My wife, Cindy, has become a great source of news and information for me to use in my Blog. She is coming to realise Social Media as the way to communicate and promote myself and my business. This is quite a change as she was once my secretary as a stock broker, who went up the management ladder. Her final place was with the Western Regional Director of Merrill Lynch (pre 2006 fallout) which had her in compliance as one of her duties. Mailing, newspaper advertising and the "written word" were all part of the old school marketing programs. She has realised that Facebook, Instagram, Linked In and the other social media sites are much more than communication sites of friends. I think of it as a current resume' that lets viewers get to know who I am and how I think. She realises that and is planning a Instagram video once the quarantine os over. Look for it!
Clients really want someone who thinks like them and can relate to their needs. Hopefully this Blog will help me help you.
From Cindy an article from Kathleen Pender of the SF Chronicle from mid January 2020 that the Bay Area home cost dropped 2.3% in 2019. She felt it was a pre-cursor of the future. Like stock prices she believed that home prices could not keep up their fevered move up. Sooner or later prices get to a point that buyers just "give up". Kathleen's article certainly gave warning of a slow down in home prices.
The Dow Jones or the S&P 500 ,as most people watch, has been jumping around with new % moves up and down that are creating records for the financial markets. Follow this with the Virus and we will see home prices sooner or later follow the 2019 decline further downward in prices. Financial anlysts all declare this to be a ber market, which means stock price will decline in the future.
On a daily basis homes are being either withdrawn, cancelled or allowed to expire. From Condo's to Single Family homes in the Redwood City, Menlo Park, Atherton, Woodside, Portola Valley, Palo Alto and La Honda area sellers have come to the conclusion that inviting others into their home is inviting an unknown virus into their home.
To homes have sold, gone pending and are contingent. They represent what has happened 30-45 days ago. As we move into the 3rd and 4th week of the virus we should be able to see the impact on the real estate market. Woodside and La honda seem to be immune as they are not experiencing the same as their sister communities.
The California Association of Realtors has declared that "No Open Houses should be held" and "Showings should be done virtually". This will have a big impact on how realtors change into the 21ast century and beyond.
I am surprised to see listings coming back on the market. Prices are being cut and new listings are still coming forth.
The new listings, price cuts, return to the market should signal "Opportunity" to the buyers.
From Cindy:
Stretching Out in the Virus Age: a healthy life style of getting outdoors to exercise, get fresh air and encourage of healthy life style. I can't believe how many families are walking pass our house these days. Dogs seem to being walked so much they must be thoroughly pooped out at the end of a day.
Bay Area Group and San Jose Mercury News contribution is Bay Area Hikes. A "Breath of Fresh Air Among the Redwoods. I first realised what beauty and grandeur there was in Redwoods when I took our first horse,Simon, on a trail ride in the hills above our house on Tripp Road in Woodside. The silence and fresh air was invigorating. Riding there with Simon became a weekend regular. It came to the point of making a lunch and stopping along the way to sit and watch a waterfall while admiring the beauty we have behind us in the Western Hills.
20 years later as a realtor, I was given an in depth appreciation of the Redwoods. My MBZ repairman saw a home in the Middleton Tract in the La Honda area that dropped in price from over $1 million to about $345,000. It turned out to be a pre-foreclosure in 2006. We drove up there. It took about 45 minutes. The ride along Skyline Boulevard was spectacular! The view of the ocean to the right and San Francisco Bay to the left was awe inspiring. When we arrived at 150 Back Road we found it within an area called the Middleton Tract. We almost missed it as it was a small entry road to the left of the Portola State Park Road entry sign. We drove over a redwood bridge, limited to 40,000 pounds, and looked over the edge. Below were fish! Steelhead trout I later found out and Peters Creek was a spawning area. As we drove in we were overpowered by the Giant Redwoods. Some so large in girth I assumed they must be the Old Growth Redwoods that I only read about and never saw. When we found the property all he said was "buy it".
Since then Middleton has been a special area for me. To my wife's dissatisfaction, since it takes longer to sell, I have had a number of listings and purchases in the Middleton. James Middleton bought the property in the 20's and subdivided it into numerous lots all of which have a deed restriction of being residential only. Recently an attorney, Laura Bryant (recently deceased) fought and won a case stopping harvesting of the redwoods in the Middleton. The tract has its own mutual water company, road maintenance association and a water table that will give any owner easy access to back up emergency water. A fire hydrant systems covers the area and up to a few years ago they had their own volunteer fire department. PGE provides electricity, Propane is the gas supplied by services and AT&T supplies a land line and hopefully soon to be added internet service if i believe what the Portola State Park people tell me.
