Palo Alto housing could rebound by end of year

Panelists offer advice on creating successful transactions

The dizzying days of rapid sales with competing offers, plentiful loan money and no contingencies are long over, but the housing market is far from dead, panelists agreed at a community forum Tuesday night.

The slowdown in the Palo Alto-and-environs housing market has not been as severe as the national trend, according to Mark Duval, chief investment officer for Opes Advisors. But local trends tend to parallel the stock market, not the national housing market. He predicted a turnaround could impact the local housing market as early as the end of 2009.

Inventory is already starting to increase, and more than a hundred potential buyers have been turning up at recent open houses, noted Coldwell Banker Realtor Steve Bellumori.

The panel of four brokers, a CPA, and a couple of financial analysts had some specific advice for the 50 potential buyers and sellers who attended the meeting at Trader Vic's in Palo Alto.

Top of the list was changing expectations.

Gone are the days of slapping on a coat of fresh paint, setting out some potted plants and offering a home "as is." Instead, sellers need to assess what work needs to be done and either fix problems before the house goes on the market or be prepared to fully disclose any issues, the panelists said.

"This is the most difficult real estate market I've ever seen," said Bellumori, a Realtor with more than 30 years' experience.

Although the economic fortunes of this area are heavily tied to the stock market, "up to this point we've been an island of resiliency," he said.

Bellumori pointed to the lack of land, strong entrepreneurial business climate, good public schools and great weather as key selling points for real estate.

But much of his job today is serving as "a reality versus a realty broker," he said.

Although plenty of money is available, the guidelines for lenders have firmed up, Tracie Southerland, financial and mortgage advisor for Opes Advisors, said. "It's not much different than 15 years ago," she added.

Southerland compared housing accessibility in 2003 versus 2009, using a $1.5 million house as an example. In 2003, with 10 percent down, a 4 percent loan on $1.2 million and a second 3.5 percent loan on a $150,000 line of credit, one would need a $143,000 income to qualify.

Today, with 25 percent down and higher rates on the jumbo loan, one would need to earn $228,000 a year to buy the same house.

"The buyer pool has shrunk," she said.

Panelists spoke to specific issues, including pricing, negotiable terms, conditions and appraisals.

"Pricing is not an exact science," Alain Pinel Realtor Nicole Aron said, but the classic issues of location, condition of property, levels of inventory and availability of financing still come into play.

And it's always the kiss of death to overprice.

"Focus on the goal of why you're on the market," she said, adding that one could be paying less for a replacement home.

A home can be made far more desirable with attractive terms, such as the seller paying down interest points that could ultimately save both buyer and seller a bundle, Southerland said.

Other options include paying six months of homeowners' association fees, seller financing or accepting a variety of contingencies, such as locking in an interest rate, Alice Nuzzo, a Realtor with Sereno Group, said.

And when it comes to disclosures, honesty is the only policy, noted Alain Pinel Realtor Carol Carnevale. Even if a seller has replaced the roof, the fact that the roof once leaked must be disclosed, she said.

Duval, who keeps his eye on economic trends nationwide, suggested taking a longer view. For someone thinking of downsizing in three years, it might make more sense to sell now while prices are still high, he said.

"Long-term economic growth in the U.S. is positive," he said, and it "will keep a premium for housing in this area."

More real-estate news and home sales data are available at Palo Alto Online's Real Estate home page.


Like this comment
Posted by really realistic
a resident of Evergreen Park
on Jan 28, 2009 at 10:28 am

Mr. Bellumori forget to list foreign buyers and a key element of the Palo Alto real estate market.

