Real Estate

Real Estate Matters: Market showing signs of chilling

 

Editor's Note: It's officially fall this weekend, which brings bright hot days and brisk nights. Like the change in seasons, the Midpeninsula real estate market changes as well as summer turns into autumn. Will it be hot? Chilly? A buyer's market or seller's? Last week, Weekly real estate columnist Hadar Guibara, of Sereno Group in Palo Alto, gave her forecast. This week, Xin Jiang of Alain Pinel Realtors in Palo Alto, will use her experience and knowledge to predict buyers' and sellers' behavior over the next few months.

The residential property market in Palo Alto is showing multiple signs of a slowdown.


Xin Jiang is a real estate agent for Alain Pinel Realtors in Palo Alto. Photo courtesy Xin Jiang.
The median price of all sold homes in Palo Alto from June to August was $2.86 million, an 8 percent drop from the first five months of 2018. Summer seasonality normally sees fewer transactions but not necessarily lower prices. In 2017, from June to August, the median home price in Palo Alto was actually 3 percent higher than that of the spring.

"Entry-level" homes also are staying on market longer. Just last spring, a typical "starter home" priced below $3 million would usually sell with as many as 10 offers within a week. As of Sept.10, with 60 active listings in Palo Alto on the Multiple Listings Service, 34 were still on the market after 14 days. Six homes listed under $3 million have been sitting for more than three weeks. No home is perfect, and surely there are certain drawbacks when homes don't sell immediately. However, in a "hot" market, buyers tend to take action to grab a home and overlook most shortcomings.

The number of offers on a single property is dropping as well. The severe bidding war was a norm in the spring. Homes listed aggressively low compared with their fair market value could attract as many as 20 bids. Recently, many homes listed for $3 million only received one or two offers. At the high end, homes don't seem to attract interest even after a $1-million price drop.

The number of offers directly translates into how much more a home finally sells. From January to May of this year, homes listed for under $3 million were sold for an average of 15 percent over asking. This overbidding dropped to eight percent during the summer months from June to August. As inventory picks up in the fall selling season, home prices are likely to remain soft.

What caused the market to shift?

First, home prices may have jumped too high too fast. The median home price in Palo Alto in the first half of 2018 reached $3.1 million. It was a 15 percent increase from 2017 and 29 percent higher than 2016, on top of a long bull-market cycle that ran for five years from 2010 to 2015, when Palo Alto's home prices nearly doubled. It's hardly sustainable.

Second, while we are still experiencing historically low inventory, the number of new listings increased by 11 percent over last year for the period from January to August, which helped slightly to restore the balance between supply and demand.

Lastly, as uncertainties about the global economy are rising, potential buyers, both local and foreign, are in wait-and-see mode. The rising tension between the U.S. and China is affecting the entire global "tech value chain." The depreciation of China's currency by about 10 percent since February also negatively affected potential demand by Chinese investors.

How should sellers and buyers react to the shift of the market?

For sellers, unfortunately, market timing plays a major role in determining sale prices. A tough market raises the bar for marketing and execution during the selling process. For buyers, if the market has finally started to correct, now is only the beginning, and there's no need to rush. On the other hand, limited supply, especially of properties at prime locations, is likely to continue in the foreseeable future. It may be wiser to keep evaluating than trying to time the market.

Xin Jiang is a real estate agent with Alain Pinel Realtors in Palo Alto. She can be emailed at xjiang@apr.com.

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Comments

3 people like this
Posted by Obama
a resident of Green Acres
on Sep 20, 2018 at 6:27 pm

No Xin, this has nothing to do with trade war or foreign money. This is what happens when the housing bubble 2.0 explodes. This bubble is bigger than the last bubble and the results will be worse. Interest rate will pass 5.0% soon and those bagholders/speculators will be running for the exit. The problem is there is only one exit door and not enough idiots to bail them out.


10 people like this
Posted by Bye Bye PA
a resident of Midtown
on Sep 20, 2018 at 6:43 pm

We are planning to sell our house in Midtown. It is an old Brown & Kauffman that can best be described as a fixer-upper. Instead of opting to remodel the kitchen, re-pipe the indoor plumbing, re-wire the AC, paint the exterior et al, it's probably cheaper just to list the house and see what happens. We paid $900K for it in 2000 and I imagine it's probably worth in the vicinity of $1.75M+ in its current state.

