Bay Area

[Secret_asian_ma]

Saw this home in Nov.  Was listed for 1 or 2 weeks.  My understanding is that there were multiple offers made on it (and even included an over asking offer).  All were rejected as the seller was assuming it would go for more.

Now it's been relisted.  

http://www.redfin.com/CA/Belmont/9-Phyllis-Ct-94002/home/766441

It originally listed for $999,999 in Nov.  This was relisted 2 days ago at $1.1m.  And then yesterday there was a price adjustment to $1.11m!

Am I missing something here?  This house basically went up 10% in 5 months!?  If you look at the comps and estimates for the surrounding homes, there's no way a bank would appraise this house at $1.1m. 

I think this is a case of a seller so in-love with their home, or they're trying to get what their neighbor sold for during the boom.

I hope this thing sits on the market!  GREEDY!

Message Edited by Secret_asian_ma on 03-17-2010 02:46 PM

[SoBitter]

It will probably sell for over asking. I've also seen homes in nice hoods i'm looking in going for 10% above their 2005 resale prices.

WTF? its a doomer's worst nightmare come true...

Lord all'mighty, the bubble is back.

Message Edited by SoBitter on 03-17-2010 02:58 PM

[Secret_asian_ma]

We shall see!  Hard to see that price when you look at the houses surrounding it.  I can't see it getting appraised for that unless they're paying all cash.  

If it's bubble #2, I'm sitting tight and renting!  (though the wife doens't feel the same!)

[PABuyer]

Here's another one that's the same sort of situation:

http://www.redfin.com/CA/Palo-Alto/602-Chimalus-Dr-94306/home/605258

While Redfin can't show the prices prior to the delisting, I've followed this for a while and can tell you that it was originally listed for north of $1.8M and got down to $1.625M after a few reductions.  It sat at that price from June 09-Sep 09 before the owner (the investor who built the place) decided to rent it out instead. 

It was listed for rent on Craigslist for $5,500 a month and was rented out for a time (not sure if the renter is still there).  Then, earlier this month, the house gets relisted for $1.689M - 104% of the previous ask.

So the current asking is more than $800 per ft2 whereas the comp sales are south of $700 per ft2 - and that's for comparable recent construction in Palo Alto.  The house is nice, but it's on a small lot and the amount of living space is small compared to other 4/3s in the area (which seem to be closer to 2,500 ft2). 

This asking price also implies a rent multiple north of 25x.  To put that in perspective, Bay Area rental properties sold at an average GRM (gross rent multiplier) of 9.3x in Q42009.  Even using a very generous 19x GRM implies a price of only $1.25M.

I tend to think Zillow's estimates shoot a bit high, but in this case even they think the house is overpriced.  I'm not sure why it's not linking to the listing, but if you go here: 

http://www.zillow.com/homedetails/602-Chimalus-Dr-Palo-Alto-CA-94306/19505064_zpid/

You'll see that the "Zestimate" is $1.54M - an 8.5% discount to the current asking price.  Not even the high end of the Zillow range is above the asking price.  (And yes, Zillow does have the updated stats for the new construction).

In the meantime, the house is 6 months older and has likely experienced the normal wear and tear of being occupied by a renter.  

All in all this paints a pretty conclusive picture of a delusional seller.

[PABuyer]

Here's another one that was featured on Burbed:

 http://www.burbed.com/2010/03/16/what-to-do-if-your-house-wont-sell-raise-the-price/

$600K price increase ... nice.

[newbiehere]

I think they are trying to get a price comparable to this one which sold for $800/sqft

http://www.redfin.com/CA/Palo-Alto/548-Barron-Ave-94306/home/1707009

BTW I do agree that this house seems priced high for today's market. But it will probably sell for $1.4M or even higher.

Where did you get the 9x gross rent multiplier from ? Was it based only on rental properties, and is that why it is so low ?

In most nicer parts of the South Bay I see GRM of 25 ($2500 pm rental selling for 750K). In more reasonable areas I see GRM of 20.

With a GRM of 9, a $2500 pm rental should sell for $270K . I think it will be very hard to find such prices for a SFH that generates upwards of $2000 rent in the South Bay. (Maybe parts of East bay - but I am not familar with those areas.)

