Monthly Archives: May 2014

Market Catching It’s Breath?

Unknown-1I was driving over to Palo Alto this week. Headed up 280, weaving between all the Tesla’s, when I noticed a Prius behind me in the rearview.  It zipped past going 80mph sporting an inconspicuous little bumper sticker that read:  “ Please God, just one more bubble.”

I had to laugh because it gave perfect expression to so much of the big dreaming that’s going on in Silicon Valley these days.  That unconscious sea of inner voices out there, each whispering: “ If I’m in the right place at the right time and all the cosmic tumblers line up, maybe I can hit the jackpot, get mine and get out before the next bubble bursts.”

No surprise that we’ve heard a lot of those voices resonating loudly and clearly in the real estate market this past year.  Musing with the multiple offers.  Bouncing off the bid ups.  Rising in pitch along with list prices.

After surviving the long, tough years of the housing bust it’s good to know that the market’s back on track and there’s still plenty of irrational exuberance left to go around.

Which, in a roundabout way, brings us to where we left off last week. I had just uttered the phrase:   “How, when and why the market has stalled.” While everyone else recoiled in horror that I could even suggest such a thing.

The fact that so many people freaked-out, shows just how far the real estate market has really come. It’s only been a few short years since home values were wallowing in the lows of the late, great recession.  When we all felt displaced and oddly resigned.

I’m making the argument that the market’s recent “stall” is actually a very healthy sign.  We are right where we should be along the road to recovery.

And just to be clear – prices haven’t nose-dived, plunged or even tanked. They are just flat for the moment. Steady and holding their own.

In February 2013, the median price for single family homes in SC County was $449,000.  Then something crazy happened.  In a two-month flash, the median rose $200,000! By April 2013, it was $641,000.  Déjà Vu all over again. It felt like we had all been transported back to 2005!

Researching the history of sales in Santa Cruz County, I can’t find any other interval of time shorter than two years, where the median price made such a staggering leap.

And since April of 2013? What has the median price done?  Despite a few minor fluctuations, it has pretty much stayed the same.

I know that seems contrary to most of what we’ve heard and read about the market over the last year.  But in some ways perceptions are just catching up to what already happened.

A few months ago, March came roaring in like a lion.  It looked like we might be poised for another quantum leap.  But the urge couldn’t quite sustain itself long enough to become a surge.

I think the market just decided to take a well-earned rest.  Catch its breath after it took off and gave us enough escape velocity to get back into the black.

There’s a far more subtle organic process at work now.  A bigger picture slowly emerging out of millions of individual decisions that different buyers and sellers are making in their lives.

We’ll watch it come into better focus in the next year or two but the message is this: The real estate market went as far as it could go by leveraging lots of quantitative easing and very little inventory.  Now it’s time to build some real inventory, jobs and equilibrium for the long haul.  And that’s good for everyone.

Clean the Windshield & Polish the Rearview

UnknownMid May.  Time for a time out.  Just what the Doctor ordered.

It’s a healthy thing for Agents, Buyers, Sellers and anyone with an interest in real estate to stop on occasion. Take a breath. Gather perspective.   Hit the pause button on Mr. Toad’s Wild Ride.  Check in, check the oil and check assumptions at the door.

These periodic realty checks are meant to power things down. Chase out any ghosts lurking in the machine. Clean the windshield and polish the rear view.  Flush, purge, detox, juice fast and otherwise execute a clean core dump of any and all bogus information we’ve mistakenly internalized as the truth about real estate.

At the count of three we’re all going to turn off, tune out and drop all the mind-numbing noise and well-meaning chatter floating around the market’s ether.

We’ll simply consider where we’ve been and where we are as we head into the great unknown known of the future. (Didn’t Donald Rumsfeld say that?)

This week’s headlines in the Merc, Business Journal, Chronicle, etc. et al,   proclaimed that Bay Area Real Estate is Back!! Or at least back to pre-great recession levels.  Which would mean 2007 levels…since all those mortgages finally hit the fan at the end of 07 before the bubble completely imploded in 08.

So…just a few questions: Is that true? Are we really back? The whole Bay Area? Even Santa Cruz County – here at the southern tip of the Silicon Valley gulag?

There’s so much misinformation and disinformation in information these days that I’m not sure where to start.  Specially cause I know some of you are trying to make important life decisions based on the occasional bones of bold font that the media tosses in your direction.

Here goes:  The notion that real estate prices are back up to 2007 levels is only partly true. Prices are back or above 2007 levels in some of the Bay Areas’ elite local markets like San Francisco, Palo Alto, Atherton.

Los Gatos and Saratoga? Close but not quite there yet.  East Bay? Lagging behind but rising. Santa Cruz County? Definitely doing better – but nowhere near 2007 prices.  In fact, we seem to be at least temporarily stalled for the moment.

Final analysis? Add all those off market multiple offers and wildly crazy overbids happening in a select few areas to the improved market data from most of the rest of the region, average them together and it certainly can look like we’re back to where we left off in 2007 – before we were so rudely interrupted.

But if you are in one of the peripheral areas outside the epicenter  – don’t count your equity before you sell. It ain’t real until escrow closes.  List prices are not comps. Sold prices are.

Here are a couple of warning labels I’d like to stick on today’s column. 1)Santa Cruz is not Los Gatos.  Or Saratoga.  Their $1.5 mill is our $700k.  2) Don’t list your home with the expectation of 22 offers. That’s somewhere else. Not here. It’s an invitation to disappointment.

One more warning about my warnings:  Just because things may not be as good as you imagined them to be doesn’t mean that the market isn’t doing well.  We’ve been terribly spoiled by our checkered past.  We somehow came to believe that if prices weren’t going up at a rapid clip, then they must be falling.

Perhaps a small part of the lesson of our late not so great bubble and recession is that when things are going up too much too fast, that’s the kind of market that’s not real.  And  a healthier market is one that looks more like now. One without multiple overbids and 40% annual appreciation.

Next week:  How, why and where the Santa Cruz County Market is stalled.