The Winner For Best Food At An Open House Goes To…

Yes, it’s a perk of the trade.  If you were to combine Top Chef with Million Dollar Listing, you would get the ritual that most real estate agents here on the Peninsula experience on a weekly basis.  Every week, agents put their new listings on “broker tour”, which is when they want every real estate agent to come by and see their new listing and quickly spread the word to their clients.  If you get a lot of agents showing up and your house is priced right, it spreads the word exponentially so it’s really like an open house for agents.

To help get agents (and the public) to show up, many agents add enticement, and nothing does it better than good old free food. Since the Primetime Emmy Awards for Outstanding Television are this coming weekend, I thought it would be appropriate to give my own real estate meets Emmy style award to the hard working, meal providing real estate agents out there who make our grueling treck to multi million dollar homes much more enjoyable.

The nominations are:

Sherry Bucolo of Alain Pinel in Palo Alto for her listing (also in Palo Alto) where she served very tasty chicken strips, fresh fruit, finger sandwiches and lemonade…all at one time.  It’s polite to grab a couple of items after viewing the  house…but I think I grabbed a small plateful between each floor – and there were three levels!  The chicken fingers were better than a restaurant and there was even ranch dressing for dipping. Oh yeah, the house was nice too and sold within a week.

Paul Engel of Coldwell Banker in Palo Alto who provided a “potential for a meal”.  I say potential because he provided a lottery ticket to every agent who showed up.  I haven’t checked my numbers yet, but if I win $5, then it’s McDonalds meal and no award.  If I win $100, then a Sundance Steak and a victory.  If I hit it big, I’ll buy Paul’s listing.

Steve Papapietro and Ahmad Ghavi of Bank of America.  These are lenders that provide broker tour food for various agents to help spark their lending business.  Their main item – meatballs to die for!  I don’t know where they get them, but they could make a tear down in East Palo Alto suddenly look like an Atherton mansion after eating the meatballs and washing them down with the iced tea they also serve. Nothing is quite the same after eating them.

Ken DeLeon of Keller Williams in Palo Alto.  Ken’s broker tours and open houses are infamous for his lunch setup which includes delightful double deviled eggs as well as the coffee cart that accompanies each new listing.  The deviled eggs are huge and sinfully delicious while the mocha’s, lattes and hot chocolates are made with personality and Star Bucks like taste.  I know agents who schedule their broker tour around Ken’s listings as you must show up around lunch to make the most out of this full free meal.

Before I announce this someday important honor, keep in mind that potential buyers can also come to these sometimes tasty broker tour hotspots.  All you have to do is call your agent and ask to join them on tour.  Broker Tour is every day of the week in a different city, for example Menlo Park and Atherton are on Tuesdays, Palo Alto and Los Altos on Fridays etc.  And if your looking to buy a home and don’t have an agent, call me and I’ll gladly serve as your Maitre d’.

Ok, the music is playing and I’m running over my allotted word count.  The Winner for best food at a broker tour/open house is………Steve Papapietro and Ahmad  Gavi of Bank of America.  Not only is their food great, but they are always at their open houses and add the element of nice conversation to the mix.  A recipe for success.

The Rich Are Defaulting On Mortgages At Alarming Rate

Don’t look around at your neighbors too closely, but the well-off are losing their master suites and saying goodbye to their wine cellars.

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population according to David Streitfeld.

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to the real estate analytics firm CoreLogic. Homes priced over a million dollars are considered luxury real estate in many areas.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

As a recent example, five luxury properties in Los Altos were scheduled for foreclosure auctions in a recent issue of The Los Altos Town Crier, the weekly newspaper where local legal notices are posted. Four have unpaid mortgage debt of more than $1 million, with the highest amount $2.8 million.

Not so long ago, said Chris Redden, the paper’s advertising services director, “it was a surprise if we had one foreclosure a month.”

In Las Vegas, Ken Lowman, a longtime agent for luxury properties, said four of the 11 sales he brokered in June were distressed properties.

“I’ve never seen the wealthy hit like this before,” Mr. Lowman said. “They made their plans based on the best of all possible scenarios — that their incomes would continue to grow, that real estate would never drop. Not many had a plan B.”

The defaulting owners, he said, often remain as long as they can. “They’re in denial,” he said.

