwell Banker, Palo Alto, noted 29 short sales and nine bank-owned properties (where the bank had foreclosed) in early March.
"If a house was purchased in 2004 or 2005, it was most likely a multiple-offer situation. Now the house isn't worth that," she said. In a short sale, the owner is able to walk away without further debt and "can usually get out of it pretty easily. It avoids foreclosure," she said.
With more than a quarter of the inventory in foreclosure or short sale, prices are impacted, she added. "Buyers are looking for really great deals and they're able to get them now. So, they're looking at the short sales. They're also attracting multiple offers -- more than the non-short sales," she said.
Prieto estimates that 70 percent of buyers in East Palo Alto today are investors, up from 50 percent a year or so ago.
While marketing a home in the surrounding areas usually starts with a broker's walk-through, followed by an open house, listing on several Web sites and advertising in local newspapers, EPA again has its own rhythm for selling homes.
Rather than holding open houses, most visits are by appointment. "We'll set up when no one's home with two or three agents," Prieto said.
The process is further complicated when the homes are abandoned and left to disintegrate. Prieto says her out-of-town investors gather their information from photos online, as well as disclosures. A lot of investors offer without seeing it, she said.
"They come in and we assist them with finding tenants and get the property rented out pretty quickly," she said. Demand for rental property is high, with rents ranging from $1,800 to $2,500 for a house, she added.
Buyers in EPA "need to come in with at least 20 percent down; they're getting pre-approved before they call us, have locked a rate down, taken care of financials," she said.
And if a house sits too long on the market, Prieto updates the banks on what else is on the market.
"After a month and a half, we let them know what's sold in the area, tell them we need to make a price reduction. We're competing with new listings that are coming in much lower," she said, noting she recently saw one for $219,000. That 60-year-old house featured two bedrooms, one bath, with a large living room and a bonus room, on a 5,900-square-foot lot.
Sales continue to be slow in EPA, and prices are fluid. Prieto did a quick search of activity in the past few months, finding nine had closed, including a land-only transaction and one house that had been on the market for close to a year (which sold for less than originally asked).
But Prieto is optimistic: "My business is thriving. We have a lot of listings, a lot of activity. I really don't know what's going to happen in the next few months. All I know is we're pretty busy here."
Associate Editor Carol Blitzer can be e-mailed at email@example.com.