Real Estate

2010: Getting back into the game

Homebuyers move off the sidelines and re-enter the real estate market

People are starting to buy houses again.

Despite continuing gloom over "the economy," people are getting married, having babies, getting divorced, dying, downsizing -- basically doing what they usually do. And those life passages send people looking for property, whether they're new parents or empty nesters.

With mortgage interest rates remaining low, more listings are coming onto the market, offering a broader range of choices. In Menlo Park, for example, there were 112 houses on the market in late September, ranging from $289,000 to $3.99 million. Palo Alto's market was even broader: 122 houses were listed from $749,000 to $10.89 million. And in Mountain View, one could choose from 83 houses, ranging from $549,000 to $1.86 million (or 137 condos, from $198,000 to $965,000).

Home sales in the first half of 2010 rose in every local community except East Palo Alto, according to the Silicon Valley Association of REALTORS*. The greatest rebounding in both number of sales and price during the past two years happened in Palo Alto and Mountain View, with Atherton and Woodside not far behind. See charts: Home Sales and Condo Sales.

Recent homebuyers shared their success stories -- how they approached and overcame obstacles in the marketplace and ultimately purchased a home.

In 2008, Jamie and Brooke Turner were ready to buy a home. With a 1-year-old and two incomes, they were poised to give up their rented townhouse and find their dream home in Palo Alto.

But, like most people, they had a budget. They started looking in the $600,000 to $700,000 range, further spurred by low interest rates.

"We were looking for prices in Palo Alto to drop. Prices all around the Bay Area were dropping.

"We quickly realized that Palo Alto seemed to be fairly immune to price drops," Jamie Turner said.

Early on they saw a townhouse they liked, listed at close to $900,000. Since there were no offers forthcoming, they put in an informal offer at about $600,000.

"They basically did not call us back," he added.

Worried that the market would continue to slide -- and they might overpay -- the Turners put their home hunt on hold for a couple of years.

By now, they had a second child.

"Our initial impulse was to pick up the same assumption we made last time," he said, and see what they could get in Palo Alto.

"Our kids go to daycare in Palo Alto, we loved the community in Palo Alto; we both worked in Palo Alto. Obviously it's a fantastic school district. It's just a cool family town, a cool place to raise kids," he said.

"We knew Palo Alto was ideal," said Brooke, who works as a partner relations representative for CK-12 Foundation, which creates free online textbooks for K-12.

"And we knew we'd get a lot less house," added Jamie, a software developer.

So they started working seriously with Nancy Goldcamp, a Coldwell Banker, Palo Alto, agent who'd been sending them e-mail market updates over the past two years. And they started haunting open houses in College Terrace and Barron Park, then Midtown and points south. They kept their eyes on websites, such as Zip Realty and Redfin, to catch houses just as they came on the market.

Soon they noticed what they called "the Palo Alto phenomenon": A house would come on the market at $850,000 to $1 million, and an open house would be held over the weekend. Offers would be accepted mid-week, "and they'd be gone. Usually the price would be boosted by a hundred grand," Jamie said, "and the house would also need 50 grand of work. The lower the price, the more it needed. ...

"They got snatched up, bid up, and there were eight bidders. We did that dance about six to eight times."

After a couple of months, the Turners realized that even the low-end houses were either bid up over their price range or needed so much work that the end price was still too high.

"By that time, we knew we wanted a house, not a condo or a townhouse. We had our two kids; we were looking for this to be a long-term place where we would get settled, a little bit of a yard where our kids could run around," Brooke said.

So the Turners widened the net, looking in Menlo Park, Los Altos and Mountain View.

"Mountain View was always going to be one of the more realistic options, a couple of hundred thousand less than Palo Alto, right across the border," Jamie said.

They soon spotted a house in the Sylvan Park neighborhood. Although they both liked it right away, they were hesitant about the elementary school assignment. They'd done their research (looking at and talking to people in the area) and knew that Bubb and Huff elementary schools were preferred ("You can almost tell by looking at the price, square footage, size of lot -- this must be in the Bubb area," he said.). Their kids would be assigned to Landels.

Jamie acknowledged that his real concern was this was the first house they'd seen that they really liked in Mountain View. "We didn't want to be too hasty," he said.

But they kept going back to look at it. "It always stayed in our minds. ... By the time we decided to go back and make a bid on it, it had already dropped in price," Brooke added.

The house was first listed at $1.049 million, then it dropped to $1.029 million, then $999,000.

"That was the sign to us that it had been on the market for awhile, and we didn't feel like we had a lot of competition," Brooke said. So they bid $925,000, negotiated back and forth, and eventually they agreed on $960,000.

Now that they've settled in, the Turners have no regrets about choosing Mountain View, although they know they didn't get every last thing they wanted. Their home is on a busy corner, and the school isn't their first choice, but "it seems to be a good school. The parent community sounds good," Brooke said.

"We let go of Palo Alto, which in the end wasn't that big of a deal," Jamie said, pointing to their 2,100-square-foot house that was built in 1986. "It has a brand-new kitchen. It's in great shape."

Like the Turners, Kathy (not her real name) began looking for a new home years ago, soon after separating from her husband in 2004.

"I quickly realized it was going to be a little trickier to buy a house this time, given the financial circumstance, market, economy, inflation, in Palo Alto," she said.

But by 2006 she'd pretty much given up and "decided renting wasn't such a bad thing."

Eventually, she said, she got frustrated renting: "Not being able to look at a wall and paint it blue today. Not having that freedom got to me."

But Kathy was concerned about the competitive market in Palo Alto, where she had grown up and wanted her son to continue in school.

