The spring market continues to be in full swing.  As is typical, Palo Alto is leading the way with high demand, multiple offers and increasing prices.  Prices in Palo Alto are starting to edge toward the peak prices of 2007-2008.   For example, a home in Palo Alto, which was listed at $1.3M sold for $1.6M with 18 offers.  Surrounding areas such as Los Altos, Mountain View, Menlo Park and other parts of the Peninsula are also starting to see such activity, but at a lesser rate.  We just recently had a home listed for $849,000 in Menlo Park, which we all thought was an outstanding value.  It did have multiple offers, but did not sell for full price.   Also, it was reported that one of our listings in Belmont had 4 offers the first week but all were under the asking price!  So, what does all this mean?  The good news for sellers right now is that there is an abundance of buyers in the market.  But , sellers need to be careful with pricing, especially in those areas that aren’t experiencing as much demand.

The other continuing trend are the sales of high end homes in Palo Alto and Atherton,  which have recently included multiple offers on $5million + homes.

The investment market is also very active right now due to two driving forces.  One, foreign investors are looking to invest in US real estate and two, the fundamentals are extremely positive.   By fundamental I mean, declining vacancies, increasing rents (average rents are up approx  7% since 2006), and the ability to produce positive cash flow from day one in some cases.  Just a few years ago, it was nearly impossible to have break-even or positive cash flow in the Bay Area with 25%-30% down.

Mortgage News

Currently, the high balance conforming loan program allows homeowners to purchase or refinance a loan up to $729,750 at preferred conforming rates.  These rates are indirectly subsidized by the federal government through Fannie Mae/Freddie Mac repurchase programs.  According to top banking executives, there is very little change the high balance conforming loan program will get extended beyond the current expiration date of September 30, 2011.  Most experts believe that the new conforming loan amount will be $625,000 (or less).  If you are planning to take on a loan in the amount of $417,001 to $729,750, now is the time to take advantage of this program before it expires.

Here are the Current Interest Rates:

CONFORMING (up to $417,000)
30 year fixed: 4. 625%
15 year fixed: 4.25%
7/1 ARM: 3.5 %
5/1 ARM: 3.125 %

HIGH BALANCE CONFORMING (up to $729,750)
30 year fixed:  4.75%
15 year fixed: 4.25%
7/1 ARM:  3.625%
5/1 ARM: 3.375%

NON-CONFORMING (over $729,750)
30 year fixed: 5.375%
5/1 ARM: 4.25