I’ve lived in Palo Alto since 1984. The local papers around here (the Palo Alto Weekly and the Daily News) are funded almost entirely through ads for real estate, so it’s pretty easy to keep one’s pulse on real estate by way of how many ads there are, how large they are, and what they emphasize. I will say, however, that in the past 35 years, I have never witnessed two particular words of the English language until now.
Price. Reduced. It’s the kind of phrase that should strike terror into the heart of anyone considering paying millions of dollars for a simple house. Because if prices are plunging, why would you make the largest financial commitment of your life and get a 30-year mortgage if the price just keeps falling? The psychology is just the opposite of a few years ago, when scores of people would line up in the wee hours of the morning just for the privilege of putting in their best offers on a single property.
And it’s not just one outlier ad. I can hardly turn the page without seeing it again….
………and again………(this time with a Trumpian adverb):
Obviously some people have bought recently, and think of the position they are in. Imagine some mid-level manager at Facebook who is feeling absolutely rich. He’s got Facebook stock, a big six-figure salary, and his youth, so he dives into a $4 million house for his starter family. But what if he turns around a few years later and learns the house could only get $3 million in the open market? And how about if his other principal asset, those FB shares, had dropped in value by half? Not feeling so rich, I suspect. To say nothing of the fact that the $50,000/year tax bill shows up every year, and it’s anchored to your purchase price.
At the same time, due to the “housing crisis” around here (which means not every human being is entitled to buy expensive real estate in the hottest market in the country, kind of like how whoever reads this article isn’t guaranteed the right to buy a home in Beverly Hills) has been thrown at the doorstep of none other than our neighbor across the street, Stanford University. They are pledging to create more affordable housing, and they’ve been taking out full page ads in the paper like this:
Although, I gotta tell ya, they might have considered taking another photo or two before spending all that money on full-page color ads. Because the husband in the photo definitely has that My God What Have I Done look on his face.
At this point, the only way to make money buying a house in Palo Alto is to have the good fortune of owning a place that happens to be next-door to a given billionaire who wants to buy up all the properties around his own house (at any price you name). Zuckerberg did it, and now this guy:
In any case, my own residence has already dropped seven figures from its peak price, but unlike a lot of my neighbors, I bought it in 1991 when it was cheap. So, meh, fall all you like. I just live here.