DEJA VU PART 2

The ability to look back to give an indication of what the future could or will bring is essential when one looks to plan one's future. That could not be more the case in real estate than it is now.

2009 is the most recent period we can look at.  Remember the term "Black Swan", an unlikely event that occured?  At that time it was the mis pricing of real estate values due to the packaging of bonds created from mortgages.  The mis pricing that occured in that the risk was improperly recognized.  What followed was foreclosures, unemployment, lack of mortgage money and to a certain extend illiquidity in real estate.  It also created the best opportunity to buy real estate. 

It took the stock market as we measure it in the S&P 500 to gain back a 58% drop in value about 4 years to hit the peak from the collapse.  During that period, great opportunities in real estate occured.

What we have now is something that is close but far from the crisis level that was created in 2009.  We are beginning to see some of the crisis markers of 2009.  Mortgages are becoming tight.  20% down is a must, jumbo mortgages are rare, credit score 700+, employers are being asked to sign a document attesting to the lender will not be laid off.

In 2 months we have gone from 4% unemployment to 15%+ unemployment of 30 million people.  The government is sending money to citizens to help them get by while a battle goes on to end the pandemic caused by COVID 19.  We dare not to leave our homes, if so we wear a mask and gloves, wash our hands regularly and whenever possible use hand sanitisers.

To add to the financial issues affecting real estate the new normal has changed the old normal.  Open houses and brokers tours ceased.  They are replaced by Virtual Tours. Flyers are no longer allowed, only mail and electronic distribution allowed.  In person showings can only occur when the occupants are gone to a maximum of two persons wearing masks, booties and gloves.  Interior doors must be opened.  A form called a PEAD, which I previously sent you in a prior Blog,  must be signed by all parties before viewing and new forms warning of COVID 19 signed at the close of escrow.  Additional form to note that lender could cancel financing commitments if they determine it necessary.  Review the past Blog and you will find the new forms.

That will and has had an effect on real estate inventory and sales.  Many sellers want to wait until the Shelter in Place ends.  Buyers will do so also.  So who is left.

Those willing to use opportunity to buy will be left to look for value and discounts.  Sellers who must do so for personal or financial reasons are left in creating inventory.  This is the one month Snapshot as of April 27, 2020 for our area

Housing Inventory Snapshot				April 27, 2020
	Average List Price	30 Day Trend	Average Sold Price	30 Day Trend	Average DOM: active/sold	30 Day Trend	Number of Active Listings	30 Day Trend
Santa Clara County, CA
Single Family	$1,398,393	-4.55%	$1,420,438	-2.54%	20 / 14	-16 / -4	695	152
Luxury Single Family	$5,049,660	-16.28%	$3,504,232	-4.42%	55 / 30	-29 / 7	219	53
Condo/Townhome	$750,519	+1.19%	$750,605	+4.13%	12 / 16	-12 / -6	301	74
Luxury Condo/Townhome	$1,479,064	-0.80%	$1,443,951	+2.56%	12 / 12	-9 / -8	92	18
San Mateo County, CA
Single Family	$1,826,489	-4.88%	$1,721,686	-8.12%	14 / 16	-14 / -1	324	64
Luxury Single Family	$8,125,348	-10.84%	$8,483,750	+39.86%	101 / 113	-22 / 33	105	22
Condo/Townhome	$872,562	+3.99%	$936,502	-1.06%	24 / 15	-11 / -3	83	17
Luxury Condo/Townhome	$1,656,610	+2.74%	$1,652,778	-0.35%	24 / 23	-17 / 13	23	5
Santa Cruz County, CA
Single Family	$976,093	+2.70%	$948,852	+0.43%	29 / 27	-15 / -22	206	30
Luxury Single Family	$3,133,233	-4.12%	$3,017,500	N/A	67 / 50	-27 / -77	64	7
Condo/Townhome	$657,739	+2.75%	$600,122	+0.52%	36 / 14	-26 / -36	60	-1
Luxury Condo/Townhome	$1,141,765	+0.72%	$1,097,667	+15.67%	65 / 37	-26 / 13	17	-2
Monterey County, CA
Single Family	$1,133,841	-4.63%	$814,848	-5.18%	63 / 30	-16 / -25	353	7
Luxury Single Family	$6,042,414	-3.34%	$4,485,786	+8.90%	125 / 120	-16 / -66	124	3
Condo/Townhome	$539,992	-1.71%	$441,000	+2.77%	40 / 55	-18 / 28	59	0
San Benito County, CA
Single Family	$628,048	-1.81%	$595,927	-3.42%	22 / 67	-23 / 21	96	16
Luxury Single Family	$1,504,853	-8.95%	$1,120,000	+4.55%	69 / 9	-5 / -91	30	6
Alameda County, CA
Single Family	$897,769	+1.07%	$968,415	+5.09%	18 / 16	-12 / -2	514	115
Luxury Single Family	$2,140,945	-5.66%	$1,907,994	-11.35%	41 / 18	-20 / -6	166	34
Condo/Townhome	$609,321	+1.38%	$605,644	+2.64%	18 / 27	-11 / 3	242	45
Luxury Condo/Townhome	$1,008,356	-0.43%	$981,895	+0.51%	19 / 12	-16 / -10	78	13
Contra Costa County, CA
Single Family	$709,488	-0.61%	$695,347	-2.66%	20 / 21	-13 / -6	725	118
Luxury Single Family	$2,339,796	-8.74%	$1,673,640	-10.96%	40 / 13	-16 / -11	231	31
Condo/Townhome	$455,852	+4.69%	$428,030	-3.96%	20 / 21	-11 / -7	198	13
Luxury Condo/Townhome	$989,991	-0.12%	$875,458	-2.54%	21 / 25	-16 / 9	61	6