Today I have 4 listings in the Tract from just under 3 acres to over 18 acres. I love taking agents and buyers on a tour and into the trails of the tract among those giants. The air is fresh. The silence is most comforting and the seclusion keeps your mind on enjoying the beauty rather than social distancing and clorox wipes, face masks. Never a harsh word will be heard from the property owners as they ask if you need help as you drive into the tract.
Take a trip to Middleton and Portola State Park. Walk the trails and get fresh air made by nature's giant, the Giant Redwood of Portola State Park and the Middleton Tract. Call me for a tour and watch for Cindy's video.
IN THE MARGIN: Monday March 30th, The National Association of Realtors announce pending home sales. The forecast is -1.3%.
Is The Spring Selling Season Dead?
Listings are being cancelled or withdrawn. Open Houses are gone or going. The outlook for the virus and the challenges of being protected look beyond the stay home order expiring April 4th. Work at home, no school, outside activities are all having a dramatic impact on our lives
Will this change the way we knew our lives and the way we lived? Is this the "New Normal"?
Does the "work at home" start a new normal? Will employees be able to be productive with working at home? Will working at home change the value of home prices? Will those working from home find that they can do so in a less expensive area.
All that is yet to be determined. It is my belief that home prices were influenced by incomes and the stock market. The growth stocks of Silicon Valley are down 25-50%. Are you willing to pay the discounted rates as much as you were willing to pay the higher prices of January 2020? Do you feel that home prices should stay high and go higher if your income is impacted and your portfolio has declined?
Will our economy move higher and when? Will the $1-2 trillion in stimulus turn our economy. If these are questions that you need to answer will you pay list on a house and if you want to sell are you confident you will be able to sell at a price that was common last month?
To many buyers and sellers there are questions they need to answer for themselves. For the person or family who have long term employment here in Silicon Valley the answer is clear they will buy. Do they do so now? Home prices will come down, but how far?
When the 2006 crisis occured Palo Alto was strong, Atherton prices were strong Menlo Park were strong. Yes there were situations in which a deal could be gotten; but over all, the prices of those communities remained in demand.
Remember you are buying your home, not a stock option or in index fund.
Will buyers look elsewhere? Will buyers continue to rent? I think renting will soon become challenged as home prices decline. The massive apartment construction project could find them without renters and may end up like the Excite Campus on 101 that remained empty for years.
I expect that moving out of California will continue. We have already lost one Congressperson due to out flow. Will movement occur?
In the present situation I cannot see why I would stay other than I have a business that pertains to local buyers and sellers. What is your situation? I have worked out of my home office for years. Real Estate Brokerage Firms & Offices have closed or down sized. Agents can work outside the Brokerage office at a discount to paying desk fees. Sellers and buyers look more to the internet to find a home or realtor. Sellers do not want a door knocker, post card, door hanger. Who knows that realtor may be passing on COVID 19.
I still believe home prices will decline before they ever go up again. Do you think so? If you do, let's discuss on the phone, email or text. Become part of the Cloud, that is where homes will be bought or sold.
I am here to help you and help answer your questions and concerns, Call, Text of Email me.
Gary
|
Will this change the way we knew our lives and the way we lived? Is this the "New Normal"?
Does the "work at home" start a new normal? Will employees be able to be productive with working at home? Will working at home change the value of home prices? Will those working from home find that they can do so in a less expensive area.
All that is yet to be determined. It is my belief that home prices were influenced by incomes and the stock market. The growth stocks of Silicon Valley are down 25-50%. Are you willing to pay the discounted rates as much as you were willing to pay the higher prices of January 2020? Do you feel that home prices should stay high and go higher if your income is impacted and your portfolio has declined?
Will our economy move higher and when? Will the $1-2 trillion in stimulus turn our economy. If these are questions that you need to answer will you pay list on a house and if you want to sell are you confident you will be able to sell at a price that was common last month?
To many buyers and sellers there are questions they need to answer for themselves. For the person or family who have long term employment here in Silicon Valley the answer is clear they will buy. Do they do so now? Home prices will come down, but how far?
When the 2006 crisis occured Palo Alto was strong, Atherton prices were strong Menlo Park were strong. Yes there were situations in which a deal could be gotten; but over all, the prices of those communities remained in demand.