So a GRM of 25 itself is not shocking at all for PA. I suspect a 2000sqft house in PA rents for far lesser than $5500. 

I do think GRM of 25 is high, but that is the reality of where things are with many many parts of the South bay today. Nothing special for this house.

[Duice]

"

Lord all'mighty, the bubble is back.

"

Houses in this price range probably haven't bubbled much; the bubble caused mostly by oversupply of 0 down mortgages.  People who can afford $1m mortgages likely put down a big down payment.  I wasn't in the market back in 05-07 but I doubt banks would've lent 1m with a 1:1 loan to value ratio...

[PABuyer]

---

newbiehere wrote:

I think they are trying to get a price comparable to this one which sold for $800/sqft

http://www.redfin.com/CA/Palo-Alto/548-Barron-Ave-94306/home/1707009

BTW I do agree that this house seems priced high for today's market. But it will probably sell for $1.4M or even higher.

Where did you get the 9x gross rent multiplier from ? Was it based only on rental properties, and is that why it is so low ?

In most nicer parts of the South Bay I see GRM of 25 ($2500 pm rental selling for 750K). In more reasonable areas I see GRM of 20.

With a GRM of 9, a $2500 pm rental should sell for $270K . I think it will be very hard to find such prices for a SFH that generates upwards of $2000 rent in the South Bay. (Maybe parts of East bay - but I am not familar with those areas.)

So a GRM of 25 itself is not shocking at all for PA. I suspect a 2000sqft house in PA rents for far lesser than $5500. 

I do think GRM of 25 is high, but that is the reality of where things are with many many parts of the South bay today. Nothing special for this house.

---

Newbie - Good call on that comp.  Although I think there are many more examples priced at $700 or below per ft2 than ones that went for $800.

The GRM number, if I recall correctly, was from a CB Richard Ellis report and was just for apartment buildings that traded in Q4.  I'll grant you it's a little bit apples and oranges, but it shows how different the math is for investment properties versus principal residences.  That's also why you haven't seen nearly the same level of investor activity in SFH in mid-high areas, because there's no way to make the math work at a 25 GRM.  And while I agree that a 25 GRM isn't unusual, I called it out in this instance because this house was actually rented for that amount.  A lot of times you have to ballpark the GRM and there are always debates about the quality of rentals, etc.  Here you have a direct comparison.  Just run the asking rent and the asking purchase price through a rent v buy calculator and you'll see how aggressive you have to be on price appreciation to have a purchase make any sense at all.

As for this house in particular, I'd buy it myself at $1.4M, but that's a 17% discount to asking.  No way they sell for that without going through multiple price cuts, and considering that they just raised the price - that's going to probably take awhile.  If you really loved the place, maybe you stretch to $1.5M, but anything north of that is overpaying.

[newbiehere]

PABuyer,

 So that GRM is irrelevant in trying to price a SFH today, esp in PA! BTW how do you know the place was rented for $5500 (perhaps just listed on Craigslist for that price!!) ? I would think $5500 would get you a lot bigger place, but I don't follow PA rental market closely, so could be mistaken.

Yes, I agree with you this will go for well over 1.4M. $1.5M may well be possible.

Look at this house in PA which sold for a 15% discount from final list price. Surprised me.

http://www.redfin.com/CA/Palo-Alto/3119-Stockton-Pl-94303/home/594242

After a price reduction, it was listed for $1.78, and then sells for $1.5M. Wouldn't most sellers drop the price further by say 5% before accepting an offer that is 15% below ? What was the strategy ? It seems like a good price for that sized home, in that location.

Anyone have insight into this one ?

But to your original point, I agree I don't know why sellers increase the list price when it did not sell before at that price. Perhaps to make it look like a larger price drop when they starting dropping the price!!

Here is another example of re-listing with higher price.

http://www.redfin.com/CA/Saratoga/13991-Saratoga-Ave-95070/home/839752

Late last year with price cuts it was down to $1.59. Wsa re-listed this year at $1.625 and now price has dropped to $1.545

[norcalnative]

Nov is the end of the season very common for houses to get pulled from the market. Also last years market suffered greatly for obvious reasons - back on the market in March ie beginning of the new season - and the stocks are up in the stock market it would make sense that a seller might want to list it at a higher price.

Welcome to the Silicon Valley where lots of people have money - and when the stock market is up they have even more money