Consumer Confidence is falling.

We are going through an large adjustment in both how we live our lives and how we will live our lives in the future.  To those of you who are buyers, I urge you to begin and finish your search before the Shelter in Place ends.  For sellers please realise that things change and how it was 2 months ago it is not the same today nor will it be tomorrow and the tomorrow's in the future.

Is it Deja Vu all over again?

Wasn't Yogi Berra a kick?  He took from Lord Toynbee his Nobel Prize on history repeating itself into Brooklyn speak.  

I was reminded of that when I read about the closing of the slaughterhouses and the issue of hogs.  What does one do with all the hogs accumulating without their way into food chain?  They are not like cattle.  Cattle can be released to the pasture and graze until the food chain opens up again.  "Where did I experience this before?"  

As a rookie stock broker in 1970, just out of college, I came to a stock market not much different than the past few  years.  New Highs after new highs and nothing could stop the stock market ascent.  The "new normal" was in vogue.  THEN, like something out of nowhere prices began to fall.  Fall they did, over 60%!  The Nifty Fifty were the FANG stocks then.  The difference it took over 3 or so years to fall 60%.  This past month it fell 60%.  

Interest rates were rising back then and kept rising along with inflation.  Commodity prices began rising our supply of grains were sold to the Russians and before anyone realised it would happen the Saudis raised oil prices.  Lines at gas stations, prices escalated and the new normal took a new phase.

Being a stockbroker became like a mortician.  No one wanted to buy stocks to see them close lower in a week than they were when purchased.  Dividends were cut.  Banks and brokers folded.  I switched to being a Commodity Manager.  Right, a commodity manager in a department of one in Honolulu Hawaii.  Business was GREAT!  clients made money bought Grains and they went up, bought Hogs, Cattle and Pork Bellies and they went up.  Sugar, Broilers and you name a commodity traded on our commodity exchanges and they went up.  Gold and silver were sky rocketing.

The Federal Reserve needed to stop this inflation and stop it they did.  Interest rates went up to double digits and commodity prices fell.  On I went to real estate.  As interest rates went up foreclosures followed.  The commercials foreclosures were from shopping centers, office buildings and garden apartments.  Some of them never lived in.  The commercial properties had great anchor tenants.  Investment banking my next stop as we put the properties in partnerships for individual investors and tenants in common for the institutional investors.

