Palo Alto Weekly

Real Estate - September 28, 2012

Real Estate Matters

Is market timing really possible in real estate?

by Wendy McPherson

From June 2009 until December 2010, there were about 1,000 houses and townhouses sold in Menlo Park and Palo Alto. I suspect that most of those buyers are very pleased with their purchases right now. They should be.

Based on average prices in those cities, that time period reflected the lowest prices in about the last seven years. Not only were the house prices the lowest but interest rates were about 5.5 percent, historically very low. Add to those factors, the regular compelling reasons to buy in this area (lack of land on which to build, a vibrant business community, a world-class university and almost unlimited intellectual stimulation) and what's not to like?

So why were many buyers unable to make a commitment to buy during that period? During those approximately 18 months, all I heard from my agents was: "My buyers won't make a decision." "They look and look and just won't make an offer." "My buyers will not get off the fence."

It's not liquidity that moves houses, or IPOs, or growing companies that are hiring. These things are tributaries. What really moves our marketplace is the river of consumer confidence, and consumer confidence was at a very low ebb during that time. If you don't have confidence in the future (or the future of the asset you are buying) then most of you will not buy.

Long-term timing

The successful investor notices the crowd mentality and starts to analyze and study the underlying structure of the marketplace. What fundamentals have actually changed? Has the amount of land on which to build changed, the business environment changed or the educational opportunities changed? How secure is the Silicon Valley machine? Will our area be better or worse in five years? If the answer to your analysis convinces you that following the crowd is the wrong thing to do, then you are a contrarian. The time to buy is when everyone else is not buying. Welcome to the Warren Buffet side of the equation.

Real estate is just another asset class in the financial spectrum. It offers a wider window of time in which to analyze and decide about buying and selling. Of course, most residential sales are based on personal client need. However, considering the percentage of net worth most of our homes represent, it is certainly prudent to examine the timing of that large investment.

Short-term timing

Learning to look for seasonal timing signs is another key to making a smart investment. My friend, Sarah, will be celebrating the first anniversary of her house purchase in Palo Alto on Dec. 23. She bought the house on Nov. 23 last year (the day before Thanksgiving) and closed two days before Christmas. The people she bought it from had had their house on the market for more than three months and while many other sellers had taken their houses off the market for the holidays, her sellers had not. Given a choice, most people do not want strangers traipsing through their house on the day before Thanksgiving. The timing was right for Sarah and her family and it was clear by the sellers' timing that the sellers were looking for an offer — Thanksgiving week or not.

From a seller's perspective, giving thoughtful consideration to the timing of presenting their home on the market for the first time can be critical. The obvious bad times are Christmas and Thanksgiving weeks. Other bad times, especially in this area, are graduation time, most of the month of August, and the week of July 4. There may be still other times that your real estate professional can fill you in on. Competition specific to the product (your home) is critical to this analysis also — what else is out there on the market? The timing of the placement of a home on the market is an art. If it is done properly, it can be worth a lot to your bottom line.

Given our local economy's close adherence to the vagaries of the stock market, and especially, NASDAQ, it is also important to be sensitive to the stock market's ups and downs. We have an extremely efficient real estate marketplace: For every buyer there is a seller, for every seller, a buyer. If you take the time to study and consult professionals, that marketplace will reward you.

Wendy McPherson manages about 145 agents for Coldwell Banker in two Menlo Park offices, plus Woodside and Portola Valley. She can be reached at WMcPherson@cbnorcal.com.

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