Remember you are buying your home, not a stock option or in index fund.
Will buyers look elsewhere? Will buyers continue to rent? I think renting will soon become challenged as home prices decline. The massive apartment construction project could find them without renters and may end up like the Excite Campus on 101 that remained empty for years.
I expect that moving out of California will continue. We have already lost one Congressperson due to out flow. Will movement occur?
In the present situation I cannot see why I would stay other than I have a business that pertains to local buyers and sellers. What is your situation? I have worked out of my home office for years. Real Estate Brokerage Firms & Offices have closed or down sized. Agents can work outside the Brokerage office at a discount to paying desk fees. Sellers and buyers look more to the internet to find a home or realtor. Sellers do not want a door knocker, post card, door hanger. Who knows that realtor may be passing on COVID 19.
I still believe home prices will decline before they ever go up again. Do you think so? If you do, let's discuss on the phone, email or text. Become part of the Cloud, that is where homes will be bought or sold.
| Bubble Watch: Coronavirus may clobber ‘overvalued’ housing markets - "The broad spread of coronavirus in the U.S. will slow down home buying activity, leading to a temporary drop in demand and lower home price growth, " Fitch wrote. "A widespread and protracted period of containment could result in larger disruptions... Read More |
I am here to help you and help answer your questions and concerns, Call, Text of Email me.
Gary
Real Estate Values, the Cronavirus and the Stock Market
This is the second edition of the Blog since I re-started it in late February 2020.
Much to talk about and focus on the real estate markets for Atherton, Menlo Park, Palo Alto, Portola Valley and Woodside.
The comments I made last edition was the similarity of the price movement of the Standard & Poor's 500 and Real Estate values. The recent lost in values of over 20%+ in the S&P and other US indexes have been joined with declines in the World's indexes. From Canada to Japan to Australia, Hong Kong and Africa the World's markets have seen devastating loses that have taken away 50 years of growth in some countries and financial loses that are difficult to comprehend.
To review I have attached below the Historical Chart of the S&P 500 and the S&P Case/Shiller SF Home Price Index. You will note in 2005 that the the decline from a high of about 220 on the S&P Case/Shiller index to 120 in 2010 to represented a 45% decline in home prices. The decline in the similar period of the S&P 500 from about 1550 to 650 represented a 58% decline. Subsequently values improved.
So what does not mean for home prices for Silicon Valley or SF area? If history is a judge of the future the prices will decline.
Tops Round and bottoms Spike is a Wall Street saying. Fear and Greed is the normal physiological reaction of humans. Fear causes the spikes and greed the buying. Buying to a point when prices are wholly over priced to a point they round as rationale thinkers are selling.
When I look at the home prices in Atherton, Menlo Park, Palo Alto, Portola Valley, I see the same price movement or chart formation that the S&P exhibited.
Home prices have progressively declined. As posted in the charts below you will note all except Woodside have had successively declining home price highs.
This is the 5 County area of Silicon Valley. Not very encouraging. We have more listings than sales
Atherton has had a steady decline in the price of home prices. While the "pops" over have occurred the "pops" are lower than the previous "pop" high.
Menlo Park has shown a very good ability to hold value. The trend still is obvious in lower highs.
Palo Alto, like Menlo Park, has shown the ability to hold value. It still has the obvious trend of lower highs
Portola Valley has a sharper decline in value than the previous cities.
Woodside has always been an outlier. What ever the market condition Woodside has never deviated. A steady place for home ownership.
Redwood City has become the new mecca for affordable living and safe living. No street beggars. Children are safe to walk to school and parks abound with a safe and family atmosphere
The lowest mortgage rates on record are colliding with the prospect of an economic down turn complicated by COVID-19. This is meeting an unpredictable Spring Selling Season. Further complicating matter is the "Stay and Work at Home" phenomenon. We in real estate have always done so. As a former Wall Street Trader and Advisor, I always felt it better to work from home and only use the phone to communicate with others. Will this new way of working have a long term effect?
Will workers find it easier to buy in a less expensive area with the same or better working and living conditions? Will it be easier to telecommunicate? Amazon has already made a dramatic change in marketing. Brick and mortar retail businesses have crumbled away and or dramatically changed to adapt to the new normal. Stanford students are being sent home to work and study and telecommute. I had my Wharton Certification telecommuting. I only went to Wharton for the finals and final lectures. after 2 years on line.
Home Sales will face uncertainty.