Like this comment
Posted by john
a resident of Downtown North
on Jan 28, 2009 at 11:02 am

sounds like a sales pitch from real estate and loan sales people to me and the weekly bought right into it?
Has anyone noticed the layoffs coming out of even stalwart SV compan ies? Has anyone noticed the increasing number of vacancies and going out of business sale signs around palo alto, especially university avenue and its side streets? has anyone noticed housing for sale signs staying up for weeks if not months as opposed to just days in the past? As Mr. Hand would've said in Fast Times at Ridgemont High, "What are you people, on dope?"
Also, Palo Alto's desirablity as a place to live is further effected by things like Paly no longer being one of the Top 100 high schools, the increasing drug problems in the schools and around town as noted in police reports, the increasing number of homeless on palo alto streets and the mess they make of the downtown area, the increasing drum beats from city officials that service cuts most probably will have to be made and businesses, which are leaving palo alto in droves, should be taxed more - I think it is time for everyone to wake up and realize Palo Alto is no longer the most desired placed that it once was and what is the community and the government going to do to reverse this trend?

Like this comment
Posted by Sarah
a resident of Midtown
on Jan 28, 2009 at 11:23 am

"Rebound" does not mean a return to last year's prices. "Rebound" means an end to the bleeding, i.e., prices stabilizing at some level possibly lower than today's prices.

Most economists expect the Obama stimulus program to cause unemployment rates to level off sometime in or before the summer. When that happens, the rest of the economy, including housing, should start its rebound.

Like this comment
Posted by Paul
a resident of Downtown North
on Jan 28, 2009 at 11:33 am

The only experts in this situation are tomorrow's historians.

Like this comment
Posted by Linda
a resident of Old Palo Alto
on Jan 28, 2009 at 11:40 am

Whoa, John
You're going to die an early death being so negative. The Weekly/Daily are just reporting on events in Palo alto. We, who've lived here for 40+ years are not dismayed by our city. We are positive, hopeful and encouraged by the good folks who share the same attitudes.

Like this comment
Posted by How about you?
a resident of Ventura
on Jan 28, 2009 at 12:01 pm

Is there any evidence that people who report negative events die early? What about people who threaten death to those who disagree with them? When do they die?

Like this comment
Posted by Positive
a resident of Barron Park
on Jan 28, 2009 at 12:29 pm

I think we all need to keep a positive attitude.
We are very fortunate to be here in this area, it still has a lot to offer each and everyone of us. I have lived here for over 40 years and have seen alot of change.
So lets look ahead and be positive.

Like this comment
Posted by Rob
a resident of Woodside
on Jan 28, 2009 at 2:08 pm

I think John is right. Silicon Valley's single industry is past it's maturity peak and after this recession there will be much more scrutiny regarding executive compensation. Normal wage earners aren't PA real estate targets, one needs to have their hands deep into a companies equity in order to shell out a $200-400k down payment and a $10,000 mortgage for your normal $1.5m PA home.

The days of executives getting money funled into their accounts is over. The money for stupid ideas has dried up. Your normal CPA's, Doctors and Lawyers can't afford PA. And like what John stated, the schools, services and lifestyle of PA is overrated.

Like this comment
Posted by Steven Rabago
a resident of another community
on Jan 28, 2009 at 2:32 pm

[Post removed due to promoting a website]

Like this comment
Posted by Rob
a resident of Woodside
on Jan 28, 2009 at 2:42 pm

Another point is people cashing out on their properties at or near retirement age to make up for lost equity in the stock market. Look around PA and this is a no brainer. It is an older population here. PA isn't really a destination retirement area either. More of a place to get rich quick for 30-50 year olds.

Like this comment
Posted by Dork
a resident of Downtown North
on Jan 28, 2009 at 3:26 pm

This is funny. The slide in Palo Alto has just started. Heck, you all were in denial only six months ago that your home prices could do anything but go up. Want to see the future? Look at Southern California, they are 18 months ahead of PA. Look at todays Wall Street Journal, Jumbos and Primes are just beginning to default in large numbers. The prime resets peak in 2011. Thats righ 2011. This will go on much longer than anyone with a vested interest is capable of grasping.

Like this comment
Posted by OhlonePar
a resident of Duveneck/St. Francis
on Jan 28, 2009 at 3:34 pm

Wow, this didn't read like an optimistic report from Realtors to me--toughest market in 30 years? Hardly a puff piece.

That said, I wouldn't be too gloom and doom about long-term prospects.