Here in Los Altos, where the median home price of $1.5 million makes it one of the most exclusive towns in the country, several houses scheduled for auction were still occupied this week. The people who answered the door were reluctant to explain their circumstances in any detail.

At one house, where the lender was owed $1.3 million, there was a couch out front wrapped in plastic. A woman said she and her husband had lost their jobs and were moving in with relatives. At another house, the family said they were renters. A third family, whose mortgage is $1.6 million, said they would be moving this weekend.

At a vacant house with a pool, where the lender was seeking $1.27 million, a raft and a water gun lay abandoned on the entryway floor.

Lenders are fearful that many of the 11 million or so homeowners who owe more than their house is worth will walk away from them, especially if the real estate market begins to weaken again. The so-called strategic defaults have become a matter of intense debate in recent months.

The delinquency rate on investment homes where the original mortgage was more than $1 million is now 23 percent. For cheaper investment homes, it is about 10 percent.

With second homes, the delinquency rate for both types of owners was rising in concert until the stock market crashed in September 2008. That sent the percentage of troubled million-dollar loans spiraling up much faster than the smaller loans.

“Those with high net worth have other resources to lean on if they get in trouble,” said Mr. Khater, the analyst. “If they’re going delinquent faster than anyone else, that tells me they are doing so willingly.”

Willingly, but not necessarily publicly. The rapper Chamillionaire is a plain-talking exception. He recently walked away from a $2 million house he bought in Houston in 2006.

“I just decided to let it go, give it back to the bank,” he told the celebrity gossip TV show “TMZ.” “I just didn’t feel like it was a good investment.”

The rich and successful often treat their homes as business investments and make decisions on their personal items in a similar way that they would for their businesses.  Bottom line decisions without the emotion that other homeowners may have towards their residences.  A default is a strategic default, not a failure.

“They may be less susceptible to the shame and fear-mongering used by the government and the mortgage banking industry to keep underwater homeowners from acting in their financial best interest,” Mr. White said.

The CoreLogic data measures serious delinquencies, which means the borrower has missed at least three payments in a row. At that point, lenders traditionally file a notice of default and the house enters the official foreclosure process.

In the current environment, however, notices of default are down for all types of loans as lenders work with owners in various modification programs. Even so, owners in some of the more expensive neighborhoods in and around San Francisco are beginning to head for the exit, according to data compiled by MDA DataQuick.

In Los Altos, Los Altos Hills and the most expensive neighborhood in adjoining Mountain View, defaults in the first five months of this year edged up approximately 10% over 2009 and over 400% from 2008.

The East Bay suburb of Orinda had eight notices of default for million-dollar properties, up from five in the same period last year. On Nob Hill in San Francisco, there were four, up from one. The Marina neighborhood had four, up from two.

The vast majority of owners in these upscale communities are still paying the mortgage, of course. But they appear to be cutting back in other ways. Many of the luxury real estate areas have downtown areas that are filled with empty storefronts, typically unusual in well to do areas.  Discretionary spending of the rich is affecting the little guys, who of course have mortgages to pay, thus the vicious circle.

But this is still Silicon Valley, where failure can always be considered a prelude to success.

In the middle of a workday, one troubled homeowner here leaned over his laptop at the kitchen table, trying to maneuver his way out from under his debt and figure out the next big thing.

His five-bedroom house, drained of hundreds of thousands of dollars of equity over the last 13 years, is scheduled for auction July 20. Nine months ago, after his latest business (he has had several) failed in what he called “the global meltdown,” the man, a technology entrepreneur, said he quit making his $9,000 monthly payments.

“I’m going to be downsizing,” he said.

The man spoke on the condition of anonymity because, he said, he did not want his current problems to interfere with his coming reinvention. “I’m a businessman,” he explained. “I have to be upbeat.”

Things seem to be turning a bit as some areas are showing nice price increases and we all have to stay upbeat and fight to keep on top, irregardless of whether you are looking to buy or sell off your luxury real estate.  If things don’t look great, just look around at your neighborhood, you’re not alone.

Palo Alto Home Sales = Multiple Offers

Every week, we have staff meetings to discuss listings, sales etc. and we are seeing a change in the market that I thought would be interesting to pass along to all of you.  I know you’ve seen me write for the past couple of months that the published stats will start to support what I am seeing on the market.  Here is an example of just one segment of the market as reported in last weeks meeting, and this is only from Alain Pinel.

