Fall Real Estate 2004

Publication Date: Friday, October 1, 2004

Finding a winning strategy
Homebuyers need to do their homework in this challenging market

by Jocelyn Dong

Buying a home has always felt like something of a crapshoot, but for would-be homebuyers this year, it's taken on the feel of high-stakes poker: If you know the game and have the cash, chances are better you'll come out a winner.

That's the assessment of local home-seekers and real estate agents. The numbers point to a recovering economy, with more homes moving and multiple offers continuing to flow in as they have in years past.

But while some house-hunters are succeeding in bidding wars, others find themselves trudging from open house to open house, searching for months for home sweet home. They speak with frustration of trying to find a place they both like and can afford in the local housing market.

Across the board, home-sales statistics show an increasingly active market. More single-family homes have sold in the first six months of this year than last year, in every city and town from Mountain View to Redwood City (see chart, below). The median price of a home also rose over last year, from as little as about 6 percent in Woodside to nearly 43 percent in Atherton.

Tom LeMieux, a broker with Coldwell Banker, has analyzed sales in Atherton through the end of August. According to him, the median price of a home there is the highest level it's been in a few years.

"2004 is going to be the best year for Atherton home sellers since 2000," he said. "We peaked at $4.3 million in 2000, then in 2001 it was $2.5 million, $2.75 million in 2002, and $2.4 million in 2003." His figures show a median so far this year of $3.3 million.

What's pulling the market up? Increased consumer confidence and low interest rates, LeMieux said. So far in 2004, more than a third of the 83 homes sold in Atherton have gone for more than $4 million.

Multiple offers on a home at the upper end are not common, because fewer buyers are able to enter that market.

But in the middle-price range -- mainly in Menlo Park and Palo Alto -- buyers and sellers encounter multiple-offer situations more frequently.

Leannah Hunt, a Realtor with Coldwell Banker, cited a recent sale in which 10 offers were made on a $2.3 million home in Palo Alto.

Buyers who are familiar with what the market has to offer jump on a good value when they see it.

This particular property didn't require remodeling -- perfect for a two-income family without a lot of time for fixing up a home, Hunt said.

Like Atherton, although on a different scale, the upper end of Palo Alto's market has been busy. Hunt estimated that greater than two-thirds of her office's listings have been more than $1.1 million.

That leaves some homebuyers discouraged, and others tuning up their game plans.

"Palo Alto for a long time has been a frustrating market for moving into," said Hunt, who's been in the business for more than three decades. "It's never been an easy market. Your dollar doesn't go as far as in Pleasanton. But in order to get the (Palo Alto) lifestyle and community, people are willing to sacrifice in square feet and amenities."

One local house-hunter found out about the market the hard way, through months of looking. Palo Alto office administrator Lucia Chacon and her husband recently searched for their first home, after renting in Mountain View since getting married in February 2002.

"We started looking around the Mountain View/Sunnyvale area. We looked in the $500,000 range, with 100 percent financing," Chacon said. But "the way the market was, we got discouraged. There was nothing in our price range. Anything (available) was a condo or a very beat down townhouse. A house would be out of the question. We really wanted to get a house."

So they moved their search down to San Jose, trying to find a three-bedroom, two-bathroom home with a good-sized yard. There too, however, they found overpriced homes. They did bid on some, but even with good credit, they found themselves constantly on the losing end. It got so discouraging, they even stopped looking at one point, for about a month and a half, she said.

It wasn't until they heard about a new town-home development by KB Home that they dared to get their hopes up again. In the end, they were successful. Today, they are the owners of a new two-bedroom, 1,300-square-foot townhome in San Jose, which they'll move into in January. The cost, Chacon said, was in their price range of low $500,000.

Her advice to house hunters: Get rid of debt, and arrange financing ahead of time, if possible.

Though San Jose is farther south than either Chacon or her husband expected to end up, the commute will work well for both of them. And at least, they've found a place to call their own.

Chacon's story is common, real-estate agents say. Either people end up moving elsewhere, or they adjust their expectations downwards in order to stay in the area. Because the area has a mature housing stock, inventory is low and prices, as a result of demand, are high.

"Everybody knows what they want," said Chuck Atwell, of Alain Pinel Realtors in Los Altos, "the problem is what they're going to have to compromise to buy. ... The intelligent buyer will realize that the inventory is low, so beggars can't be choosers."

Atwell said that a motivated buyer could find a home in about a month.

He urged would-be homeowners not to try to time the market, waiting until it hits a low. "This market is starting to flatten, but that doesn't mean it's going to go down and stay down for a long period of time," he said. "Are you trying to buy a deal or a home? Those that want to make a deal, move to Tracy."

Several real-estate agents agreed, however, that the market has peaked and that housing prices will stay at this level until a "significant event" occurs, such as a terrorist attack or the upcoming elections.

As frustrating as the market has been for some buyers, inventory traditionally picks up in the fall, and the numbers are bearing that trend out. According to Hunt, there were 25 properties on the home tour last week, more than August, which is typically one of the slowest real-estate months.

The key to success, then, lies in knowing what the market has to offer and being ready to seize a good value, real-estate agents said. Having enough cash and a few old-fashioned virtues also wouldn't hurt.

"We have traditionally been an undersupplied market. ... Patience is a necessary quality to have here," Le Mieux said.