Publication Date: Friday, April 24, 2009
Sitting on the fence
Both buyers and sellers await the perfect moment
On a cool, breezy Sunday afternoon in March, hordes of would-be buyers left their shoes at the door and walked through dozens of Open Houses.
Among them were Ryan and Jennifer King, who moved to Palo Alto from San Mateo a couple of years ago and are renting near downtown. After leasing for a year, they got serious about buying.
"Last summer we almost made a bid," Ryan said, but while they were filling out their paperwork, the house was sold.
"We vastly underestimated how long it would take (to find a house)," he said.
Since then, the couple has been "casually watching houses," going to Open Houses about every three weeks, looking for "a high-end condo or low-end house."
What they're seeing this year are more houses on the market -- and for a longer time.
No more Open House on Sunday, bids due on Tuesday, decision by Wednesday. "We can look at an Open House not just for a weekend," Ryan said.
But even if they find the home of their first-time homebuyers' dreams, the Kings are reticent about jumping into the market. They look at friends who bought within the past couple of years who fear their houses have gone down in value.
Two years ago, everyone thought prices would go up, Jennifer said, but now "everyone feels it'll get worse. Everyone's waiting."
Waiting for the market to bottom out is a pretty useless exercise, points out Michael Dreyfus, of Michael Dreyfus Properties, Palo Alto, who's been a Realtor for close to 20 years.
"This is not about investing. It's about buying a house," Dreyfus said, noting that 30 years ago someone would buy a house in the Midwest, live in it, then sell it for the same price 30 years later. "What happened here is not normal," he added.
Instead of wearing the investor hat, Dreyfus suggests making "decisions about what you can afford. ... It changes our way of talking about everything."
It isn't just buyers who are reticent about making the leap.
"Sellers are equally confused, so they put it off," he said, pointing to a couple in their late 60s who really wanted to downsize and move to San Francisco. But they couldn't let go of the idea of selling at the peak of the market -- and three years later they're still in their oversized home, waiting.
"It's about your life and where you want to live," Dreyfus said.
Just a few miles away in Mountain View, Yvonne Heyl, an agent with Intero, Los Altos, sat in an updated Whisman Station home. Recently reduced to $915,000, the house was built just 12 years ago.
Among the 30-plus groups of visitors that day was Caroline, who was renting a townhouse in the development with her husband and two kids.
Holding back the couple was their need to first sell their house in Seattle before they knew what they could afford in Mountain View.
With her husband working nearby and both kids in private school in Campbell, she was very happy in Whisman Station.
"I don't care about the school district; I care about the space," she added.
Heyl, who lives in the development herself, says the economy "definitely has made people not so anxious to buy. A lot are looking, but waiting for the bottom."
Among the 30 to 45 groups of people expected that day, Heyl said "probably 28 are very serious."
The Jenkins Lane home had already been reduced by $60,000, impacted by other homes on the market at the same time. She cited a larger house, but without the granite or bar in the remodeled kitchen, that recently went for $829,000.
"It didn't show well," she said, but it did sell in about three weeks.
A few blocks away, on Plum Court, Harold Hughes, a Coldwell Banker agent, welcomed visitors to a $899,000 home.
In his 18 years in the business, he's never seen a market as challenging as this one.
"If I were young today, I'd be scared to death," the 85-year-old Realtor said.
He too talked about expectations, recalling that when he bought in Los Altos 32 years ago and paid $180,000, his friends thought he'd overpaid. But soon they figured it'd be worth twice that, in 20 years. In actuality, it's worth four to five times that price, he said.
But even with changing expectations about homes continuing to go up and up, Hughes thinks this is a good time to purchase: "If I were 20 years younger, I'd buy a house today. There are good buys out there," he said.
Keri Nicholas, a Coldwell Banker, Menlo Park, agent who ranked as the 10th most successful agent in Northern California last year, held seven Open Houses one day in March, including one on Johnson Street in Menlo Park. That home drew 25 groups, and "it's been on the market for 60 days," she said. Nicholas, 35, has been in the business for half her life. She sees Open Houses "being attended better than ever."
Much of her job, she said, is educating prospective sellers and buyers about today's market -- not six months ago's.
"The difference now is buyers are getting the best interest rates we've ever had. They have choices, but sellers aren't going to give it away.
"That's the balance now of making this market work. If something's listed at $3 million you're not going to get it at $2 million," she said, noting that she has seen multiple offers, but with bids not going over list price.
"We had a pretty good upswing for a long time, and we're used to things selling very quickly. It was an easier time. Now, there's a lot more to the process and more time to gather information, get inspections. ... It's a slower process," she added, but "it is the biggest investment you'll ever make."
Despite the downturn in the economy, the local real-estate market is moving faster than many people think, she said, but confidentiality agreements preclude agents from acknowledging specific off-market sales that are not reflected in housing statistics (see related story).
Nicholas' optimism is based on known facts. She's aware of several recent large-scale sales so comes armed with up-to-date comparable data.
The bottom line for her is, "There are still people who are moving. Buyers have more opportunities to negotiate. Interest rates are better. Long-term, even if you think you overpaid, the fundamentals don't change. There's still not enough land."
Back in downtown Palo Alto, Dreyfus said some of his clients are realizing that "they can get a house for what they're paying in rent."
He e-mailed his clients a few weeks ago that he's seeing prices go down -- the home on Everett where he was holding an Open House had been lowered from $1.65 million to $1.45 million.
"Palo Alto is on sale," he added.
"Palo Alto is a very resilient market -- not that it doesn't go down, but it happens later and ends sooner," he said, pointing to the vivacity of Palo Alto, from its school-age population boom to lower interest rates and prices.
The last six months have seen big adjustments, he said, more apparent at the higher price points. Few homes attract multiple offers.
"Well-priced, well-located, nice-inside properties are selling," Dreyfus said, adding that "People always want the best property on the market; it'll attract the buyers."
As for the Ryans, they're pretty focused on finding a home to buy in Palo Alto. Jennifer works in San Jose, they have family in the East Bay.
"We know we could get a bigger house in Mountain View (for the money)," she said, but they'll keep looking in Palo Alto until the right one, at the right price, comes along.
Associate Editor Carol Blitzer can be e-mailed at firstname.lastname@example.org.
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