Remember History forecasts the future. As the prices declined in 2005 in both the S&P 500 and the S&P Case/Shiller Price Index...they also increased. Buying opportunities occur when fear is high. Has that time come? We will need to see how home prices have changed. The home prices are not the exact reflection of the S&P. Stocks are liquid. Homes are not. 30-45 day escrow closes in real estate reflect what has happened in the past. We will not see the present prices until 30-45 days from now.
Real estate is an asset class and its movement is reflected in the stock market movement; along with other asset classes. The large declines in stocks and other asset classes have historically been matched by declines in real estate values. Does that mean stock prices cause similar movement in real estate prices? NO! It means that emotions of that affect asset prices are common in their movements. Fear and Greed, Supply and Demand will not change. Prices of all assets will once again increase. When and from what level will asset prices increase or stop declining is still in the future.
Now is the time for buyers to begin to pick out their style of home and city to live in. Asking price is just that. "ASKING" Look at affordability and pick a price at least 5% under the list. Remember you are buying a home not a trading vehicle. The same must be thought of in a seller. They can live in their home and wait out the return in value. Of course, from what value is also in the future.
Sellers must reflect on the statistics. Prices do not jump up to past highs. Prices slowly decline as buyers retreat. Insecurity and fear take over. Sellers must think about looking at the last high as a point to discount their list price. Pricing at the high will only cause further price cuts and cuts below what could have been gotten if the price was realistically below the past high. The high oil 2005 was not seen until 2016, so consider and tame your greed instinct.
Where are the values? Land Sales will and are the best value. While home prices have increased land prices have remained stagnant. Next issue will discuss why buyers should look to vacant land sales as the best opportunity to build the home of their dreams; irrespective of what city in the Peninsula you prefer.
Gary
Two parcels APN # 085-013-191 and APN# 085-013-192 for a total of 2.96 acres. Property has water share to mutual water company and connection rights. PGE on street. Paved road to property. Development rights restricted to residential only. Old Growth Redwoods can only be harvested for building site. Ideal recreation site 45 minutes to Palo Alto.Let your imagination wander on what you could do here
McKae Properties Blog Resumes
February 25, 2017 was when I wrote my last Blog for McKae Properties. Since then, I joined to Berkshire Hathaway HomeServices franchisee Drysdale Properties. Drysdale had made many changes to the blog format and additions to a final point, I could no longer add my commentary to their Monthly newsletter. So "I am Back" as crazy comedian Johnathan Winters exclaimed upon his return from a mental institution on late night Johnny Carson show....if you haven't seen it do so. He was one crazy fellow!!! https://www.youtube.com/watch?v=4RRpgYKX3JM
In February 2017 we had conditions that are similar to today. Low inventory, interest rates which were low for the time are now lower. Demand for homes remained strong as buyers fought against rising prices only to see them go higher.
So what makes prices go higher and demand to remain strong? What causes the tight inventory?
Let's go back to school. Remember the law of Supply and Demand? Prices and demand are tied together. More demand and supply does not meet demand...prices go up. More supply and prices go down. Logical.
Now that is the simplistic approach that should be obvious. There is the tie up of homes to the stock market. The stock market goes up, people have more money and they are willing to pay more when houses for sale are in tight supply.
Stock prices rise and home prices rise. They are both asset classes. They both are a source of funds. That is when money is needed for an expense, the owner either sell stocks or bonds or real estate. They both offer liquidity and a store of value.
The largest asset the average American has is their home. When it comes time to cash in their assets the home is sold. Now here comes the trick. Most Americans have bought their homes for life. Business people and those who have a career will not look at a home as a permanent asset. They will look at their home as a cheap alternative to renting that will create store of value and future appreciation, with maybe some tax benefits as interest write off.
Then we have those owners who will look at better alternatives. The 55+ communities have become very popular. Children have moved out and away. The years of sacrificing are over and the need to relax and enjoy the remaining years become something to look at. The growth in 55+ communities have been quite extra ordinary. So has the growth in Senior care centers. Seniors who look at their future with caution would like to have some place to live without the daily needs of cutting grass, replacing broken parts in the house, or fighting with contractors over prices and repairs. The Senior Care centers will appeal to all who seek an alternative and offer price comparisons to the wealth of the buyer. Added to those senior care centers are hospice care. We have all come to face with how to take care of a loved one who can no longer care for themselves. If you haven't you will! A parent who falls and can not care for themselves or are unable to live independently they will need some sort of care. The care is not cheap. Many do not have Long Term Health Insurance. Even if they do, Long Term Health Care has a maximum coverage in money and time. This who either outlive the time or require greater cost to care for, they will need assets to sell.
