Realtors all over Silicon Valley are being asked their opinion on what the market looks like. Some people want to know because they want to make sure the equity in their home continues to maintain its value; others want to find out whether maybe, just maybe, they can afford finally to buy.
Taking a look at the big picture is a good idea, since the real-estate market typically runs in cycles. There are high and low periods running an average of 5 to 10 years. On the other hand, you can't really describe the San Francisco Bay Area and Silicon Valley as a "typical" real-estate market.
During the past two decades, the local real-estate market has enjoyed a somewhat consistent upward spiral. Although the market has experienced some peaks and valleys, our valleys have never been so extreme as the declines seen in other parts of the country and prices have always rebounded.
About 10 years ago, the market was going through one of its "down" periods. During this time there were many homes that didn't sell within the first two weeks or even two months. Prices were sometimes reduced, and only a few of the most desirable properties in the best areas sold with multiple offers.
The past two years have been extremely unusual. Prices escalated dramatically, driven by the high demand of the work force and the low supply of new listings. The minute a sign went up, buyers were knocking at the door. Irrespective of location and condition, all houses were selling.
During the first few months of this year, things appear to be settling down. The supply of listings also seems to be increasing. It's not that the buyers are gone; it's just that they seem to be more selective. Homes that are in less desirable locations, in poor condition and/or overpriced are not selling with multiple offers. Many of these homes are staying on the market, and their prices are being reduced. That doesn't mean that the bidding wars are completely over. Exceptional homes that are well priced and in good locations are still selling quickly and often with multiple offers.
That sanity has returned to the market is good news for buyers and sellers, who will also share the benefits of a more "normal" market. They will still receive good return on value for their homes, with less pressure and potential liability. Bidding wars don't improve property values so much as they force buyers to make hasty purchase decisions without having enough time to evaluate the property. Buying a home is a huge commitment and should be taken seriously by both buyers and sellers. A slower market that allows for purchasing based on the genuine suitability of the property to the buyer rather than the heat of competition is much better for the economy. And reasonable contingency periods to allow for buyer inspections would also be beneficial to everyone involved in the transactions.
A realtor with Taylor Properties in Palo Alto, Ceci Ellis is a local residential real estate specialist who started her career more than 20 years ago in investment real estate.