I just listed a house for sale in south Palo Alto. Well, it isn’t a house, really, at least not any more. You see, the house was essentially destroyed by a fire. The good news is that nobody was hurt. The bad news is that the house has to be demolished and completely rebuilt.

But that is only part of the story. My clients originally had planned to rebuild the house themselves. Even though they have not lived there for over 20 years, they are sentimentally attached to it because that is where they raised their children before they moved to their current home. But it quickly became apparent that the house was underinsured and the insurance payment did not even close to covering the cost of rebuilding.  In additon to being underinsured, the policy did not include “code upgrade” coverage.

Because the house is in a flood zone, local regulations now require that the foundation has to be raised at least 3 feet to minimize the potential for future flooding. In addition, there have been many other code upgrades since the house was originally built some 50 years ago. All of these code upgrades substantially increase construction costs over and above the amount covered by their insurance. And so, they are forced to sell.

There are two insurance endorsements that could have prevented their loss… inflation protection and code upgrade coverage. If you do not have these two endorsements in your existing policy, pick up the phone right now and call your insurance agent. In addition, be sure to review your policy coverage every two or three years to make sure the coverage remains in line with the current conditions. Do not count on your insurance agent to call you. It is important to be proactive to protect your investment.

This is the weekly update from Coldwell Banker, Northern California COO, Avram Goldman:

The Easter Bunny, Spring break and the last (hopefully) of the rain put a bit of a damper on the market. We saw fewer multiple offers and listings come on the market. However that didn’t stop buyers in certain markets that seemed to power right through it---Central and Southern Marin, Danville, most parts of San Francisco, Palo Alto and parts of Menlo Park seemed unfazed. The San Rafael office had 17 opens for the week and So Marin had a $3.1 mil. home sell with 6 offers. In San Francisco we had strong multiple offer activity with the offices having between 25-50% of their offers involved in multiples and this figure does not include pre-emptive offers. A listing in our Van Ness office at $4.75 mil. received 5 offers. In San Mateo we had a listing at $1.248 mil. garnering 9 offers and a listing in Portola Valley at $1.325mil received 4 offers. These were all homes in inventory short markets that were priced competitively.

San Mateo and San Francisco counties still have a lack of inventory to supply the current demand. Overall inventories remain in the 2-4 month range for our markets. Again this reflects a balanced market. Open houses for the most part were active. Buyers are still more cautious than they were last year and most sellers still need to negotiate with buyers unlike a year ago.

With the weather clearing we will watch with great interest to see if more inventory begins to come on the market. Certainly, if that inventory is priced and presented properly we should see an increase in sales.

Here are the numbers for the week of April 10-16^th: 

5 offices reported increasing inventories, 19 steady and 3 declining---sales activity showed 5 offices increasing 16 steady and 6 declining.

Avram

I read in the paper last weekend that median home prices in Santa Clara County were down in April 2006 compared to April 2005. This is significant because this is the first year over year decrease in some time.

At first glance one might think that the much discussed bubble is finally showing signs of bursting, but be careful not to jump to conclusions. The article went on to explain that starter homes were still selling fast and with multiple offers, but more expensive and luxury home activity has slowed significantly.

It is important to understand that the median home price is simply the midway price between the highest and the lowest prices. If the median price decreases, it does not necessarily mean that the price of similar homes have decreased. If the number of expensive homes sold has decreased but the  number of less expensive homes remains the same, that alone will lower the median price.

First time buyers who are looking for a bargain may be sorely disappointed to find out that the home they could have bought for $750,000 this time last year is now selling for $850,000 this year, even though the median price has declined.

I continue to counsel my buyers to buy the home they love and plan to stay there for at least 3-5 years. Even if there is a temporary decline int he market, it is sure to rebound and become a good investment in the long run. And in the meantime, they will enjoy having a home of their own with all of the advantages that go along with it.

To search for homes for sale in the mid peninsula area, visit my website at www.Lmercer.com.

More and more we read about the real estate bubble. It seems our newspapers cannot get enough of it. I suppose it generates revenue for them. The San Francisco Chronicle is one of these, as witnessed by yet another article along the same lines this past weekend. But somehow they are not living in the same world as I am. Consider this:

Listings in Santa Clara County currently number around 2800. It is true; this is approximately twice as many listings as this time last year. But in April of 1990 (when the real estate market did, in fact, drop) there were 14,000 homes for sale in Santa Clara County! Sellers were frantic. Now that was a real estate bubble!

It is true that only about 40-50% of listed homes in the Palo Alto/Mountain View area are currently receiving multiple offers, whereas almost all were this time last year. And homes are less likely to receive 10 or 15 offers... it is now more likely that a home will get just three or four. But even one extra offer will frequently drive the price up over the asking price, and it almost certainly will come in with better terms than if there is only 1 offer.

Also, open houses are still extremely busy. DESPITE the incessant rain, it is not unusual to get 50-100 buyers through an open house.

From our weekly meetings it is apparent that many homeowners are waiting until the weather improves before putting their property on the open market. For frustrated buyers, there are listings in the grapevine, so don't give up!

Clearly there have been some changes. The market has slowed some and we seem to be moving towards a more balanced market than we have had for the past two years. However, from my vantage point, the real estate market remains a robust one, not one that is in its death throes. Don't believe everything you read! Check with the pros, those in the trenches, to get the real story as to what is going on!