Not overly concerned as someone will eventually buy it. Everybody wants to live in Palo Alto these days...for what reasons I haven't the foggiest.

We're relocating to Washington (Mercer island).



7 people like this
Posted by Hello PA
a resident of Adobe-Meadow
on Sep 24, 2018 at 4:26 pm

To Bye Bye PA...
As a former PA resident for many years, I can tell you there are many great reasons to live in PA. You may discover, as you move to the PNW, that:
1. It rains. A lot. It's beautifully green...there's a reason. I call it PNW Post Nasal Drip. Folks will tell you it only rains 36.5" a year. They won't tell you that's only 0.10" a day. Every day.
2. Seattle traffic is awful, at least as bad as the Bay Area; maybe worse, since transit options are more limited. The run from Portland to Seattle was 2.5 hours ten years ago. Now it's five hours, no longer a day trip. Newsweek once called Seattle "LA with Rain." They weren't too far off.
We live in the rain country, have for many years. We escape for a month to warmer/sunnier climes each winter. I can no longer afford to live in the Bay Area, but I do miss it at times, particularly its weather. If you're great at enjoying the outdoors despite some gray and rain, you'll do well in the PNW. If not, you may be returning south. The first winter is a curiosity, new and exciting. It's the second one that determines whether or not you're a Webfoot.
It's a bit dated, but you may enjoy Timothy Egan's book, The Good Rain.
P.S. Don't feel you need to quickly remove those California plates from your car. Fully half the folks in the PNW are from California.



15 people like this
Posted by RE Agent
a resident of Portola Valley
on Sep 24, 2018 at 5:37 pm

Just off-season for homebuying. No big deal. Things pick-up around April.

Heading off to Matzatlan and then Maui. Sold my quota+ for 2018. Almost too easy.

70% of my buyers were from overseas (China) and I don't even speak the language!




8 people like this
Posted by Zhao
a resident of Charleston Meadows
on Sep 25, 2018 at 8:25 am

"70% of my buyers were from overseas (China) and I don't even speak the language!"

No need to speak language. Numbers are universal language.


2 people like this
Posted by Time to Sell (Out)?
a resident of Professorville
on Sep 25, 2018 at 5:45 pm

"Things pick-up around April...70% of my buyers were from overseas (China)"

Would next spring be a good time to list? I have no issue (or problem) with who's residing in PA as I won't be here anymore.


9 people like this
Posted by XDOW
a resident of Downtown North
on Sep 26, 2018 at 2:40 am

I believe Xin is reading too much into the current situation. I will admit, sellers can no longer play, "hide the weenie", and expect buyers to load up on the mustard. It is the fall and we have had some cool evenings. School is on everyone's mind. The only ones who are concerned are the traditional real estate agents who are used to making a million a year in commissions. For those folks, you might have to settle for 500 K. So sorry.


5 people like this
Posted by XDOW
a resident of Downtown North
on Sep 26, 2018 at 2:57 am

If you are a real estate agent, it's going to be a long fall and winter.


9 people like this
Posted by Get Used to a Little Less
a resident of Adobe-Meadow
on Sep 26, 2018 at 1:57 pm

The only ones who are concerned are the traditional real estate agents who are used to making a million a year in commissions. For those folks, you might have to settle for 500 K. So sorry.

Why be so greedy? $500K is enough to live on.


7 people like this
Posted by PL
a resident of Old Palo Alto
on Oct 22, 2018 at 12:07 am

Trust the invisible hand, economics 101. We sold our house in August ... 100 block Kellogg in Old Palo Akto for $4.6M before it even hit the MLS. The preemptive offer was $300K more than the intended list price. Many of the houses that are sitting on the market were priced too high .... this is absolutely it.


10 people like this
Posted by R.Davis
a resident of Crescent Park
on Oct 22, 2018 at 9:21 am

R.Davis is a registered user.

QUOTE: Many of the houses that are sitting on the market were priced too high .... this is absolutely it.

The key strategy...price the house/property slightly lower than what potential buyers expect. Then watch them grovel with competing bids until you get an offer close to what you are anticipating or desire.

Around here, the buyers from overseas with CASH usually win this game of oneupsmanship. The only drawback is that prime properties become overvalued.


