Arn Cenedella

Archive for the 'Real Estate Data' Category

Real Estate Statistics – take with a grain of salt !

Kevin Boer of 3 Oceans Real Estate, a Palo Alto real estate broker recently posted on analysis of Menlo Park real estate market data. The median price of Menlo Park homes has dropped significantly over the past year or so. Have property values actually dropped? Local agents like Kevin Boer and myself are out seeing and selling property in our local market place. We know Menlo Park values HAVE NOT DECREASED. Kevin’s analysis indicates that over the past year or so inventory has increased dramatically in Belle Haven, a Menlo Park neighborhood located east of HWY 101. The Belle Haven area is the lowest priced neighborhood in Menlo Park (average price $600,000) and it has been especially hit with the subprime mortgage meltdown. Inventory has decreased in the more expensive areas of Menlo Park west of HWY 101 and especially west of El Camino. So what has happened is that lots of lower priced homes in Belle Haven have come on the market and DO NOT sell, therefore the median price of Menlo Park homes has dropped BUT VALUES have not gone down.

This clearly points out why statistics need to be taken with a grain of salt and also points out the important of working with an expereinced local agent who knows the market in order to give you the accurate up to date information on the market.

Zillow estimates? How accurate are they?

How accurate are Zillow estimates?

As a test, I decided to check the Zillow estimate of my own home in San Carlos.

My home is a 3 bedroom 1 bath home of a little over 1200 square feet.

It is located in the desirable White Oaks area of San Carlos and is located on one of the best streets (only 2 blocks long – large lots – no thru traffic) in the White Oaks neighborhood.

The Zillow estimate was $794,087.

I know I could put my house on the market and sell it tomorrow before NOON for that price !!

I looked at the 50 comps used my Zillow.

The average price per sf for these comparables was $698 per square foot.

Of these 50 comparables used by Zillow:

22 were either in Redwood City (lower average sales price than San Carlos) or on very busy streets like Alameda de las Pulgas or Brittan Avenue.

Of the remaining 28, 9 of the comparables houses were over 1,500 square foot in size.

Using larger homes to value a smaller home on the basis of cost per square foot underestimates the value of the smaller home because such a large percentage of the overall value of the property is in the land. If a price per square foot number is accurate across all size homes then a 1,000sf home would be worth one half what a 2,000sf home would be (in the same neighborhood) and I think we all know that isn’t true.

Eliminating homes in the wrong city or on busy streets and eliminating homes that are 25% larger than the subject property results in a price per square foot of $750 -  an 7.4% increase in price per square foot. An 7.4% increase in the zillow estimate would result in a market value of approx. $850,000 – still low but closer to the true value.

Zillow provides some useful “down and dirty” information but really is only a broad brush estimate of value. It is a starting point only. Condition, degree of updating and remodel, school district, overall appeal, and specific locational factors are not considered.

For an accurate estimate of your home’s value, contact an active real estate agent in your neighborhood. He or she will know the recent sales and the competition. The value analysis can be fine-tuned based on this expert local knowledge.

A colleague of mine in the Piedmont area Julie Joyce Coldwell Banker in her homes across the bridge blog did a similar study and found that Zillow included comparables in another city and in an inferior school district.

Nothing beats local knowledge !

The SF Chronicle finally gets a real estate article right !

Carol Lloyd of the SF Chron, in an insightful article, talks about her friends who are first time buyers with a big down payment and how they can’t find a house to buy in San Francisco. Carol talks about how her friend’s experience – actually being out there in the market, looking at houses, trying to find a house, making offers and still being unable to buy a house – is SO DIFFERENT than what most of the media would have you believe about the current market.

Insightfully in her tale of San Francisco’s two cities, Carol writes:

Far from the Nob Hills and Noe Valleys, the Pacific Heights and Outer Sunsets, there are neighborhoods stretching across the southern and eastern quadrant of the city that tourists have never heard of and many San Franciscans have never visited. And it is these areas – Portola, Ingleside, Ocean View, Mission Terrace, Outer Mission, Bayview, Excelsior – that have been hit hardest by the real estate downturn.

A local agent tells Carol: “For the whole city, the supply of homes is about 3.7 months,” he says referring to a common measurement for predicting how long it will take to sell the homes on the market. “But if you take out those (southeastern) neighborhoods, the supply is closer to two months. If you look only at the (southeastern) neighborhoods, the supply of homes is closer to 20 months.”

