In previous posts, I have indicated that the strenght of the market is a function of the price range involved. In my opinion, the market in 2007 has been strong properties priced at about $800,000 and above and weaker for properties below that price range.
To illustrate this point, let’s look at inventory levels in two cities, San Carlos (where the average price is about $1,200,000) and East Palo Alto (where the average price is about $600,000).
San Carlos
San Carlos inventory levels typically bottom out in January of each year. As with Menlo Park, the inventory level in January 2008 is higher and in the two preceeding Januarys.
East Palo Alto
Unlike most cities on the Peninsula, the CURRENT inventory level is HIGHER than at any point in the past 3 year. This graph clearly indicates the weakness in the East Palo Alto market. The inventory levels have been increasing since January 2007.
I believe the East Palo Alto inventory level is indicative of the damage the “subprime” crisis has done to the entry level market on the Peninsula. I would venture to say the overwhelming number of buyers who purchased the past few years in East Palo Alto obtained “subprime” mortgages. These mortgages are not available at the present time. Hence, East Palo Alto homes are not selling and perhaps many owners in East Palo Alto have put their homes on the market as the loan payments are no longer affordable.
Kevin Boer a Palo Alto real estate agent has looked at inventory levels from Burlingame to Los Gatos including Palo Alto.
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