3 people like this
Posted by Chilling & Counting $$
a resident of Duveneck/St. Francis
on Oct 23, 2018 at 2:53 pm

The local RE market is not chilling. You just have to have the right property (location, floor plan, amenities etc.) + buyers who can pay outright. Not the ones that have to arrange financing and get approved.

We jacked the price up on our house and while there were no offers for the first two weeks or so, a very nice Chinese family met our asking price and paid cash as well.

Moral of the story...don't waste your time with first-time buyers and various tire kickers. They're just there to snoop around and eat the free cookies.


3 people like this
Posted by Paly Grad
a resident of Leland Manor/Garland Drive
on Nov 20, 2018 at 7:17 pm

I wonder if new federal financial disclosure rules are playing a part in this recent trend?

Web Link


10 people like this
Posted by Pricing
a resident of Evergreen Park
on Nov 21, 2018 at 1:08 am

Agree that homes that linger on the market are usually priced too high. Now is a good time to find more affordable (at least by Palo Alto standards) homes without multiple competing bids by bidding below asking price on one of these lingerers.


5 people like this
Posted by CrescentParkAnon.
a resident of Crescent Park
on Nov 21, 2018 at 4:52 am

> Market showing signs of chilling

2 years ago

> Now is a good time to find more affordable (at least by Palo Alto standards) homes without multiple competing bids by bidding below asking price on one of these lingerers.

They price too high because they cannot afford to sell below that number, because they bought too high to weather any disruptions. I have to wonder if we are teetering on the edge or a larger market collapse in this area, with Trump licking his chops over any blow he can deal to CA, and the tech companies finally starting to realize that people are fed up with their surveillance and the fact that they just take and take and take and do nothing to help make the country better, except the fake MAGA.

Even Americans who voted for Trump with the direction things are going.

And putting more fake voices online than real voices to trick everyone doesn't do it in the long run.


2 people like this
Posted by CrescentParkAnon.
a resident of Crescent Park
on Nov 21, 2018 at 5:00 am

> Everybody wants to live in Palo Alto these days...for what reasons I haven't the foggiest.

Please, give me a break, for those of us who have lived here for decades or grew up here, do not think you are going to find a time warp anywhere to Palo Alto of the past. You might as well dream about Mayberry. Things have changed and people have changed all over.

Comparatively, if you can afford it, Palo Alto is still a very nice place to live and with the central location, education, services, better real estate market than most of the country, and and jobs, not to mention the weather there are plenty of reasons to want to buy here.


8 people like this
Posted by The Times They Are a Changin'
a resident of Community Center
on Nov 21, 2018 at 8:31 am

>Things have changed and people have changed all over.

Yes. Newer residents from overseas who can afford to pay cash for their PA homes and lower income + millennials who can barely afford the rent.

>Comparatively, if you can afford it, Palo Alto is still a very nice place to live...

Yes. For those who can afford it or have resided in PA for awhile and whose 1976 property tax rates are protected under Proposition 13. To purchase a PA home via conventional means (down payment/30 year mortgage/1% property taxes at current home valuations) amounts to indentured servitude as one will essentially be paying rent for a lifetime.

While residing in Palo Alto may be an enjoyable living experience for some, for others it is little more than a slave sentence...which is why relocation to other more affordable communities is perhaps the best alternative.

Unfortunately, there are those who refuse to leave. Thus PA has the current development conflict.


12 people like this
Posted by Wu Shen
a resident of Charleston Meadows
on Nov 21, 2018 at 1:36 pm

If priced attractively with potential for appreciation, houses will sell in Palo Alto regardless of slow sales. Overseas buyers with available cash always on lookout and real estate agents in China prospect SF bay area for homes.

Cupertino, Sunnyvale and Mountain View very popular locations but Palo Alto better. Costs more but has more prestige. Good school district and expensive places to shop.

Next spring, more Chinese will be exploring Palo Alto housing opportunities.
Paying $8-$10M+ for home not restrictive.


7 people like this
Posted by WSJ agrees
a resident of Professorville
on Nov 21, 2018 at 6:52 pm

Existing-Home Sales Suffer Largest Annual Drop in Four Years
Sales fell on an annual basis in October, as higher mortgage rates reduce home affordability
Web Link


4 people like this
Posted by Changing Demographics of PA
a resident of Midtown
on Nov 21, 2018 at 7:10 pm

[Post removed.]


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