There is more to the story, but I will stop there.  We are now in the new normal....better to say change will happen.

The most difficult thing for us humans is, we dislike change.  We like the same way day in and day out.  We like our stocks to keep going up, employment to keep going down, inflation low, change will happen.

To follow the pattern of the past it will be improbable to have us return to the past as it never has happened before.   Politicians and government spokespersons will try to convince us that it will be back to normal.  Sure but what is normal?

Like in the past the old normal will start with Air B&B's.  How much leverage has been taken by investors in purchasing homes that they could rent at prices greater than what the property could rent for as a residence?  Air B&B Becomes a Victim of the Cronavirus.  Know a neighbor who has turned his home into a Air B&B or has several.  Foreclosures will put pressure on housing prices.  It is hard to tell where.  The cities we live in do not have a registry for Air B&B.  I questioned Menlo Park on  business licences and a list...don't have it.  Just like the last crisis in housing crisis.  The investment community created it!  Remember Air B&B was planning a mega billion IPO?  

Hawaii was booming back when, in 1970 tourism was booming and by 74 no tourists!  All my colleagues who bought into the condo conversion boom had negative cash flow and it became horrible as the number of condo's fell from occupied or rented to empty.  The ability to rent long term did not cover the mortgage and maintenance.  Sooner or later prices came down and auctions at the courthouse steps became common....EVEN IN HAWAII!.

How many senior citizens here in our area have a number of rental homes?  Wasn't it that long ago that hedge funds and private capital were buying rental homes foreclosed on by banks?  Why do we have a low supply of houses for sale?  Too many in investor hands as they milk rents?  The next shoe to drop is "Landlords are worried increasingly fewer renters will pay rents as coronavirus job losses mount"  As I read the local county and state orders on rents:

Assembly Bill 828 Prohibits foreclosure on a residential real property while a declared state of emergency related to COVID-19 is in effect and until 15 days thereafter Prohibits a tax collector from selling tax-defaulted properties while a declared state of emergency related to COVID-19 is in effect and until 15 days thereafter Prohibits state courts, sheriffs, or party to an eviction from taking any further action including executing a writ of possession during the timeframe in which a declared state of emergency related to COVID-19 is in effect and until 15 days thereafter The bill requires a court, if it determines that a tenant is unable to pay their rent on a current basis as the result of increased costs or decreased household earnings due to the COVID-19 virus, to order that the tenant remain in possession, to reduce the rent for the property by 25% for the next year, and to require the tenant to make monthly payments to the landlord beginning in the next calendar month in accordance with certain terms If the landlord owns 10 or more rental units the court must presume that the landlord would not suffer a material economic hardship if a tenant is unable to stay current on their rent due to the COVID-19 virus The provisions of the bill are to take effect immediately upon passage