Plenty of people stay retired here--there's a large retiree community here. People may not come here to retire, but they do stay here. Their houses are affordable, there are plenty of services in the area for seniors and the weather's good. The get-rich-quick folk are a fairly recent (dot-com boom) crowd and distorts what have been the longer-term trends here.

Also, because of the drop in stock-market assets, it makes more sense for a lot of retirees to stay in their comfortable paid-for house instead of moving to Hawaii. They don't have to put their houses up in a distressed market. It's the people who overpaid and lost their jobs who will be in that position.

Single industry past its peak? Yes, it's all tech here, but it's a wide array of tech. Chip manufacturers aren't Internet search engines. Google, Apple (with the iPhone) are hardly dead in the water.


Palo Alto school scores aren't always pristine, but they are consistently high. More importantly, Palo Alto is basic aid and passes school bonds at a time when the state overall is falling apart. As a buyer with kids nearing school age, I'd be interested in PA because the community has a history of supporting its schools--all the more important when general revenue funds are likely to get hacked.

That said, while I think long-term, the Valley will be fine, short-term we've not yet seen the worst. I just saw my first bank-foreclosure open house this weekend in Palo Alto.

Like this comment
Posted by stock trader
a resident of Charleston Meadows
on Jan 28, 2009 at 4:21 pm

Hah, yea, rebound only means a slow down in the drastic drop in prices. As a professional stock trader who has made thousands shorting the stock market, let me tell you this bear market is only just getting started. We have much further to drop in real estate and the stock market. Get ready for 4 years of economic pain.

Figure out a way to hedge your real estate if you want to buy. Personally, I'm waiting until 2012.

Like this comment
Posted by OhlonePar
a resident of Duveneck/St. Francis
on Jan 28, 2009 at 9:28 pm

stock trader,

At least you admit you short things--kind of makes anything you say suspect though for that reason . . .

Like this comment
Posted by Old Palo Alto Resident
a resident of Old Palo Alto
on Jan 28, 2009 at 10:57 pm

Quietly, the State is finalizing plans to run the High Speed LA to SF train through Palo Alto via a 6 rail elevated expansion of the Caltrain tracks. You can imagine what this eyesore and increased noise will do our housing prices. Some residents will loose their homes as a result of the expansion.

Public comment is being sought Jan 29th, Santa Clara Convention Center, Meeting rooms 1 & 2 from 3 to 8 PM. There are more expensive alternatives also under consideration which direct trains through the east bay or highway 101.

Like this comment
Posted by Rob
a resident of Woodside
on Jan 29, 2009 at 12:10 am

Whatever, I wouldn't buy anything in PA right now. That's a gut instinct intuition. There are better places to put your money. We just got over one of the most overhyped real estate scams ever. To think it's all better a couple months later is fricking crazy.

Like this comment
Posted by OhlonePar
a resident of Duveneck/St. Francis
on Jan 29, 2009 at 12:58 am


It's actually a good time to buy right now--I saw a 4 bedroom foreclosure on a large lot for $890,000. That's going to be a good deal for someone. Houses are long-term investments. Unfortunately, like a lot of other people I can't invest because what the stock market did.

But buy low sell high--that means going against the wind.

Like this comment
Posted by HappilyRenting
a resident of Crescent Park
on Jan 29, 2009 at 6:21 am

Dork and Stock Broker have it right - the pain has just started, the economy is going to get much, much worse, and the PA housing market is going to get much much worse. Perhaps there will be a higher volume of home sales by end 2009, but only on the back of significantly lower prices than exist right now.

For those of you hopeful that Obama's stimulus plan will make a difference, IMO you're living in Oz. It's pork-barrel politics that will have little/no impact in 2009/2010.

Sometimes gloom & doom is the right way to look at things, and healthier than cheerily assuming all will be well and then waking up to a nightmare.

Like this comment
Posted by Lawyer
a resident of Crescent Park
on Jan 29, 2009 at 8:11 am

Sorry, Rob, there are lots of big law firms in Palo Alto--and a lot of us buy houses in Palo Alto. Not having a commute is awesome! For junior people, it is more comfortable if you have a spouse/partner that also works, although I have seen it done with one income.

