March 2007 Quarterly Newsletter

Volume 2 Issue 1

Nicholas French, Broker Associate

March 1, 2007

Quarterly Review The Housing Boom: 2002-2005 Inside this issue: The Housing Boom: 2002-2005

1

Saratoga At a Glance

1

Have We Ever Experienced a Down Market?

2

Client Testimonial— Chao Liu and Family

2

What Is This Affordability 3 Index? The Rule of 72...

The real estate market is coming off the recent housing boom, which occurred between 20022005. During this fouryear run we experienced a 100% increase in the California median price with double digit appreciation year over year. There are many factors that played a role in this historic increase including the interest rates and new builds. Santa Clara County doubled its median price in a seven year period (1998-2004).

Santa Clara County Median Price (1998-2006) 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0

3

Saratoga At a Glance... Current Neighborhood Statistics

4

1) Saratoga Village Revitalization - Over the past decade the city has been working with the local businesses to revitalize the commerce in the Village. The City Council is assigning new council members to the Village ad hoc Task Force in 2007, which should result in new ideas and direction to ultimately generate more revenue for the town. 2) Tree Plans At Historic Park - At the recommendation of consulting Arborist Barrie Coate, the Historic Preservation Commission passed a motion recommending the removal of two redwood trees growing between the Historic Museum, the Book-Go-Round and the McWilliams House because they are shading out the neighboring oak trees. The Historic Preservation Commission is commitment to preserving the natural beauty of the town and welcomes feedback from the community.

Nicholas French Broker Associate 4906 El Camino Real #2 Los Altos, CA 94022 650 773 8000 (cell) 650 961 2338 (office) 650 961 5238 (fax) [email protected]

3) De Anza Trail - This project has been in discussion for many years, but is definitely making progress. The public trail that will span along the Union Pacific Railroad will connect Los Gatos, Saratoga, Cupertino and Campbell. After feasibility studies, many council meetings, and many dollars later the master plan is near completion. There are several options prior to any approval that include accepting one of the proposals or denying and waiting for revisions. I have not heard an update on this step, but am anxiously awaiting as I think it will be a great addition to the community.

Quarterly Review Page 2

Have We Ever Experienced a Down Market? DON’T FORGET ABOUT YOUR PROPERTY TAXES A friendly reminder that your second installment of property taxes are due by April 10th. You have three payment options: 1) walk your payment into the county office, 2) postmark payment by April 10th, 3) pay online via the county website (there is a fee for this option)

At least once every few weeks I have a discussion with an individual that says the Bay Area Real Estate market has never gone down and will never go down. I take this as an opportunity to share some of the data and research I have compiled over the years. By the end of the conversation we come to the understanding that the market does have ups and downs, but compared to other parts of the nation we are amazingly robust and the market has a much greater upswing than downturn. Our last hiccup market in 2001 was short lived; the increased affordability from such variables as the historically low interest rates saved what could have been a significant decline at the time. The last two declining markets in this area were the early 1980’s with interest rates around seventeen percent and the early 1990’s both during recessions. Needless to say that during these periods’ families had more concerns than their property values. Many families held their homes to the best of their ability through the down market. Those that were most affected had job transfers, life changes or the inability to afford the property. Change is inevitable and as long as we can prepare for these changes and do our best to foresee them we will be in a good position to sustain the market. Please contact me if you would like to see the actual data during these periods of decline or the more current data on our local areas. Existing Single Family Homes Annual Median Sales Price and % Change in Sales 1982-2005 San Francisco Santa Clara % Chg % Chg Median % Chg Sales Price Price Year Median Price Price 1982 $128,090 -31.3% 1983 $133,730 4.4% 50.2% 1984 $134,131 0.3% 8.7% 1985 $145,129 8.2% 1.4% 1986 $166,318 14.6% 12.8% 1987 $176,796 6.3% -5.5% 1988 $212,863 20.4% 4.8% 1989 $260,722 22.5% -7.5% $275,270 1990 $259,000 -0.7% -21.6% $268,890 -2.3% 1991 $262,420 1.3% 8.5% $256,640 -4.6% 1992 $259,250 -1.2% 2.2% $248,260 -3.3% 1993 $256,200 -1.2% -4.7% $246,510 -0.7% 1994 $255,580 -0.2% 10.6% $254,390 3.2% 1995 $254,610 -0.4% -12.2% $255,260 0.3% 1996 $267,260 5.0% 16.0% $273,830 7.3% 1997 $286,470 7.2% 6.8% $316,250 15.5% 1998 $321,070 12.1% 8.7% $364,740 15.3% 1999 $363,200 13.1% 15.4% $399,380 9.5% 2000 $454,560 25.2% -9.4% $521,240 30.5% 2001 $475,890 4.7% -21.3% $524,320 0.6% 2002 $517,060 8.7% 25.0% $547,500 4.4% 2003 $558,100 7.9% 7.1% $550,000 0.5% 2004 $641,650 15.0% 6.3% $628,000 14.2% 2005 $715,730 11.5% -10.3% $739,000 17.7% * data released September 5, 2006, OFHEO

% Chg Sales

-20.4% 7.0% 2.0% -7.6% 10.8% -11.5% 14.8% -4.0% 4.3% 19.4% -9.3% -28.5% 36.3% 8.0% 17.9% -12.5%

Client Testimonial - Chao Liu and Family “I never expected such a high quality of real estate service. Nick has provided great expertise, is very knowledgeable and is great at negotiating the terms of a purchase. We have built a good friendship that will definitely continue even after our purchase.”

