The chart above shows trends in sales and listings in Saratoga.  It is interesting to note that while list prices peaked in Spring of this year and have been on a moderately steady decline,  prices of homes actually sold has not followed the same trend – the average over the year has been relatively level.  So much of what you hear or read about national trends is not expressed in some smaller market areas such as Saratoga.

Yesterday I attended a presentation by economists at our SILVAR meeting in Palo Alto Country Club.  Stanford professor John Shoven charted the first time in 40 years there has been a national decline in housing values.  He attributed the bust of the housing bubble to “3-4 million people over the past 8 years buying homes they could not afford”, a circumstance enabled by our federal government’s policies.  Under Greenspan ”interest rates were lowered too low for too long.”  Bush administration tax cuts & more spending drove prices up, but they could not be sustained.  Simply put “we have been living beyond our means as a nation”. 

We are now experiencing a sharp and deep recession; unemloyment is expected in increase from 6% up to 8%.  However, in the economist’s opinion this recession will be nothing like the great depression of the late 1920’s because our govenment is also taking swift action to counterbalance this.

The stock market is down 45% in the past several months, which means that  sendable wealth of many potential Saratoga buyers have been dimished which will have an effect on real estate supply and demand.  On the other hand, those with money are looking for opportunities and safe places to invest.

Shoven noted that bubbles tend to overcorrect so he forecast that ”nationally we may see the economic situation get worse (a further drop of 10%) before it stabilizes in the second half of 2009.  Unlike Japan’s decline in the 1980’s, the forecasters see a workout in the USA over a few number of years rather than decades.”

The upper end of the Saratoga housing market is currently soft.  Unexpected bad news and uncertainty is likely to persist nationally at least until a new administration is in the White House.  This also means opportunity for astute buyers to find advantage during times of fear.

Call Rick Bonetti 408-857-8800 if you have questions or comments.