Senate Bill 939 Prohibits eviction of commercial real property tenants, including non-profit organizations, during the pendency of the state of emergency declared by Governor Newsom on March 4, 2020 Evictions that occurred after the declaration by the Governor but before the effective date of this bill would be rendered void and unenforceable. Evictions commenced before the date of declaration may be continued A violation of the eviction prohibition will be a misdemeanor act of unfair competition and unfair business practice Local ordinances that prohibit the same or similar conduct or that imposes more severe penalty for the same conduct are not preempted The provisions of the bill are to take effect immediately upon passage as it is an urgency statute Deja Vu Yogi? The adjustments in housing are before us.  It will take an experienced hand to move through the new waters ahead.  Same shoals, same waves, but 50 years old!  Silicon Valley will adjust.  California will adjust and so will the US.  Knowing where to look and what to pay will be the "watch word" Here is the new game rules: California Stay-at-Home Order Extended through May, Counties to Ease Some SIP Restrictions Effective Monday California Governor Gavin Newsom has extended the state stay-at-home order through the end of May and has California's Pandemic Roadmap to safely re-open all businesses and institutions stages. Meanwhile, San Mateo and Santa Clara counties, along with the four other Bay Area counties of Alameda, Contra Costa, Marin, San Francisco, have announced they will ease some of their Shelter-in-Place (SIP) restrictions effective Monday, May 4. With regard to the practice of real estate, the Santa Clara County Public Health Order states (SILVAR has confirmed that the same applies to San Mateo County): "Service providers that enable real estate transactions (including rentals, leases, and home sales), including, but not limited to, real estate agents, escrow agents, notaries, and title companies, provided that appointments and other real estate viewings must only occur virtually or, if a virtual viewing is not feasible, by appointment with no more than two visitors at a time residing within the same household or living unit and one individual showing the unit (except that in-person visits are not allowed when an occupant is present in a residence);" Previously, private showings and walk-throughs were not allowed when an occupant was living in the residence. This mirrors prior direction for limited photography/videography, inspections, and necessary work to close a transaction, while generally limiting it to no more than three people at a property at one time. The following guidance for showings of properties continue: No open houses. Virtual showings are highly encouraged. If a virtual viewing is not feasible, then an in-person viewing of the property may be done by appointment only. During the in-person showing of the property, all social distancing protocols must be practiced, and protective measures, such as the wearing of gloves, cloth face coverings, and not touching of surfaces and maintaining a distance of six feet between each other must be followed. The revised Order allows outdoor activities like construction, landscaping, agricultural operations and some outdoor recreational facilities that do not contain high-touch equipment, with the understanding that social distancing and strong mitigation measures to prevent community spread of COVID-19 are maintained. Childcare, outdoor education programs and summer camps will be allowed where there are stable groups of no more than 12 for all persons who are working in essential businesses or outdoor businesses or performing minimum basic operations to access childcare. Outdoor restaurants, cafes, or bars are still not allowed to operate. Much like the governor's plan to re-open, county health officer Dr. Sarah Cody says further loosening of restrictions will depend on five indicators: whether the total number of cases in the community is flat or decreasing; whether the number of hospital patients with COVID is flat or decreasing; whether there is an adequate supply of personal protective equipment to protect all healthcare workers; whether the county is meeting the need for testing especially for people in vulnerable populations or those in high risk settings or occupations; and on whether the county has the capacity to investigate all COVID-19 cases and trace all of their contacts, isolating those who test positive and quarantining the people who may have been exposed. Regarding the interaction between the state health officer's order and local health officer's orders, where there is an overlap, "the stricter of the two orders controls." See the revised Santa Clara County Order HERE. See the revised San Mateo County Order HERE. What should you be prepared for?  Inventory will come from the leveraged sources of rental properties, prices will come down, buyers and sellers alike will want to step back to see what will happen to the market?  Will stock prices go back up?  Will we return to the Old Normal or will there be a New Normal.   We have passed the spring buying season and are going into the summer doldrums. That is not the Old Normal.   It will be a great time to buy and sell homes.  Interest rates are low and affordability is measured in what you pay per month, not the price of the property. Sellers will find that all they are doing is releasing equity to buy another home and they will keep more money in reserves.   Where are the new opportunities?   It amazed me for years that buyers would go for cities rather than the suburbs like Portola Valley and Woodside.  Areas like Skyline and the County not city properties.  Then I saw the method or ranking homes on the MLS...."Walk Score".  How close are you to coffee shops, restaurants and shopping centers.  Hey, we graduated from college why go back to the dorms and study halls?   The laws are now social distancing.  Oh what fun to stand in line to get a cup of coffee to take to your car!  Oh what fun it is to stand in line at the grocers to buy food.  Talk to your neighbor lately.  Right!   About 6 feet away and wearing masks.  Is this the new normal? I grew up in a city, in an apartment and walked to parks.  The only grass was that that grew between the cracks in the sidewalk.  I lived in San Francisco and dealt with homelessness and a homeless man telling my daughter she had pretty eyes.  Woodside was for me! Social distancing was there before it is now and is still there.  There were 30 redwoods in the rear of my one acre parcel.  We had a 2500 or so square foot house surrounded by roses and herbs and later grapes and horses.  My daughters safely walked to school.   Redwoods are the greatest source of oxygen.  The life among the Redwoods and forests that surround us are so gratifying.  My pick are properties in Skyline, Woodside, Portola Valley.   Here are my listings to help you: https://00-slate-creek-road.spw4u.com\ https://00-back-road.spw4u.com https://000-slate-creek-road.spw4u.com https://150-back-road.spw4u.com Go to www.mckaeproeprties.com to begin your search. Just Sold in The Redwoods: https://mckaeproperties.com/IDX/265-Portola-State-Park-Road-La-Honda-CA-94020/81762061_REIL/0004001 https://mlslmedia.azureedge.net/property/MLSL/81740278/e69d4ed079944af398ee05d4f2616087/2/1 I can take you to Woodside and Portola Valley and Skyline to find your next home. 7 Weeks and Counting.

