My wife is a designer so every year I hear about how the “color authority” in her industry (Pantone) has made a prediction for the color of the year. Last year it was a an ugly shade of pink—completely forgettable. This year this news actually made an impression on me. The color for 2012 is a super bright and out-there orange. The choice even warranted an article in the WSJ (WSJ: Orange blossoms…). I have to say I agree with the observations regarding the thought that this choice is indicative of more positive feelings about our economy, and hope for a brighter year. It’s been a tough 3-5 years for everyone. I don’t know anyone in our area who hasn’t been affected in some way by the national economic crisis which started in 2008. With the new year starting, I say there’s every indication (including this color prediction) that the next year is going to be a better one for all!
I’ve been chatting with many clients about buying income property recently. An article I just read in the WSJ has a some good tips regarding risks and what to plan for if you’re considering taking this step ( WSJ: Are you ready to be a landlord? ) Lower home prices in some areas combined with low interest rates make this the best time in years to become a real estate investor. News sources have been reporting a strong rental market since summer, calling it a “landlord’s market” in many cities and anticipating rising rents.
My input: If you’ve run the numbers and buying income property is an investment you’d like to move forward with, location is the MOST important thing to consider. The tip in the WSJ article about buying rental properties in your immediate geographical area is a good one, I think. Even though prices can be lower elsewhere, maintaining properties remotely can be very difficult. Safe neighborhoods near good schools and public amenities like parks, public transportation, and shopping districts are especially attractive to renters. What type of property are you interested in buying? Condominiums can be a good choice for first-time investors. But they appreciate more slowly and command smaller rents. Single-family homes tend to attract longer term renters. Also, don’t forget duplexes, triplexes and fourplexes which are great investment opportunities.
The ultra-urban and contemporary home of some friends (John Dunham and Dana Kawano) is featured in the Wall Street Journal today (A Tall Order in San Francisco). What a beautiful home they have built. Architect Olle Lundberg took their industrial, Japanese and artistic inspirations and combined them to create a truly one-of-a-kind residence. Reading about their lifestyle changes (from Mid-Peninsula to San Francisco) made me think about how fortunate we are to have the city so close to us. I love living on the mid-peninsula—life with a family doesn’t get much better then this. But it sure is nice to be able to experience the amazing things San Francisco has to offer (restaurants, art, design, etc.) within just a few minutes’ drive.
I was reading an article in the New York Times the other day about The Waldorf School in Los Altos (A Silicon Valley School That Doesn’t Compute). A friend and client (Alan Eagle) is quoted in the article as rejecting the notion that children need technology aids (computers, iPads, etc.) in grammar school to thrive. Alan offers a fascinating philosophy about education here in the heart of Silicon Valley—and he happens to work at one of the most cutting-edge technology firms in the world (Google)!
This is what I absolutely love about living here on the Mid-Peninsula. We have many, many strong points of view about important topics such as education in a very small geographic area. The intellect that surrounds us locally is just amazing. Our choices in education here range from excellent public schools to a variety of independent school models—whatever your views on childhood education may be, it’s almost certain that an option exists here which will work for you and your family.
Earlier today in downtown Palo Alto, I ran into Eric Trailer of Absolute Mortgage Banking. We chatted about the dynamics of the “millionaire watch” cited in today’s Wall Street Journal (Millionaire Watch: In Silicon Valley a Countdown Is Under Way). As many of our local technology firms plan to go public (Facebook, Zynyga) and employees who have their shares unlocked at firms who already have had an IPO (LinkedIn, Pandora Media), it’s anticipated that many will purchase high-end goods (everything from homes to cars to motorcycles). Eric mentioned he has tripled the staff at his mortgage firm, and said he does think we’re going to see a very busy winter in terms of local home sales. This dynamic was seen in the 1990’s, but many people were burned when the dot-com era ended. I think that now there is anticipation about what will happen once tech employees at firms going public can spend, but it feels a bit more restrained to me. Even so, I think that given the current lack of inventory in our Mid-Peninsula housing market, and this anticipated demand, our winter housing market could be an active one.
Interest rates for 30 year fixed mortgages fell to their lowest rates ever—wow. (CNN Money) While prices have not fallen in our local Mid-Peninsula neighborhoods, the cost of home ownership has fallen considerably. Historic low interest rates haven’t been helping the real estate market across the country the way regulators and politicians have hoped for, but here in Palo Alto, Menlo Park and surrounding areas it is certainly another driving force that is keeping our demand high.
If you are thinking of buying a home, my advice is to find a good house and make an offer so you can lock in a low rate now. Prices in this area are not going down, so don’t wait for the “bottom of the market.” At least that’s my opinion. The deals I see being made now are going to pay off long term for those who step up. While prices may not see any solid appreciation for another year, the reward of a relatively low tax base and historically low interest rate on a trade-up property will pay off both sooner and later, making the joys of Mid-Peninsula home ownership all the greater. Expect new listings coming on the market in the coming weeks to be realistically priced, but be prepared to compete with multiple offers.
The current number of listings in our local neighborhoods has fallen from one year ago, while demand has remained high. Right now in Palo Alto, the number of houses for sale is almost 50% less then last year. While the numbers of new listings have decreased, the number of homes sold has stayed mostly the same. Even with two of the wildest months in stock market history, our market continues to defy what is happening in other markets across the state and country.
If you are considering selling your Mid-Peninsula home (Palo Alto, Menlo Park or surrounding areas) the traditional fall selling season would have started in earnest right after Labor Day with lots of new listings hitting the market. So far this hasn’t been the case and sellers that have chosen to list now have benefited from the low inventory and high demand. If you’ve been thinking about selling, the time may be right for you.