Why would one part of San Francisco experience the housing bust while other neighborhoods seem immune? “We really started to see it during the whole subprime mess,” adding that buyers have become more scarce in part because low-down-payment loans have become more difficult to obtain.

The agent continues: “The banks got much pickier. The people in Pacific Heights never had to lie for a loan – never had to do stated income, they have sizable down payments. But the people buying in the lower end of the market – up to, say, $700,000 – often had no-down-payments with adjustable loans.”

Indeed, an inordinate number of the single-family homes coming on the market in recent weeks are located in these neighborhoods. 77 percent of December’s SFNewsletter’s list of houses that have been on the market for more than 100 days come from these (southeastern lower -priced) neighborhoods. ”

This pattern of two markets is demonstarted again and again up and down the Peninsula.

Above about $800,000 market is strong.

Below $700,000; the market is weaker.

A Tale of Two Cities

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.

Interested in Los Altos real estate?

My colleague David Blockhus at Coldwell Banker Los Altos  has just completed an inventory study for Los Altos. David also provides some interesting data regarding the number of listings each year with the number of sales each year. List price to sales price ratios are often published. The number of listings to numbers of sales is also a good market barometer.

There are some good comparisions between Los Altos and Menlo Park.

Current inventory levels as of January 1, 2008 are higher in both communties than they were in 2006 and 2007.

Inventory levels in Los Altos were quite a bit lower in 2008 as compared to 2006 and 2007. In Menlo Park, however, inventory levels in 2008 were about the same as they were during the preceeding 2 years. Interesting?

As noted in my earlier post, neighborhood differences within cities are important. Los Altos is a fairly homogeneous community with little or no moderate income property available whereas Menlo Park is a little more diverse and does offer housing in the Belle Haven area in the $600,000 price range – Los Altos homes typically start at about $1,000,000.

Another similarity to note is that in both communities during 2006 and 2007 the inventory curve contains a single “hump” – start low in January increase until about September and then drop through the rest of the year. In 2007, the inventory curves have more of a double “hump” (Math or statistic majors please help me out! I know there must be a technical term for the “hump”) where inventory levels rose after Labor Day and then decreased later in the year. I wonder why?

Inventory Levels – Menlo Park Real Estate

What will the new year bring for Menlo Park real estate?

Below you will see a graph showing inventory levels for single family homes in Menlo Park over the past 2.5 years.

The inventory levels for available single family homes usually reaches a low point right around January 1 of each year. On January 1, 2006, there were 45 single family homes for sale in Menlo Park. On Janaury 1, 2007, there were only 27 single family homes for sale in Menlo Park. Currently as of January 1, 2008; there are 67 single family homes for sale in Menlo Park.

So current inventory is higher than it has been the past 2 years. I guess that’s no suprise given the current market.

Inventory levels typically increase from the low levels in January and reach a peak in Menlo Park typically in May or June of each year. Inventory levels often tend to drop a little towards the end of summer (family vacations? getting kids back to school? the dog days of summer?) and then pick up again after Labor Day until dropping again as we approach the November and December holiday period.

The shape of these graphs on an annual basis are similar but not exact. 2005 and 2007 exhibited a spike in inventory after Labor Day where 2006 did not.

I thought it would be informative to compare listings and sales for the last 4 months of each year – i.e. September, October, November, and December.

In these 4 months:

2006             170 new listings        130 closed sales           40 more listings than sales

2007             122 new listings        107 closed sales            15 more listings than sales

2008             157 new listings        74 closed sales              83 more listings than sales

These number clearly show why inventory has not dropped as much at the end of 2007 and it did in the preceeding years – fewer closed sales compared to new listings – hence higher inventory.

What will 2008 bring?

My sense is overall inventory will increase significantly from the current level of 67 homes as we leave the holiday period. Many of the agents in my office say they are working on new listings that will come to market the first quarter 2008.

But again, one must remember real estate is very local.

Even within cities, each neighborhood is different.

My sense is well-priced homes in west menlo will be in high demand and will sell quickly as they come on the market. There will be more buyers looking in west menlo than there will be houses for them. The less expensive areas of Menlo Park near HWY 101 and east of HWY 101 will see softer markets than experienced west of El Camino.