1. 5 offers received on 2553 Emerson street in Midtown Palo Alto with 3 bedroom, 2 bath, 1784 sf.  Listed at $1,398,000 and went  pending within a week on the market. Top offers went over $1.5M.

2. 4 offers on 2671 Emerson with 4 bedroom, 2 bath listed at $1,648,000, sold to an all cash buyer. No contingency, as is, quick close clean offer.

3. 6 offers on 3250 Murry way with 3 bedroom, 2.5 bath 1548sf, listed at $1,098,000 sold within a weeks.

4. All cash buyer bought 2340 Dartmouth house for its tear down value and will rebuild it. It was listed at $1,295,000 last year. Sold off the market.

5. Approx. 3 offers on 3715 Whitsell with 3 bedrooms, 1 bath listed at $895,000.

6. One all cash offer was received on 3145 Emerson new construction house. Seller rejected the low ball offer.

7. Multiple interested parties are taking disclosure packages for 601 Matadero.  Multiple offers to follow.

The same thing is happening in Menlo Park, Atherton and areas along the Peninsula.

Market Focus: South Palo Alto

December and January were very slow – for two months the Palo Alto housing market was in a dormant state. Only six homes have changed hands since the beginning of the year in South Palo Alto. A year ago at this time, many homes were languishing on the market as buyers stayed on the sidelines, worrying about their jobs, the sharp decline in their 401k accounts, and whether housing prices would ever rise again.

While no one claims the housing market is out of the woods yet, an unusual dynamic is occurring in many communities around the Bay Area and in our own backyard. Buyers and sellers have realized that neither of them will benefit from rising interest rates, and now we have a market with rising inventory and many active, well-qualified buyers looking for houses. Open houses are very busy. Most of this year’s sales happened within the last two weeks. Today when we write this article, there are 19 pending sales in South Palo Alto and 21 active listings. Well-maintained, reasonably priced homes in the median price point or lower, sell with multiple offers. One recent sale generated 13.

South Palo Alto is on the lower range of the overall Palo Alto housing market, and today it gets a disproportionate level of activity comparing with the rest of the city. In the entire city of Palo Alto there are 36 “pending sales” and more than half of them (19 as mentioned above) are in South Palo Alto.

There are a lot of areas in all price ranges here in the SF Bay Area and that’s what makes this such an interesting real estate market.

Menlo Park Bans Smoking In Some Public Places

Menlo Park’s City Council at its March 2 meeting passed an ordinance banning smoking in public places, including ATM lines and parking lots.

In addition to banning smoking in enclosed spaces such as restaurants and places of employment, the revised ordinance will also prohibit smoking in public parks, parking lots open to the public, places of congregation such as ATM machines and bus stops, and in common areas within multi-unit residences.

Perhaps most significantly, the ordinance declares second-hand smoke a nuisance — enabling people to take legal action against others who smoke in their vicinity, in an adjoining apartment unit, for instance.

The council approved the wording of the ordinance by a 4-1 vote, with Councilman John Boyle dissenting. The ordinance will come before the council at a later date, and will go into effect 30 days after it’s enacted.

In dissenting, Boyle said he thought the ordinance was too restrictive, and would have unintended consequences. As examples, he cited a ban on smoking in parking lots open to the public, such as the lot in front of Safeway, and a prohibition on ash trays in non-smoking areas.

“I think we shouldn’t enact legislation unless we’ve thought through it,” he said.

Bill Davis, the owner of Knickerbockers Cigars, pointed out that under the new ordinance, people would not be allowed to smoke in a patio outside his shop. Council members expressed sympathy, but decided against “grandfathering in” his shop.

The city drafted the ordinance in response to an extraordinary lobbying effort by Barbara Franklin, who decided to take up the issue after she was bothered by smoke wafting into her condominium unit from an apartment below hers. She began making presentations to the council about the dangers of secondhand smoke in late 2008, and has attended most council meetings since then, often sitting through the several hours of the meeting.

The council has received a trickle of correspondence about the issue from residents since then, with several people making nuanced arguments about how far the ordinance should go. At the meeting, the council incorporated into the ordinance several changes suggested by the California Apartment Association.

The revised ordinance will also enable the city to enforce a San Mateo County law, requiring tobacco vendors to obtain permits from the county. Some believe that requirement would decrease the incidence of vendors selling cigarettes to minors.

