Living in one of the best, most stable communities helped us maintain high home prices which appreciated immensely during the last 30 years. We did have some dips during that time but generally our homes appreciated about 5 times over, (milk, bread, fruit and vegetables hardly doubled in price). Very few homes get sold here. People prefer to stay put.
The easy access to shops, I-280 and I-85, the proximity to Cupertino, Los Altos or Palo Alto schools makes it ideal neighborhoods to live in. South Sunnyvale, Cupertino, Los Altos, Palo Alto and the good parts of Mountain View maintained high prices. A 3-bedroom ranch-style house in the South Sunnyvale, priced at $950K was reduced in price after a week to $908K and attracted 4 offers to raise the price to above $910k. Generally, in these desired areas the prices are about 20% lower than the peak time on March 2008. Back then, a 3 bedroom ranch style home was priced at $975K and after reviewing 11 offers sold for $1.109M. Invested funds lost many times more than 20%.
The banks’ new guidelines are very strict - they demand higher down payments and better credit. The new limit for Conforming loan starting January 2009 is $625,500. Buyers will have to pay a higher down payment or get a second loan. The underwriters who decide if you can get a loan and on what terms, expect a fully documented file. Stated income (in which you would state that you earn a certain amount without proving it) is gone. Many foreign families from overseas go back home to their native land. Most of them lived in rental homes so it didn’t affect the prices much. The banks are getting more organized and more in control of the situation but a new wave of layoffs is arriving and we all hope that the employment market stabilizes.

The world economy is shaky; the Dow Jones Index lost 504 points in one day, and looking at the candidates to lead the most important country in the world is not encouraging. The papers predict a grim economic future; prices are dropping in most of the U.S. People are having a hard time getting loans and banks continue to ask for more proof of work verification and available funds to close the deal. It all sounds so depressing, so how come housing prices in our area are still holding strong? I still see multiple offers. So many people check the open homes during the weekend and show real interest. Two weeks ago a 3br 1525 s.f. house was sold in Sunnyvale, in the Santa Clara school district; just on the East side of Wolfe. It was sold for $82k over asking price. It was not significantly improved (an Ikea kitchen with Formicas counter tops and bathrooms with vinyl floors) but the sellers removed some walls and the yard was very pretty and spacious. A 3 br town house in Sunnyvale, just north of Fremont Ave near Mary Ave was sold with 4 offers over asking price and a similar one was sold for a higher price with 2 offers.
The prices in the Cupertino school district area have not increased since the crazier period in February-March this year when people offered 10-15% more than asking price. Now they either negotiate around asking price, or if there is competition (Yes, it still happens) they add 1-3%. If you compare today’s sold prices to what was sold in March 2008 the prices have decreased.
As of today there are 75 homes for sale in Palo Alto - the most expensive priced at $29,850,000, which has been on the market for 381 days. The cheapest house in Palo Alto is priced at $799,950.
Los Altos and Los Altos hills have 114 homes for sale in. The longest listing time on the market at that area is 405 days.
Mountain View has 63 homes for sale in - the most expensive is $4.4M for a small house on a huge lot (40,386 s.f.). The longest listing time in MV is 97 days.
Sunnyvale has122 homes for sale in, with one home at 216 days on the market. There are only 14 homes for sale in Sunnyvale in Cupertino school district.
Cupertino has 106 homes for sale with one home on the market for 390 days (the sellers surprisingly raised the asking price). Out of these homes 84 homes belong to the Cupertino school District.
Saratoga has 128 homes for sale, the most expensive priced at $12M. One home has been on the market for 763 days, asking $6.6M.
The inventory is growing very slowly these days, as it does every autumn. September is the beginning of fall and most sellers prefer to sell in the spring. However, people still have to move or need to sell.
This graph represents the whole Santa Clara County. It shows how the inventory slows down and more homes get into contracts. Many foreclosures, short sales and REO are selling faster. Investors and home owners use the opportunity to own homes with relatively low prices. Please feel free to ask me if you are not familiar with any of the terms I used. I am always happy to hear from you.

We hear and read all these predictions and market analysis about the market in the Bay area and the U.S. Everyone claims to know what is going to happen and why.