Is another Housing Crash in the Cards?

It is so easy to let fear in without carefully examining the situation.  Yes, housing prices are coming down, yes housing prices came down in 2006-07, yes they came down in 1987.  Had you purchased at those times look what happened.  Home prices rebounded and went even higher.

I had written in my inaugural letter that the stock market leads the real estate market.  Since records have been kept the price of homes have followed the stock market average.  Whether the average be the Dow Jones or the Standard and Poor 500 or any other index created.  Why?  The averages are economic measurements of our economy.  With every reaction down there was a rebound up and those rebounds kept going onward and went beyond the lows that created the concept of "crash". 

10 years from now all those who went back to their rental or their under sized house will look back and regret not moving forward.

How can one make a mistake?  Interest rates are at historic lows. There will be a new normal in real estate. 

This past week we have seen prices cut in various sections of Silicon Valley and large drops in sales prices versus list prices.  Should you be fearful?  Or, should you begin looking for opportunity. 

For sellers it is a opportunity to move up, or an opportunity to create a large cash cushion and move into an updated home that fits your family needs.

For the buyers it is the opportunity of a lifetime.  Get your dealing hats out and find a realtor who will work hard to get a price less than list or at a discounted price that will increase in time.  I have my name out there if you don't realise it.

What will be the new normal.  First there will be an end to "Open Houses".  Virtual Tours will replace the Open House and visitations will come once the buyer is ready to make an offer, or has made an offer and can substantiate funds to cover purchase and or a commitment from a lender. 

The new normal may find buyers and sellers speaking to one another on Skype, Team, Zoom or any service that can create a one on one atmosphere.  This I believe will allow buyers to carefully examine the merchandise before making an offer, reviewing the disclosure packets and asking their agents pertinent questions from the disclosures.  Remember, nothing is unimportant.

Your real estate agent is here to serve you, not flip you and move onto the next buyer/seller.  If you get that feeling get another agent.

Where are buyers active?  They are active throughout Silicon Valley.  Sales are not as numerous as they were pre-pandemic and pre February 2020 stock market.  They are still there. 

Getting used to the new normal will take new forms from the California Association of Realtors.  New guidelines in viewing homes with face masks and social distancing.  Sellers realise that the lender may ask for documentation from employers that the employee will not be laid off due to COVID 19 issues.  Buyers, be prepared for larger down payments, be prepared for jumbo loans being harder to find. 

Putting your parents in a Senior's Facility will become harder.  I already have a realtor associate who has taken in her aunt from a Senior's Facility.  Expect parents to begin looking at +55 communities in the eastern hills where COVID 19 was a rarity.

There will be changes, and for every change there will be opportunities.  Look for those opportunities whether you are selling or buying.  Get onto my Facebook, LinkedIn and Twitter pages to get values in today's real estate market. 

The the reader that asked what I think about the economy and market let's say that the economy and the stock market will not move as quickly up as it did down.  It will be a gradual affair.  I think that the low of March will be challenged or broken.  When that occurs homes value opportunities will occur....get ready.

Month One and Counting Shelter in Place

Harley my Old English Sheep Dog looked up at me as I waited for cocktail hour to begin and said, "Now you know why a chew on furniture".

We now are looking forward for the Governor to decide on the resumption of our economy.  Good Political play from POTUS.  If it is successful he wins and if it is a failure the Democratic Governors who opposed him making the decision are left holding "The Bag".   A stinky bag it will be.  Redwood City has declared that all walking outdoors must now wear a facemask.  Isn't this locking the barn door after the horse is stolen?