Current MLS data indicates 58 homes for sale in Menlo Park as of 1-3-2008.

27 of these are located in Belle Haven – east of HWY 101.

10 of these are located in the unicorporated area of Fair Oaks off Marsh Road.

5 of these are in the Willows or the Flood Park triangle off Bay Road.

6 are in west Menlo and 6 are off the Alameda or in Sharon Heights.

So maybe ONLY 12 homes for sale in west menlo.

Again, it is all abut location, location, location.

What is the real estate market doing in other areas?

Altos Research provides real time real estate information to real estate professionals and investors.

In their December Real IQ Housing Market Update; 20 major metropolitan markets are analysed.

The report indicates:

Listing inventories over the past 3 months have declined in all markets except for Las Vegas, Detroit, and Miami. San Francisco had one of the largest decreases in listing inventory. The report attributes some of the listing inventory decreases to seasonal factors.

The monthly average days on market ranged from a high in Miami of 137 days to a low in San Diego of 75 days. San Francisco had one of the shorter average days on market with 83 days.

Percentage of Inventory with price reductions ranged from a high of 51.5% in Las Vegas and Minneapolis to a low of 32.8% in Washington DC. San Francisco saw price reductions on 50.3% of the inventory.

This data is for single family homes only. Condominiums and townhouses are not included. Each market area is defined by the Census Bureau’s Metropolitan Statistical Area.

Real Estate Data: How helpful to the consumer?

There is almost an unlimited amount of real estate data available to real estate professionals and consumers alike.

The amount and availability of data is so different than it was when I entered the real estate business in 1978. Back then, there was no computerized database of mls listings. Each agent carried around a little black book that contained the listings. Each city had its own board of realtors with its own listings. Each city had their own keysafe keys. Since I sell property from San Carlos to Sunnyvale, I had 5 or 6 different keys to open up lock boxes. “Hotsheets” were printed out twice and a week. These “hotsheets” showed new sales, new listings, and price reductions. Agents updated their little black books by hand.

Fast forward 30 years – what a difference! On the Peninsula we have one mls system! One keysafe opener will open keysafes from San Jose to San Francisco. Zillow and Trulia post listing and sales data. MLS information is available to consumers thru a wide variety of sources.

Back in the old days, one of the main services an agent offered was access to the mls information. Today just about anyone can access mls information.

So what benefits do agents provide? what value do agents bring to today’s consumer?

Marian Bennett Coldwell Banker sells real estate on the San Mateo Coastside has written a recent post addressing these questions.

I agree with Marian that depsite all the information available to the consumer, an agent can help put this information in best persepctive for a buyer or seller. Agents like Marian or myself are out in the marketplace everyday. We see these properties – we see what’s on the market and what has sold. We can give buyers and sellers more detailed non-quantative information about these properties that are not available on the Web. We have been through countless transactions and can help guide our clients to solutions that work best for them.

1326 American Way Menlo Park has sold

1326 American Way is under contract – like 5 days on market !

Wonder what it sold for?

A true market barometer !

We see countless reports about average and median prices going up or going down.

This kind of data while giving some information about the market always needs to be taken with a grain of salt. At any given time in any given market, certain price ranges may be stronger than others. So if in a given market, homes in the higher price ranges are selling more frenquently than those in the lower price ranges; the average and median price may increase even if market values in reality do not increase. The converse is also true – if the lower end gets hot and the upper end slows, average and median prices may drop eventhough values are actually going up.

The better data to get a handle on what the market is doing is to track the same property over time.

A new listing just came on in west Menlo Park that will allow us the opportunity to get some concrete data as to what the market has done over the past 5 years and give us a better idea of where the market is in relation to a year or so ago.

1326 American Way listed by Louise Guzzo of Cashin Company (650 598-4900) at $1,225,000.

The home is a 2 bedroom 2 bath home with a small addition to the rear – contains 1,370sf of living area and sits on a 6,000sf lot.

This home last sold April 19, 2002 for $895,000 (bid up from a $765,000 list price).

I saw the home when it was on the market in 2002 and I toured the home today. I can tell you the current owner has done little or none significant updating to the home. The home is basically similar to what it was back in 2002. Therefore, the difference in the 2002 purchase price and the 2007/8 sales price should be primarily a result of the appreciation of property values in the west Menlo area over the past 5 or so years.

So let’s see what the property sells for!