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.

Atherton Average Home Price: $5.6 Million

The statistics are in and the average price of a home that was sold in February was 5.6 million dollars, up from a typical January low.  Not a bad statistic if you might be selling, but a challenging number if you are on the buying side.

I have seen several 10-12 million dollar homes that are just hitting the market, so maybe that is why the average listing price in February was $6.23 million and rising.  Here are the statistics for the past year.

Menlo Park Home Prices Spike in February

It looks like sales are starting to jump in Menlo Park.  In what is typically a slow start to the new year, the average price for a home sold in Menlo Park in January 2010 averaged only $630,000, but jumped to an average sale price of $1,438,000 in February. This much anticipated jump in average price is a good sign that people are still looking for and buying real estate in the SF Peninsula. Menlo Park real estate is getting ready for a busy spring season.

Short Sales Could Mean Big Taxes!

Just When You Think You Are Back On Your Feet, The IRS Keeps You In The Prone Position.

If you are considering a real estate short sale of your home, you should be aware that you may receive a form 1099-C for the amount of the lender’s losses. This is considered loan forgiveness in the eyes of the IRS.

If you have other assets such as saving and you are not insolvent, you may end up being responsible to pay ordinary taxes on the amount of the 1099-C.

If you settle a debt with a creditor for less than the full amount owed, you may be required to report this forgiven debt as regular income, with certain important exceptions. The forgiven debts include money owed after foreclosure or property repossession or credit accounts that you don’t pay. There are exceptions noted below.

If a lender forgives or writes off $600 or more of a debt’s principal (the amount not including interest or fees), they must send you and the IRS a Form 1099-C at the end of the year. When you file your tax return for the tax year in which your debt was written off, the IRS will require that you report the amount on the form as income.

While you may not have received this form from the creditor, the creditor may have submitted one to the IRS anyway. If you don’t list the income on your tax return and the IRS has the information of the transaction on file, you could get a tax bill or, worse, an audit notice. This could end up costing you more than just the original tax bill.

There are several exceptions stated in the Internal Revenue Code. For example, you do not have to report the income on your tax return if the write off of the debt is intended as a gift, you discharge the debt in bankruptcy, or you were insolvent before the creditor agreed to settle or write off the debt. You should consult a qualified tax and legal counsel to see if these circumstances apply.

So, just when you thought you found a way to solve your problems, the IRS makes sure they are there to prevent it from happening.

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.