Homes for sale declined 15.7% in March and so far this month the results are:

Atherton: 6 new listings, 3 cancels, 2 cuts
Menlo Park:  13 new listings, 6 pending, 7 sold, 1 withdrawn,1 expired, 3 cuts
Palo Alto:  17 new listings, 9 pending, 9 sold, 3 expired, 4 cancelled, 3 cuts
Woodside:  5 new listings, 1 pending, 5 sold, 1 withdrawn, 1 expired, 0 cuts
Portola Valley: 2 active, 3 sold, 1 withdrawn, 0 cuts
La Honda: 1 active, 1 sold, 1 expired, 0 cuts
Redwood City: 24 new listings, 10 pending, 20 sold, 1 withdrawn, 1 expired, 2 cancelled, 7 cuts

Days on the market are increasing.  So far, the effects of Shelter in Place and the requirements in listing and viewing documents have not shown an impact.

I am taking a pessimistic attitude toward the ability of realtors to show property and get virtual tours from some of the listing agents.  Sellers are reluctant to show homes and buyers are cautious on viewing homes.  There must be a process to keep everyone pleased.  I will be creating a sanitized home condition for all homes that I list and close.  For viewings there will be the California Association of Realtors inspection form, I will require facemasks, gloves and booties.  I suggest all you buyers become prepared to view your chosen house with your own equipment.  Make offers at below list and make offers contingent upon a sanitizing of the house and living areas.  That includes garages and storage areas.

The desire to live in communities that have active city centers will diminish.  The joy of a vibrant downtown area like Palo Alto, Los Altos, Mountain View and Menlo Park will come under pressure as the joy of sitting close to one another in conversation will be gone.  Face masks make word recognition difficult and down right impossible when one has a hearing disability.  Why pay up to live in a city when it is dangerous and unhealthy to walk to downtown area?

I have always believed that the value of Woodside, Atherton and Portola Valley has been the privacy and security a large land parcel offers owners.  Children can enjoy the outdoors without incurring the potential health threats of a playground in Menlo Park, Palo Alto or Los Altos.  The value of the former with a $5 million home on an acre or more seems far more beneficial than a 12,000 square foot lot in Menlo Park. 

I think there will be a greater risk of ownership when a Facebook employee must work from home for the next 8 months.  Now I know what Solitary Confinement means as a punishment!

There are communities in Silicon Valley that offer solitude and space and are within minutes of local cities and work environments.  There will be the areas of growth while the hot downtown cities will see declining home values.  IF, the return to normal does not occur as all expect it will happen.

On a weekly basis I send out selections of homes that are presently on the market or have recently come on the market as values, as I perceive them as.  Get on my

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Week 4 Of Shelter in Place: The Real Estate Markets Tighten Up

The new thing appears to be emails from all those we know and have known with their various jokes on being too long in Solitary.  "Going out this week? What should you wear to take out the garbage?"

In Santa Clara County list prices of Single Family Homes have had a -2.88% fall in a 30-day trend, Luxury Home list prices have had a -10.78% fall in a 30-day trend.  Importantly, the average sales prices for single family is +8.10% and Luxury Single Family +0.28%.

In San Mateo County Single Family list prices have a -5.66% 30-day trend and Luxury Single Family have had a -2.10% 30-day trend.  Average sales prices for Single Family homes are +11.27% with no statistics available for Luxury Homes in the 30-day trend.

Watching the daily summary of listings of Atherton, Menlo Park, Palo Alto, La Honda, Redwood City, Woodside and Portola Valley the only trend I can see is that there have been a number of cancellations, expired and withdrawn properties in the Luxury Markets of Woodside, Portola Valley and Atherton.  Palo Alto, Menlo Park, and Redwood City have remained unchanged.  La Honda appears to have some active markets in the land sales and large parcels with buildings.

