A remarkably lively corpse.
You may be excused for thinking that local real estate—all real estate—has either gone into a deep coma or flat kicked the bucket. A few recent San Jose Mercury headlines that found me without even trying tell the sorry tale:
And just in case you thought there might be a ray of hope for the patient,
Yes, pretty soon you'll be able to buy a house with just the change you get from recycling plastic containers. Unless that house happens to be on the mid-Peninsula. Or in the South Bay. Then you'll have to shell out real US dollars. And maybe more of them than you would have last year.
Bubble? I don't need to check the blogs to know that the bubble heads are gearing up for another holy crusade against home buying, but I think "early signs of yet another recovery" is the more reasonable explanation. You can always count on some of us to be offended that the rest of us find this area attractive enough to prop up its property values. But you didn't need a crystal ball to know that real estate would rebound here. Just because Las Vegas home prices are still falling doesn't mean that home prices on the traditionally desirable San Francisco Peninsula have to jump off the cliff with them.
Let's chart average sales price per square foot to see how 2011 has treated local real estate:
This chart won't be news to anyone who's tried to buy in one of our favorite communities. Palo Alto leads the way, of course, but there's been appreciation in virtually every upper-midrange town. Menlo Park is the one exception (although it's had pockets of boom-like activity) which seems to prove my contention that this recovery is based largely on high school test scores. Note that every community with appreciation in 2011 has high-testing secondary schools. Today's upper-midrange buyer demands uniformly stellar scores from K through 12, and that's something you find in precious few cities, even on the mid-Peninsula. Menlo Park is a great town, but many of my buyers have been scared away by Menlo-Atherton's low average API test score, not realizing that any motivated kid with adequate preparation will get a fine education there. But API scores don't lie, except when they do.
The chart does not lie, however, and it tells us that not every local market has seen home price appreciation. Prices have dipped in many communities lacking the reputation for all-around goodness of, say, a Palo Alto or Los Altos. But as the next chart shows, even their real estate markets have more spring in their step these days. Homes in virtually every city I've charted are selling significantly faster this year than last.
Yes, median days on market (DOM) is almost uniformly down this year, even in communities where prices have slipped. Even the also-rans are turning in credible times these days.
So is Palo Alto, with its 9.54 percent price appreciation and its days on market cut nearly in half in 2011, a fluke, a bubble, or a sign of things to come for second-tier markets? If you're a bubble head, your answer will be a predictable too much! too soon! But if, on the other hand, you see the real estate marketplace not as a battleground between the forces of Darkness and Light, but as a rather interesting place you aim to be someday soon, you might consider making that day come sooner. Buyer's markets are a fun place for buyers. Seller's markets? Not so much.