So at some point the question of supply of homes will be answered with a Grey Tsunami. The Baby Boom generation, who are the major owners of homes, will sooner of later become the major supplier of home sales. Whether they want to or not, the home will be sold by their children or forced upon them by circumstances.
Now let's go back to the charts. We all know that the stock market has daily swings. The daily swing may pass by until the daily becomes a large decline. It is the law of supply and demand. Prices go too high, sellers reduce offering prices as buyers retreat. The sell off will affect home prices as buyer will feel poorer and they will become less willing to pay up, or over bid on a home for sale.
Whether it is stocks as measured by the S&P or Homes Prices, both will come down to a level the buyer will feel comfortable in making an offer. It is the cycle of that must be followed and every buyer and seller must become aware of.
Begin to look at home prices in the weekly papers and internet news. You will see that homes and stocks march together.
With February coming to an end I will being my monthly commentary on real estate in Atherton, Woodside, Menlo Park, Palo Alto and Portola Valley, with some Redwood City analysis in March.
Until then, please add your comments and questions and send them to gary@mckaeproeprties.com or text to 650-743-7249.
Gary
In February 2017 we had conditions that are similar to today. Low inventory, interest rates which were low for the time are now lower. Demand for homes remained strong as buyers fought against rising prices only to see them go higher.
So what makes prices go higher and demand to remain strong? What causes the tight inventory?
Let's go back to school. Remember the law of Supply and Demand? Prices and demand are tied together. More demand and supply does not meet demand...prices go up. More supply and prices go down. Logical.
Now that is the simplistic approach that should be obvious. There is the tie up of homes to the stock market. The stock market goes up, people have more money and they are willing to pay more when houses for sale are in tight supply.
Stock prices rise and home prices rise. They are both asset classes. They both are a source of funds. That is when money is needed for an expense, the owner either sell stocks or bonds or real estate. They both offer liquidity and a store of value.
The largest asset the average American has is their home. When it comes time to cash in their assets the home is sold. Now here comes the trick. Most Americans have bought their homes for life. Business people and those who have a career will not look at a home as a permanent asset. They will look at their home as a cheap alternative to renting that will create store of value and future appreciation, with maybe some tax benefits as interest write off.
Then we have those owners who will look at better alternatives. The 55+ communities have become very popular. Children have moved out and away. The years of sacrificing are over and the need to relax and enjoy the remaining years become something to look at. The growth in 55+ communities have been quite extra ordinary. So has the growth in Senior care centers. Seniors who look at their future with caution would like to have some place to live without the daily needs of cutting grass, replacing broken parts in the house, or fighting with contractors over prices and repairs. The Senior Care centers will appeal to all who seek an alternative and offer price comparisons to the wealth of the buyer. Added to those senior care centers are hospice care. We have all come to face with how to take care of a loved one who can no longer care for themselves. If you haven't you will! A parent who falls and can not care for themselves or are unable to live independently they will need some sort of care. The care is not cheap. Many do not have Long Term Health Insurance. Even if they do, Long Term Health Care has a maximum coverage in money and time. This who either outlive the time or require greater cost to care for, they will need assets to sell.
So at some point the question of supply of homes will be answered with a Grey Tsunami. The Baby Boom generation, who are the major owners of homes, will sooner of later become the major supplier of home sales. Whether they want to or not, the home will be sold by their children or forced upon them by circumstances.
Now let's go back to the charts. We all know that the stock market has daily swings. The daily swing may pass by until the daily becomes a large decline. It is the law of supply and demand. Prices go too high, sellers reduce offering prices as buyers retreat. The sell off will affect home prices as buyer will feel poorer and they will become less willing to pay up, or over bid on a home for sale.
Whether it is stocks as measured by the S&P or Homes Prices, both will come down to a level the buyer will feel comfortable in making an offer. It is the cycle of that must be followed and every buyer and seller must become aware of.
Begin to look at home prices in the weekly papers and internet news. You will see that homes and stocks march together.
With February coming to an end I will being my monthly commentary on real estate in Atherton, Woodside, Menlo Park, Palo Alto and Portola Valley, with some Redwood City analysis in March.
Until then, please add your comments and questions and send them to gary@mckaeproeprties.com or text to 650-743-7249.
Gary
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