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Crisis? Not for local housing market, reps say

Original post made on Oct 1, 2008

National financial crisis or no, the wealthy enclave of Silicon Valley formed by Palo Alto, Menlo Park, Portola Valley and Los Altos will continue to experience high property demand and steady prices, realtors and financial advisers said this week.

Read the full story here Web Link posted Tuesday, September 30, 2008, 10:08 PM

Comments (19)

Posted by OhlonePar
a resident of Duveneck/St. Francis
on Oct 1, 2008 at 1:19 am

Our housing prices are going go down if we enter a recession and the stock market does some more tumbling. Options finance a lot of homes around here--there's no money if the options are under water.

Posted by natasha
a resident of Meadow Park
on Oct 1, 2008 at 4:56 am

OP, I grew up around here. Prices level off, they don't go down, except for the highest priced houses, which were overpriced anway while dot com Monopoly money funded those purchases. Normal range house prices (normal being a relative term) will not plummet.

Posted by ZappaFan
a resident of Ventura
on Oct 1, 2008 at 9:07 am

It can't happen here
It can't happen here
I'm telling you, my dear
That it can't happen here
Because I been checkin' it out, baby
I checked it out a couple a times

But I'm telling you
It can't happen here
Oh darling, it's important that you believe me
(Bop bop bop bop)
That it can't happen here

Posted by optimistic
a resident of Duveneck/St. Francis
on Oct 1, 2008 at 9:10 am

there will be dip through the end of the year to be followed by a bounce and flat to moderate appreciation. Continued consolidation will bring much needed liquidity to the thousands of paper rich/cash poor folks looking to buy a new or first home. In a year and a half record high prices will again be broken. my $.02

Posted by OhlonePar
a resident of Duveneck/St. Francis
on Oct 1, 2008 at 10:51 am


We've had housing prices fall before--20 percent in the 1980s. There was a price drop after the 6.9 earthquake. Yes, it comes back, eventually, but we're not immune from price drops.

I think we do have a couple of helpful factors--one is the very nearby companies that are doing well (Google readily makes up for Sun)and having good schools in a state that has a severe shortage of them. We're also a job center.

Even so, there's a lot of tumbling in real estate. At what point, as a family, do you decide to buy the big house in the less-than-stellar school district and send your kids private?

Posted by steve
a resident of Duveneck/St. Francis
on Oct 1, 2008 at 11:19 am

As a member of the national financial press, the fact that realtors are even discussing the issue and trying to convince everyone to the fact says it all- local realty is heading for trouble (anyone notice the increase in houses for sale, the empty open house showings, the reduced number of transactions - and that is just for those actually listing, not to mention those who are holding back from doing so)

Wasn't it just days/weeks/months ago that the Fed was saying the fundamentals of the national economy were sound - oh how quickly that has changed!

While the valley may be amongst the last place to feel the pinch, get ready to say a nice big "Ouch!" from the pain of it all - walk around downtown Palo Alto and talk to the merchants and eateries who are desperate for business from these so-called rich Palo Alto homeowners wo aren't feeling the effect, except that they've cut back on al non-essential spending.

Posted by OhlonePar
a resident of Duveneck/St. Francis
on Oct 1, 2008 at 11:37 am


I thought a similar thing--Realtors always, always give a positive spin, so it's all about reading between the lines.

I don't want the real-estate market to fall here--I haven't owned a house long enough to just toss off a housing slump, I just see a lot of negatives.

From a purely selfish basis, I don't need any more developments going up.

Posted by AnotherZappaFan
a resident of Midtown
on Oct 1, 2008 at 11:47 am

And they thought it couldn't happen here

(duh duh duh)

They knew it couldn't happen here

They were so sure it couldn't happen here

But . . .

Posted by George
a resident of Old Palo Alto
on Oct 1, 2008 at 1:32 pm

Pass the weed please.

Posted by Real Terms
a resident of Another Palo Alto neighborhood
on Oct 1, 2008 at 1:41 pm

Housing prices can drop anywhere, even lively Palo Alto. If you look at the U.S. Dollar versus a basket of currencies from trading partners, then local housing prices have dropped relative to other currencies. Why do you think all those foreign tourists are here in the U.S. on shopping sprees?

Posted by Los Altos Native
a resident of Los Altos
on Oct 1, 2008 at 1:42 pm

I agree with Natasha, I've grown up here too and prices in the good areas: Palo Alto, Los Altos, etc, will not plummet. Like the article said they may level off or continue to rise but not as fast. People want to live here, there is always a demand and that's what keeps prices steady. Now if the Bay Area were to fall into the ocean, that would be a different story.

Posted by zanon
a resident of Esther Clark Park
on Oct 1, 2008 at 3:03 pm

Los Altos Native is right.

Palo Alto and Los Altos may have lower prices if they fall into the Ocean, but even then, I'm not sure.

In the meantime, we must stop all construction, pull down houses, and make parks.