The recent laws by the California Association of Realtors has had a substantial impact on home viewing and showings.  The big issue is Virtual Tours, do the listings have them and will buyers move from the physical visual impact of looking before they buy.  That will be the big determinant of home sales in the future.  Will real estate go the way of Carmax and Amazon, shopping on line and waiting for delivery?  A big question that remains to be seen.

Many of the sellers have gone off market awaiting the end of our isolation.  Buyers now fight over what is on the market, owing to the increase in sales over list.  Lists are going down as sellers realise that they need to discount to sell.

The ability to go back to work will change.  Will more wish to remain "work at home" employees?  Will more businesses adjust to the "Cloud Based" economy?  Will clients accept a "Cloud Based" economy?  Whether you like it or not, we are already in a Cloud Based Economy!   The exception is that it is now broader than it ever was before.   Then  what will happen to all the commercial spaces?

The stock market this week, 4 days, had a 13% rise in value.  To get a better idea of performance it took from October 2019 to February 2020 for the market, call it S&P 500, to gain 12%.  Looking at "Bear Market" which is the term for the present condition of the stock market; which means lower prices, there has been a normal 10% rise and fall before the markets resumed an upward trend and it took years before the old highs were ever reached.  The greatest loss in the stock market was the Bear Market of 1974.   The previous high was not reached until 1983! 

We are not in normal circumstances.  The Federal Reserve and Congress and the President have taken unprecedented steps in keeping the country from falling into chaos and depression.  $1200 coming in the mail for each American is the first of many benefits.  Expanded unemployment for those out of work or unable to perform their profession.  Businesses get money from 2 different SBA loans.  One $10,000 out right forgiven loan and another loan to keep employees on with a Paycheck Protection Program.  Getting Federal Funds will take time.

As we await money to help subsidise or Staying At Home and keeping the virus in check from spreading and making the Spanish Epidemic look pale and the Black Death a more reasonable comparison.  We wait for a solution to Covid19.  Who will have a stop gap, who will create a vaccine?  What will be the effect be
on our economy and more importantly employment?

When the all clear is given will it be so?  Will we all go back to elbow to elbow or waiting in line within 12 inches of each other?  I rather doubt it.  Will children be safe on playgrounds, in soccer games or any field sport?  Will foursomes in golf return?  If so, each walk or have their own cart and of  course remain 6 feet apart.  Will we all be labeled as positive, negative, immune or a carrier without symptoms?

It appears we will be  in place until mid May?  Each week the real estate market will have some reflection on our future.  At one point I think we will see a large increase in listings and movement EAST.  I look at the Mercury News daily and look at the areas in the state that have reported cases.  It is very clear that as one moves beyond the Bay Area east cases decline and so do deaths decline or disappear.  I am now gretfull my youngest daughter and family moved to the El Dorado Hills.  She was the first one I know who realised that working from home did not mean living in the Bay area and took her profits and bought a larger home on a larger lot with better schools and  from her comments a far better environment. 

On the Baby Boom Generation and the Silver Tsunami of sales and movement, I don't think that senior centers will be a good choice.  They appear to be areas of infection and dying alone.  Seniors are prone to die in place.  Will they move east to be in a safer environment will be the big question; as it will be, the big question on the work from home Bay Area residents.

The major issue I think about is the empty holes along El Camino in Redwood City, Menlo Park to Palo Alto.  Will they end up being empty or will apartments fill their space as originally planned?  How are rental properties going to fare?  Rents are being forgiven in April by some of the large REITS, private owners are waiting to see if they will have past rent made up and or will the renter be there in May, or moving east?  Will rental properties carry the premium of the past in low Capital Rates looking for Capital Gains in property value increases.  Will rental single family homes be the real Tsunami?

Once the Government subsidies end will the economy and the individual normal return or will there be a new normal.  I think the later will be the case.  We will need to wait to see what the New Normal will be.

Stay Healthy and safe, Happy Easter and Passover

Gary

The New Normal in Real Estate Sales

LIFE AND HOME SALES DURING THE COVID 19 PANDEMIC, WEEK 3

We are now finishing our 3rd week with the Shelter at Home orders by Governor Newsom.  Cities and Counties have followed up with their orders.  It does not appear that the order will expire until after May at this point.  Next week is the height of deaths and infections per the medical community advising our governmental leaders. STAY AT HOME!