"I had put in a few offers and I was massively outbid even when I went significantly over the asking price," she said, adding that she was looking in the $1 million to $1.25 million range.

And, she said, "I'm kind of picky. I didn't want a beat-up Eichler in Midtown; I wanted charm and a specific location. We were renting a comfortable house and didn't think buying a house should be a step down."

Although she'd been meeting with a new agent since November 2009, she actually found her Barron Park house on her own. In early February, jet-lagged from a recent business trip to India, Kathy drove by the house "and knew I needed to jump on it. I called to find out how quickly I could get in," she said.

Luckily the open house happened on a rainy weekend, what Kathy calls one of her "real-estate secrets."

"It cuts down on the competition," she said.

Gwen Luce, the listing agent from Coldwell Banker, Palo Alto, spent a lot of time with her, walking her through the disclosures.

Kathy saw that there were things that needed to be fixed, so she brought over a contractor/friend to give a "reality check" and estimate what it would cost to fix the unbolted foundation and the leak under the bathtub. She also needed to customize a room for a home office since she spent 90 percent of her time working from home. She was assured that nothing was an emergency fix.

"He said, 'You have to have this house. It's totally you,'" she said.

At $978,000 "the asking price was set to get the house moving fast," but Kathy feared getting outbid -- again. So she offered $1.107 million, which turned out to be just $5,000 more than the next highest bidder.

"If I hadn't had experience in previous years, I would have gone conservative, but I knew better this time," she said.

"Almost any house in Palo Alto, if it's listed for less than $1 million they just want it to go quickly. ... It is a game; it's kind of frustrating. It almost seems like buyers should be given some sort of cheat sheet. It's just a strange little song and dance," she said.

In the end, Kathy said, "I got a sweet and charming house. The layout is kind of funny, but I realized I need not be intimidated by adapting a house. I'm a single woman, not very handy. ... (By being) willing to buy something close and make it just right, I got what I wanted."

Downsizing was Linda Jensen's main motivation for finding a downtown Palo Alto condominium. Jensen, 66, had lived in her Silva Avenue home in Palo Alto's Monroe Park neighborhood for 34 years.

After her second husband died seven years ago, Jensen struggled with upkeep. "I had a gardener but still had to garden," she said, adding that her son said he never wanted to live in the home again.

Since she no longer needed a four-bedroom, two-bath home on a quarter acre, she began by going through her belongings and getting rid of things. She figured she'd need a two-bedroom, two-bathroom place. "I wanted a garage. I didn't care about the fireplace, but I got one," she said.

More important was location. After having to drive everywhere for years, she wanted to be located downtown, near her brother and her former mother-in-law. "I wanted to be able to walk and go places," she said.

But first, she needed to figure out just what she could afford. After meeting with a tax lawyer, she learned how much capital-gains tax she'd owe on her house, depending on the price. In early June she listed the house at $1.098 million and sold it in seven days for $1.2 million.

"As soon as I got an offer, I started looking," Jensen said.

Working with Nancy MacLeod, a Palo Alto owner/broker with, she bought her condo for $775,000, "down from eight-something with two counter offers," she said.

Her only regrets are not asking enough questions -- and not turning on every faucet in the place before closing.

"I'm not an aggressive person," she said. The condo needed electrical work; the washing machine overflowed because the hose wasn't tied down; the shower just dribbled; the patio door was broken. "They said it was fixed, but I couldn't close it. My brother fixed it," she added.

But once the kinks were worked out, Jensen was very happy with her choice.

"I would have loved to have a little cottage, but I was willing to go into a condo. I can walk to Stanford, Town & Country, Menlo Park, downtown, the clinic. I don't have to drive every five minutes."

Once they found their homes, each buyer had a different experience lining up a mortgage.

Linda Jensen put down $650,000 on her new condo, looking to finance the last $125,000. She was still reeling from her experience the year before when she refinanced her home at what she thought would be a 5 percent rate.

"The 5 percent rate turned out to be 5.3 percent, and I had to come up with $10,000 at closing," Jensen said.

Then, when she put her house on the market, she discovered she had to front the money for repairs rather than put the money in escrow to be paid when the sale was final -- like she had the last time she bought a house 34 years ago.

Nancy MacLeod, her Realtor, ultimately matched her with a broker who was able to coordinate a small loan.

For Kathy, lining up a mortgage "was truly a terrifying thing for me. I hadn't needed to get a mortgage in this century," she said, noting that this was the fourth house she purchased.

But previously, she noted, "loans were handed out more generously. I've never been a credit risk. I wasn't aware how tough it was."

Kathy works as a contractor for a high-tech company but has a large, diversified stock portfolio. "It helps, but they're aware that that portfolio could dissolve in a few days' time.

"It was odd. Even though I could have paid cash for this house, they looked at me and said, 'Your income is not what it needs to be.'"

A different mortgage broker was happy enough with her income when she agreed to put 50 percent down. "I still had to jump through a lot of hoops. It was late February and I needed to do my taxes in the next few days."

The Turners, on the other hand, were pre-approved "for a lot more house than we could afford. They were too easy on us because they factored in our $2,900 rent, but we pay more for childcare. We look really good on paper," Jamie said.

Ultimately, they went to the bank of Mom and Dad, and are paying their mortgage directly to them.

The Turners have no second thoughts about their decision to buy a house in Mountain View.

"We have all these projects, but that's OK. Every weekend we chip away at it, but we'll be there for a long time. It's a very different feeling, knowing it's ours," Jamie said.

"I didn't expect to have that feeling. A couple of weeks after moving in, I felt like a huge weight was lifted from my shoulders," Brooke added.

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