Posted by Steve B.
a resident of Menlo Park
on Oct 1, 2008 at 4:14 pm

1. Prices did not drop 20% in the 1980's. To the best of my knowledge, that is not correct. There was a downturn in the very early 80's due to record interest rates -- 18% or higher for example. Houses stopped selling almost completely as a result until adjustable rate mortgages came into being and seller financing on short term (5 years) came into being. Prices went flat to slightly down for a while then came back up. There may be exceptions here or there but that was the reality. Rarely has the area, especially areas such as PA, MP, LA experienced a 10% temporary downward push on prices. (5-8% is more realistic in the broadest sense of the market but only for a brief time.) What is correct is that the very high end of the market had the most significant adjustments after Nasdaq 2001. They had also had the most significant increases, in some cases 50% to 100% in rare cirumstances in a two year period prior. Much puchasing with stock options. Even with the a huge adjustments afterwards, they remained above their pre Nasdaq crash prices. And in almost all community price points now far exceed those prices then. (Not though at the $10.0+ range.)
2. Open houses in PA and surrounding communities are very busy and in fact inventory is at one of its lowest points in years. Demand is there. Confidence is not. Statistics for last several years prove that out.
3. Prices do go downward, go flat, etc. but eventually come back up. Just depends on how long. 1990's saw a downturn and gradual drop in price from 1989 thru end of 93, then turn around, then thru the roof. The slow down though was measurable in number of sales decreasing during that time period year to year. 1996 blew the roof off pricing and values in the area once it turned around. The demand will only wait so long before the market starts to move strongly.
4. We've been there before.
5. This may be a difficult time but is one of the best times to be buying if you can arrange the financing. That is the more difficult part. Those people who can't sell their homes take them off the market.
6. Unfortunately during last S and L bailout of the 1990's, only the National Resolution Trust Corporation (which is where we may be headed again) was able to level out the financial mess of lenders. We are heading there again now and sooner or later the fed will hopefully makes sure that money (banks) are not lending money without some common sense qualifications and ability to pay. In PA, MP, LA and surrounding communities we did not see that much of the subprime loans due to the price points of our properties, but we are not an island so it becomes more of a slowdown than a crash locally. Happens over and over again. We've been there (the S and L bailout of the early 90's) before, and hopefully won't have to be there in another 15 years as before.

Keep a good thought. There are enough other things to be concerned about. Tight money is currently a reality in the large picture but local banks, eg. Wells Fargo, etc. are very solid financially and did not get as absorbed into the subprime loans. As always in the past, eventually buyers and sellers figure it out and houses begin selling again. The demand and supply issues don't change, they may go on hold or wait and see, but they don't really change. And as in many markets in the past, once the market comes out of that holding pattern, it ends up costing the buyers money as home prices first firm up, then go up.


Posted by Realtor
a resident of Ventura
on Oct 1, 2008 at 4:59 pm

It's *always" a good time to buy real estate. Just ask your

Palo Alto is way too special for housing prices to go down.

"Everybody's safe and it can't happen here."

Hey George, you're bogarting over there!

Posted by Chris Iverson
a resident of Downtown North
on Oct 6, 2008 at 10:58 am

I'm a Realtor in Palo Alto, one of those evil beings mentioned below as always saying that prices are going up. The reality is that the market has slowed, inventory is up, and transactions are way down from the last few years. My clients see the market as going down, and are waiting for it to shift. It's a Buyers Market, even in Palo Alto, and while we won't see the slide that has happened in Sacramento or Stockton, prices are off from the last couple of years.

You can see objective charts and statistics on Palo Alto and the surrounding communities for free at


Posted by OhlonePar
a resident of Duveneck/St. Francis
on Oct 6, 2008 at 1:47 pm


Thanks for being straightforward. I don't think we're overbuilt here the way the Central Valley was, but there are just too many things for us not to feel some effect.

Posted by Google Stock
a resident of Old Palo Alto
on Oct 6, 2008 at 3:47 pm

Just FYI, Google Stock is down quite heavily this year, so is Apple and other Silicon Valley Companies. So where are these buyers going to come from? Case-Schiller did just show that the Bay Area dropped about 25% in the last year, some areas more than others, but the trend is certainly looking down. Throw in a recession, and things could get dicey even for Palo Alto. Go check out a chart for the Japanese housing boom/bust, it's been 15+ years from peak and it is still like 40-50% under peak prices. Unless you get phenomenal growth or inflation, we may have a long way to go.

Posted by narnia
a resident of Midtown
on Oct 6, 2008 at 7:21 pm

Los altos Native (or should I say Naive?)

Prices DID plummet in around 1989 by 25%. Those are the stats.
The house I sold in February of was again sold in 1990 barely 14 moths later for 26% less than buyer paid me. Buyer had to sell. It is true that if you stay for a while and if employment growth continues the chances are you will be able to recover. But the price of a house on the market will go down nevertheless. There isn't any IPO money around now and stock options have all but been wiped off. So demand will level off and with it prices.

Posted by narnia
a resident of Midtown
on Oct 6, 2008 at 7:23 pm

chris iverson,

thanks for being honest.

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