Bay Area Homes Sales Down, Prices Up

It sometimes takes a while to compose the stats, but the number of Bay Area homes sold in January fell more than usual from December and dropped below the year-ago level for the first time in 17 months. The median sale price rose above last year for the fourth straight month but dipped 8 percent from December as demand shifted more toward foreclosures and less-expensive inland homes.

A total of 4,853 new and resale houses and condos closed escrow in the nine-county Bay Area last month. That was down 38.0 percent from 7,828 sales in December and down 3.9 percent from 5,050 sales in January 2009, according to MDA DataQuick of San Diego.

A decline in sales between December and January is normal for the season. On average, sales have dropped 28 percent between those two months since 1988, when DataQuick’s statistics begin.

Last month was the first since August 2008 in which sales fell on a year-over-year basis. January’s 4,853 sales total was 22.5 percent short of the average January tally – 6,261 – since 1988. Sales last month were also the second-lowest for a January since 1995, behind 3,586 sales in January 2007. The peak sales total for a January was in 2005, when 8,298 homes sold.

“The January figures show the market lost some of the momentum it had built up in the second half of ’09, when home buyers rushed to ensure they could take advantage of a tax credit, ultra-low mortgage rates and lower prices,” said John Walsh, MDA DataQuick president.

“It’s difficult to gauge how much of the slowdown stems from a thinner inventory of homes for sale in some areas as opposed to lower demand,” he said. “Whether last month’s relatively weak performance portends any substantial, lasting changes in the market is unclear. One month doesn’t make a trend and, in the past, January hasn’t proven to be very predictive.”

The January sales figures are based largely on deals that were struck during the holidays (late November through early January) and that closed escrow in January. In the Bay Area and across California, the sales data indicate that investors and first-time buyers remained the most committed home shoppers, and that helped skew the sales toward foreclosures and other lower-cost properties.

Sales out of our offices are showing a much different picture for the months of February and so far in March.  Real estate that is priced right in Menlo Park, Atherton, Palo Alto and other areas  are getting multiple offers and many are selling at above listing price.  Once the sales figures catch up, you will see the luxury real estate market showing a change from a buyers market to somewhere in the middle between buyers and sellers market.  If you have your home for sale and it is priced right, the sellers will get offers.  If you are overpricing, it’s a buyers market on your home as the offers will trickle in at lowball rates. SF Bay Area real estate is a good buy right now.

Menlo Park Turnover Higher Than Atherton

When looking at the statistics for which cities have the highest percentage of turnover in the Bay Area, Menlo Park outpaced Atherton and many other communities for home and condo turnover for the year 2009.  The numbers are still lower than you might expect, but interesting to look at for determining which communities have the highest percentage of moving trucks throughout the year.

A couple of key cities and their turnover rates are:

Community     # of homes     Sales in 2009     Turnover %

Atherton                2,504                71                          2.84

Burlingame          7,318              195                         2.48

Hillsborough       2,872               106                         2.74

Menlo Park          8,915                323                        3.62

All numbers are down from 2008, but I guess this shows that, at most, about one out of every 30 of your neighbors will be moving this year or lising their house for sale.  I’m sure there are times when we wish that number was higher (loud parties, barking dogs, deferred maintenance) but at least now you know what to expect. So, even though luxury real estate in Menlo Park is highly sought after, the turnover is a bit higher than other areas.

Atherton Home Prices on the Rebound

Signs of Recovery

On a year to year comparison, the average listing price and selling price of luxury real estate in Atherton were both up in listing and sales prices.  The average selling price was $2,689,000 while the average Atherton home for sale had a listing price of just over $5.5 million dollars.

Knowing that Atherton real estate has about a 93% list to selling price ratio, I’m sure there will be further increases in sold prices for the month of January as well as listing prices.  We are seeing lots of buyers out there looking for luxury real estate in Atherton and many with cash in hand so the loan process won’t impact the sale.  Our office is having more high end sales in Atherton so far in January than it has in the last couple of years for the same time period, so despite the economy, luxury real estate in Atherton is still on the highly sought after list of places to live.