The California Association of Realtors have put together forms that require full disclosure of potential issues to protect both the buyer and the seller of real estate in California.  The first is a Quick Guide to Real Estate Transactions in a Safer at Home Environment for Covid 19.  Buyers and sellers should review this link as the realtor must comply.  Being self-informed is far better than word of mouth.  For the seller there is the Listing Agreement Coronavirus Addendum or Amendment.  Whether you are presently listed or planning to list this is an essential form for completion.  Once the buyer has chosen a property to view there is the Coronavirus Property Entry and Advisory  To complete the advisory there is the Notice of Unforeseen Coronavirus Circumstances. Finally there is the Revised Coronavirus Addendum and Amendment to the Purchase Agreement.

There is much more for the real estate agent to manage along with various forms and document review that a brokerage firms may require.  Then there will be the normal packet of disclosure documents that the seller must complete, sign or initial and the buyer to complete, sign or initial.

I had originally thought that prices would decline as buyers would back away.  That was the historic of the real estate price action when related to the S&P 500.  This is not a normal circumstance.  The results of March are in and Menlo Park has seen offers 104% over list with a 27 day inventory of homes for sale.  Palo Alto is 106% over list with 2.1 months of inventory.  Portola Valley is 98% of list and 3.8 months of inventory and sales within 34 days of listing.  Woodside is 98.4% off list after being on the market 33 days with 4.5 months of inventory.  Atherton was 95% of list after being on the market 128 days and 4.4 month inventory of homes for sale.  Redwood City sold 104% over list after 17 days on the market and 30 days of inventory.

Many of the high priced homes have seen cancelled listings.  Over all there have been cancelled, expired and withdrawn listings in the areas stated above, but they do not match the new listings that still are coming onto the market; along with pending/contingent and sold properties.  

The new normal of being at home has lead to buyers looking at virtual tours and cloud based packages to review properties and the disclosure packets.   Once that is done they are ready to view the property, mask on, gloves on, booties too; don't forget to sign all the new forms!  Sales then occur with all the disclosures signed and filed with escrow, all electronically.

Escrow companies are ready too, with online signatures. Notaries in parking lots ready to witness the signature of forms.  We are in a new normal with buyers and sellers that are ready to accept.  Thanks to Zoom, Amazon, Docusign and the bevy of online sources sellers and buyers are fully knowledgeable on the process of kicking real estate into the 21st Century.  I expect the notary to end soon and also become electronic.

Real Estate is one of the last areas of our economy that has hung onto the old generation of administration and operation.  The biggest change and New Normal will be in how your realtor and title/escrow company operate.  The days of Open houses will end.  Realtors will ask buyer to review the virtual tours thoroughly before a home visit is made.  How many times will a buyer complete forms to view a property and a seller accept without a semi-firm commitment of an interested buyer will be an area of interest.  Only time will tell that case.

The next issue I would like to see is how the work at home situation carries itself out.  I have been working at home for over 6 years.  Each year it becomes easier and easier.  The only issue is up-to-date computers and software.  The days of Realtor offices on every corner will soon go.  Real Estate agents are now in the situation of Netflix in the Blockbuster era.  Amazon and the corner store era.  

What will happen to the Campuses of Apple, Google and Facebook?  Will their employees work from home and be on conference meetings via a firm network?  It sounds highly probable to me.  With that the case, will the employees want to live in a high priced Silicon Valley community?  Will the need to be in Menlo Park, Los Altos and Palo Alto because of their downtown areas diminish?  Six foot distancing will impact health clubs, restaurants, football games, baseball games.  WILL THE GRAY TSUNAMI of Baby Boomers occur?  Baby boomers may just feel far more comfortable in their home than a +55 Community or a Senior Center.  When I look at the Real Estate investment Trusts that specialize in Senior Communities drop 70-80% it tells me that there are some major issues are at hand for those communities.  

Looking forward to Week 4 and PRAY that Angel of Death passes us all by.