Really Low inventory, historically low interest rates, an economy wrestling for stability on a teeter-totter, and a massive relocation effort have all combined together to create the perfect storm. However, there is one other reason that I normally point to that has been left out. I am referring to it here as the Palo Alto Effect. When I say “Palo Alto”, I am also including Menlo Park, Mountain View & San Carlos. As competitive as our market has become, these markets are even more so. I started to notice a slight change in home cities of agents showing up at homes on Brokers Tour starting last year. We started to pull in agents from these three towns at a much higher rate than we normally would for showings and our tour. Many buyers in these towns who have lost out on several offers have turned their focus to area beyond the initial search parameters. Extending your parameters may yield prices that aren’t quite as high and they feel that they can get close to what they are looking for and can be more competitive in offer situations. As all of our markets continue to tighten, expect the noose of Palo Alto Effect to hold steady.
For many buyers who have struggled through the market for the last six months, they are familiar with the sinking feeling that what they once thought was obtainable, may no longer be. The market has simply passed many buyer groups right on by. Start with the largest group, the 3/2s. A year ago, 1.1M would have been good enough for a 3/2 at 1,500 square feet in the flats of San Carlos. Now, that number appears to be higher than 1.3-1.395M based on several recent closings. That is simply the benchmark. It can be a tough reality for many to face. The concession for many in this group will be possibly buying at 2/1 or a 2/2, saving for a while and then adding on a master suite.
Speaking of two bedroom homes, many that have closed recently and will close toward the end of the next month will indicate a noticeable price jump as well. The new bar for two bedrooms in the flats will be right up against 1M. The concession for this group may be to start a search in other areas that originally were outside the search parameters.
Home buyers extending there search to surrounding communities are trying to gain any edge possible to secure a home. Contrary to buyer perception Going direct to the listing Agent does not necessarily yield an advantage. If you have been working with a realtor that you trust and has the pulse on the specific markets you are interested in and feel inclined to search, Approach your agent and be frank with him/her. Show honesty and integrity to your Agent and your Agent (should by all accounts) return such Honesty and if they can not assist in such a search then at least they can refer you to an associate that can deliver the results you deserve. Recently I am hearing complaints about the lack of Loyalty from established relationships between Agents & there “Clients” If, as a buyer you expect your agent to work diligently on your behalf, represent your best interest with the highest degree of integrity, service & results then suffice it to say that agents should require buyers to apply the same etiquette.
Until Next Time…
Happy House Hunting to those on the Hunt !
Nino M. Gaetano