There are also lots of other people who live here besides lawyers and tech professionals. The dot com millionaires may be the ones who advertise their wealth by building McMansions, but that doesn't mean that everyone else is poverty-stricken.

Housing prices may go down, but I think those who are waiting for a crash--especially at the low end of the Palo Alto market--will be disappointed.

Like this comment
Posted by stock trader
a resident of Charleston Meadows
on Jan 29, 2009 at 8:36 am

Ohlone Par,
Hah! the stock market is down thousands of points, real estate down on average 30%. I will see you on the other side of OZ. :)

Like this comment
Posted by Sad renter
a resident of Menlo Park
on Jan 29, 2009 at 1:18 pm

With 25% down requirement, and 7-9% on jumbo mortgages, the only people buying now are foreign investors or delusional buyers. I know my savings has dropped by 45% thanks to the market. We went from close to buying in MP/PA to not being able to afford Redwood city in just 4 months. We're not alone. Every tech company is laying off. Palo Alto is not immune. I LOVE this area, but the prices will drop here too. PA lags the overall trend, but it will get there. Think about it.... no one from the east bay or San Jose is going to sell at a 40% loss and move up to PA/MP/LA.

Like this comment
Posted by OhlonePar
a resident of Duveneck/St. Francis
on Jan 29, 2009 at 1:33 pm

Stock trader,

Yes, exactly. It's clearly not the peak of the market. Will it go down more? Probably, but the best time to grab something is while interest rates are still down.

Sad renter,

I agree there's been a lag. However, a couple of things. One there's relatively little housing stock in PA, so you don't need a ton of buyers. Second, the only thing doing worse than the stock market is the state government--and that means schools get it in the gut. Palo Alto has a scarce resource--a basic-aid district that just passed a whopping bond.

Yes tech companies are laying off--but Google has only laid off some of its *recruiters* and let go of contracters. Google wants its workers to live nearby.

Because the PA schools are so desirable and because of ins and outs of hiring and grad school at Stanford, this area will continue to have a strong rental market. For a lot of people, if they bought long-enough ago, that means they'll rent instead of sell until the market starts to recover.

The biggest issue, I think, is the now huge down requirement and the lack of jumbos. I think we're not going to see those 20 percent jumps per year in a long time, if ever. I also think the high end of the market is going to have some serious white elephants. I think the Eichler/Sterling Gardens/random smallish house market will continue to bump along.

Like this comment
Posted by Catherine
a resident of Atherton
on Jan 29, 2009 at 3:36 pm

I don't know why all the doom and gloom. You can get a 5.05 percent interest only jumbo. That seems very reasonable to me.

Like this comment
Posted by Moving Man
a resident of Crescent Park
on Jan 29, 2009 at 6:32 pm

Compared to other Bay Area cities Palo Alto is a desirable place to live, which I expect to continue given the presence of Stanford, good public schools and weather, exceptional job opportunities, cultural and recreational opportunities nearby, etc. However, over the past thirty five years that I have lived in north Palo Alto, I've seen a tremendous increase in downtown and neighborhood traffic, increased housing density downtown along with the destruction of smaller, quaint single family homes, astronomical housing price increases and a change in character and culture from a college town to a big money/high tech Mecca. While this might appeal to some, it doesn't to me so I sold and moved. Palo Alto is still a great place to live, but less desirable and liveable than it has been in the past.

Like this comment
Posted by Reymundo
a resident of another community
on Jan 30, 2009 at 10:33 am

You can get a jumbo at 5.05, but much fewer people qualify for them now that the banks are actually requiring people to verify income/assets and to put down reasonable downpayments. The combination of much tighter credit, layoffs, and a plunging stock market makes for a lot less buying power out there.

This week, they just cut the price for a brand new house in Professorville by $600K to $2.8M. "Won't last at this price!" the web listing now says. We'll see about that.