According to DataQuick, the figures were as follows:

1 month			1 Year			15 Months
	Nov 09	Dec 09	% Change	Dec 08	Dec 09	% Change	Oct 08	Dec 09	% Change
Avg. Active Price	5123	5551	8.4%	5434	5551	2.2%	5394	5551	2.9%
Avg. Sold Price	2284	2698	18.1%	1925	2698	40.2%	2337	2698	15.4 %

Menlo Park Inventories Down, Sales Up

Prices Are Down, But More Are Selling
Statistics for the month of December show that Menlo Park residents aren’t putting as many homes on the market, but the overall volume of sales and pending sales is up.   With a 25% increase in number of homes sold and a whopping 300% increase of pending sales, more people are definitely getting their homes sold according to Dataquick.

The average sales price for a home in Menlo Park in December was $1,020,00 (down 4.1% compared to last December).  I believe this low average sales price and higher volume has a lot to do with the first time home buyer tax credit that was being pushed so heavily towards the end of the year (which has been extended to April 30, 2010 for first time and now includes move up home buyers).  The average listing price in Menlo Park for December was just over $1.7 million dollars, but it’s the homes closer to the million dollar mark that have been selling.

	1 month			1 year			15 months
	Nov 09	Dec 09	% Change	Dec 08	Dec 09	% Change	Oct 08	Dec 09	% Change
Avg. Active Price	1775	1745	-1.7%	1464	1745	19.2%	1702	1745	2.5%
Avg. Sold Price	1325	1020	-23%	1064	1020	-4.1%	1308	1020	-22%

San Francisco Bay Area Real Estate Median Sale Price Tops Year Ago Level For First Time Since ‘07

Here is some real estate news that came out today about the Bay Area’s housing market.  It has continued to ease back toward normalcy in October as fewer distressed properties sold and $500,000-plus sales accounted for a greater share of transactions than a year ago. The result: The nine-county region posted a modest year-over-year gain in its median sale price – the first in nearly two years.

The median price paid for all new and resale houses and condos that closed escrow rose to $390,000, up 6.8 percent from $365,000 in September and up 4 percent from $375,000 in October 2008. The last time the median sale price rose on a year-over-year basis was in November 2007, when it gained 1.5 percent, according to MDA DataQuick of San Diego.

Last month’s median was the highest since it was $395,000 in July this year, but it was 41.4 percent below the $665,000 peak reached in June and July of 2007.

In addition to the Bay Area overall, three counties – Santa Clara, Marin and Sonoma – saw their median sale prices rise year-over-year last month. The last time that more than one county posted an annual gain in the median was November 2007. Also last month, Alameda, Santa Clara, San Francisco and the nine-county region overall posted single-digit annual gains in their median price paid for a specific home-type: resale single-family detached houses.  This is the key home type in cities such as Atherton and Menlo Park.

A total of 7,933 new and resale houses and condos closed escrow in the nine-county San Francisco Bay Area last month. That was up 0.7 percent from 7,879 in September and up 4.2 percent from 7,613 in October 2008.

Last month’s sales were 10.2 percent below the October sales average of 8,833 since 1988, when DataQuick’s stats begin. October sales have ranged from a low of 5,486 in 2007 to a high of 13,392 in 2003. The average change in sales between September and October since 1988 is a gain of 0.9 percent.

Sales in the region’s higher-cost counties – Marin, San Francisco, Santa Clara and San Mateo – represented 42.2 percent of October sales, up from 35.3 percent a year ago, when more sales were concentrated in the lower-cost inland areas rife with deeply discounted foreclosures.  Areas such as Palo Alto, Los Altos and Los Altos Hills are prime reasons for the increases.  Sales over $500,000 made up 36 percent of all sales last month, up from 34.9 percent a year ago and a low this year of 22.7 percent in January.

October’s overall increase in sales from September and a year ago came even as fewer foreclosed properties sold.   It was the lowest since foreclosure resales were 29.9 percent of all resales in June 2008. Foreclosure resales peaked at 52 percent of Bay Area resales in February this year.

The declining inventory of lower-cost foreclosures has been key to stabilizing the housing market, along with the federal government’s efforts to boost housing demand through lower mortgage rates, tax incentives and plentiful, low-down-payment FHA financing.

Mortgages above $417,000 – formerly the definition of a jumbo loan – made up 30.1 percent of all home purchase loans last month. That was up from 29.6 percent in September and 25.9 percent a year ago. More than 60 percent of Bay Area purchase loans were over $417,000 before the August 2007 credit crunch hit.