Foreclosures and short sales are still here to stay for a while. There are still many homeowners who owe more money to a lender than the value of their home. Sometimes it is more than a $100,000 difference. Many home owners, in order to avoid an ugly stain on their credit history, try to sell their home in a “short sale”. They (or their agent) approach the lender who is willing to forgive some of their debt in order to cut his losses short. The lender might agree to get less money and avoid having to deal with foreclosure. There are many short sales everywhere. It’s a long, tedious process and if a buyer can cope with it he might get a house for a better price.

If you are looking for a house for your family in a good school area, namely Palo Alto, Los Altos, Cupertino, Saratoga and South Sunnyvale, you are in a totally different market. To my personal experience, all of the homes in the Cupertino school district that I submitted offers on or represented the seller within the last month had 4-7 offers and people offered up to 6% over asking price. Back in February – March of this year buyers offered 10-15% more than asking price to win a home. In Los Altos, a few days ago, a $2,395,000 house with 2294 S.f. was sold (all cash) for $50,000 over asking price. The asking prices remained the same. The difference is how much buyers are willing to pay over asking price. There are very few ’short sales’ in these areas because prices are holding strong.

There is a feeling in the air that the inflation is getting worse. Bernanke didn’t lower interest rates, and oil prices, food prices and everything else are getting more expensive. Mortgage interest rates are on the slow rise (1/2% last week and 1/8% yesterday and today it went down ¼%). You can expect either a rush to buy homes before interest rates rise even higher or buyers to be scared away because they cannot afford higher interest rates. It would be wise to watch the rates very carefully before locking the rates because they can change during the day.

The inventory keeps growing as well as the number of transactions. Many short sales, Foreclosures and REO (homes that were foreclosed, were not purchased by an auction on the Court house stairs and remained in the banks’ possession) are being sold, some of them with multiple offers. Even the foreclosures in Stockton are being sold out.

There are still many people who can afford to purchase homes. Los Altos and Mountain View and Sunnyvale are getting more balanced, with less multiple offers and more negotiations and concessions toward the buyers. Palo Alto, Cupertino and Saratoga are still holding tight. When I see a nicely remodeled house in a beautiful street and good schools I know it will attract many buyers and sell for more than asking price but the rest of the homes are being sold with negotiations, more contingency times and demands from buyers to fix things. This is the sign of a balance market where supply and demands are the main drivers. I did manage to get a “deal” for one of my clients in Mountain View. A similar house, in the same street, is priced for sale at $175,000 more. When you see a for sale sign standing for a long time it’s because the house is on a busy street or it was priced too high. Pricing right is very important especially in a down turn market. If you price it too high you end up chasing the market down by having to lower the price. The house becomes “stale” as we say in the real estate jargon. This is the time for bargain hunters.

We are back in full action. Inventory is growing as fast as expected in the spring. The “for Sale” signs are springing up like mushrooms after the rain. If you drive through the neighborhood during the afternoon time you’ll see ‘open house’ signs pointing in all directions. Homes are being sold fairly fast, especially in desirable areas with good schools.  Some homes in the most attractive areas in Sunnyvale, close to Helena and Wright Ave, were sold under or at the asking price. The agents told me that they were very surprised. Other homes, near Ortega Park in Sunnyvale, were sold with multiple offers way above (18%) asking price. All these homes in both areas needed a lot of work (what we call TLC “tender love and care”).

People always ask me “how much do you think this house will sell for?” or “how much this property is worth?” I run the comps (homes that were sold lately in that neighborhood) and even though I really know all these homes, it’s hard to predict. Who knows how desperate the other bidders are, how many homes they lost out on by trying to offer just enough to get the house and not too much. Who knows what other motivations the buyers have. Some are being vacated from their rentals and are sick of moving, some want to invest their savings in real estate instead of a rocky stock market.  Sometimes we have the chance to raise our bid and win the house but the buyers are not ready to pay so much more than the asking price. Buying a house is not just mathematics. Feelings and emotions play a crucial part in the decision to buy and pay the outrageous sum of money for a hut in the Silicon Valley.