Like this comment
Posted by Greg
a resident of Downtown North
on Feb 3, 2009 at 9:05 am

According to the Mercury-News, most Santa Clara County cities had declining home prices during the last 3 months of 2008. However, Palo Alto home prices actually went up 5.2% during that period.

Web Link

Like this comment
Posted by Ada
a resident of Midtown
on Feb 3, 2009 at 9:37 am

You can get interest-only jumbo at 5.05%????? I am looking to refinance but none of loan officers I work with can offer anything close to it. Can you refer me to whoever offers it?

Like this comment
Posted by Old Palo Alto
a resident of Old Palo Alto
on Feb 5, 2009 at 8:44 pm

I'm actually surprised at the resilience of Palo Alto's market as a whole given the state of the overall economy and nearly 4 year decline of American's housing market. The lending crisis and tightening of mortgage credit started in Palo Alto in late 2007. Palo Alto volume was low in 2008 but prices were essentially flat. I read a statistic that 1/3 of all homes in Palo Alto have no mortgage. If you take that only 0.5% of the total inventory sells per year, the number of homes affected in the past 5 years is only 2.5%, and most of these were bought with significant down payments. It's inevitable that some who are over leveraged will get behind on their payments and ultimately could be forced to sell, maybe even a short sale. However, this is the case even in a good market. I'm sure some will extrapolate a few data points as the sky is falling. But, the vast majority of Palo Altans owe very little on their home and have no intention of selling. I would think most Palo Altans are probably oblivious to their home values and should be as they probably will never sell. I don't sense panic in Palo Alto, although it could always change. I do think there may be a bigger correction, but I also think that Palo Alto will be the last one in and the first one out of the housing correction. Bottom line: you should buy a home you can afford and have a time horizon of 10 years. If that's the case, you have little to worry about.

Like this comment
Posted by OhlonePar
a resident of Duveneck/St. Francis
on Feb 5, 2009 at 11:53 pm

Old Palo Alto,

That 1/3 is an interesting figure. I wonder if it's true. I could certainly see that with the large number of senior homeowners as well as some of the dot-com buyers.

I do know a number of people in Palo Alto, though, who are paying a lot to live here. A job loss would be catastrophic for them. More of this in the lower (relatively) priced areas of Palo Alto.

We're not going to have the subprime mortgage issue here and I don't see a mass of foreclosures. I do think we could be affected by just the sheer drop in prices nearby. At some point, people buy the bigger house for less and send the kids to private school. Or they buy outside the city, rent here and send the kids to the public schools.

Like this comment
Posted by Old Palo Alto
a resident of Old Palo Alto
on Feb 6, 2009 at 11:03 am

It should be interesting the dynamics over the next year or two. I was not here in the 89-93 timeframe, would appreciate any insight from anyone who was.

Like this comment
Posted by Jeff
a resident of College Terrace
on Feb 8, 2009 at 9:20 am

If my guessing is correct, I'd like to say John is a Chinese, cuz I'm a Chinese and heard few Chinese(maybe John is one of the few guys I really know or met before) who hold the exactly same opinion and same expression as him. I think his words are kind of too sarcastic.

It can not be more natural that the house prices fluctuate with the economy situation changing everywhere. PA is by no means an exception. The only differences are the amplitude and long term trend.

Sounds like John eagerly has been wanting to buy a house in PA but never got an good opportunity before. Think about this way -- now or the coming months if the house price dramatically goes down as you are hoping/wishing/expecting, and if you're really smart enough as you're trying to stance, don't let the opportunity vainly pass by. By then, you'll be the lucky guy. Get it?

Posted by Name hidden
a resident of The Greenhouse

on Jun 5, 2017 at 11:16 am

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?

Sorry, but further commenting on this topic has been closed.

Burger chain Shake Shack to open in Palo Alto
By Elena Kadvany | 5 comments | 2,939 views

Eat, Surf, Love
By Laura Stec | 4 comments | 1,068 views

Couples: So You Married Mom or Dad . . .
By Chandrama Anderson | 1 comment | 1,009 views

The Cost of Service
By Aldis Petriceks | 2 comments | 685 views