Volume 2 Issue 1 Page 3

What Is This Affordability Index? You will often hear this term referred to in the media and you may ask yourself, what is this index and more importantly, how is it calculated? I hope to answer both of these questions and add value for the next time you are analyzing the Real Estate market. The affordability index is basically nothing more than a calculation of home prices to income levels in a given area. It is generally agreed that the home price figure is the median price level for the area and the income level is a general calculation from various sources depending on who is claiming the index. It is arguably the single, most important variable when discussing the health of a Real Estate market. I would like to focus on the affordability index that is calculated by the California Association of Realtors. It is compiled with data that is generally accepted across the spectrum. 1) Based on the median prices of closed transactions from the MLS boards 2) Assume that a household can make a 20 percent down payment on the median-priced home 3) Use the national average effective mortgage interest rate on all fixed and adjustable rate mortgages 4) Monthly property taxes are assumed to be one percent of the median sale price divided by twelve months 5) Insurance payments are assumed to be 0.38 percent of the median home sales price divided by twelve months 6) It is assumed that the monthly payment for principal, interest, taxes and insurance can be no more than 30 percent of a household’s income 7) The various income ranges are obtained from a data source similar to the census data Annual Housing Affordability Index - California Regions 1984 - 2005 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 No. California

42% 43% 42%

43% 45% 45%

41% 37% 39%

35% 30%

22% 16%

Sacramento

54% 56% 56%

60% 61% 62%

58% 53% 51%

45% 41%

29% 21%

SF Bay Area Santa Clara

34% 33% 31% 41% 41% 36%

30% 29% 30% 34% 30% 29%

27% 18% 21% 28% 18% 24%

20% 20% 25% 27%

15% 12% 23% 19%

Let Your Money Work for You!

By using the Rule of 72 you can approximate how long it will take to double your money. The “rule” takes the number 72 and divides by a rate of return to reach the amount of time needed. For example, at 9% interest it will take 8 years to double your money. This is the power of compounding interest.

Did You Know?

Approximately 80% of millionaires drive second-hand cars

On average, Americans spend $1.22 for every dollar earned

Almost 80% of speaking is selftalk (talking to yourself)

Current Neighborhood Statistics City

Year

Qtr No. of Closed Sales

% of List Price

Med. Price

Avg. Price

Avg. DOM

Campbell

2006 Q4

83

98.56

775,000

809,080

48

Campbell

2006 Q3

48

99.16

810,000

890,568

48

Campbell

2006 Q2

82

99.65

791,000

847,059

141

Cupertino

2006 Q4

69

98.81

1,138,000

1,189,134

45

Cupertino

2006 Q3

108

100.01

1,040,000

1,131,709

31

Cupertino

2006 Q2

119

102.05

1,131,000

1,155,527

219

Los Altos

2006 Q4

88

98.53

1,650,000

1,851,327

45

Los Altos

2006 Q3

93

99.11

1,652,000

1,792,445

37

Los Altos

2006 Q2

95

100.27

1,570,000

1,721,938

159

Los Altos Hills

2006 Q4

21

95.54

2,250,000

2,541,705

159

Los Altos Hills

2006 Q3

25

97.17

2,300,000

2,677,600

54

Los Altos Hills

2006 Q2

26

93.72

2,400,000

2,796,710

67

Los Gatos

2006 Q4

83

97.97

1,355,000

1,538,691

63

Los Gatos

2006 Q3

64

97.2

1,323,000

1,510,684

55

Los Gatos

2006 Q2

91

98.95

1,350,000

1,478,012

210

Menlo Park

2006 Q4

89

98.24

1,245,000

1,418,394

46

Menlo Park

2006 Q3

80

100.44

1,277,000

1,436,338

34

Menlo Park

2006 Q2

132

102.24

1,250,000

1,444,724

168

Monte Sereno

2006 Q4

8

95.43

1,687,500

1,840,063

51

Monte Sereno

2006 Q3

9

97.7

2,050,000

2,223,000

94

Monte Sereno

2006 Q2

12

100.33

1,745,000

1,982,708

31

Mountain View

2006 Q4

72

100

950,000

992,551

25

Mountain View

2006 Q3

80

100.38

920,000

1,013,884

33

Mountain View

2006 Q2

93

102.13

930,000

1,017,886

132

Palo Alto

2006 Q4

112

100.49

1,315,000

1,538,639

38

Palo Alto

2006 Q3

121

102.57

1,285,000

1,476,630

30

Palo Alto

2006 Q2

184

102.11

1,380,000

1,522,089

216

Saratoga

2006 Q4

57

96.96

1,550,000

1,705,290

75

Saratoga

2006 Q3

75

97.05

1,514,955

1,676,349

54

Saratoga

2006 Q2

113

99.41

1,565,000

1,666,530

276

Please Send This Newsletter to My Family and Friends If you know someone who would like to receive this newsletter I would like to send it to them. Please either have them contact me or provide me their contact information and I will make contact with them. My goal is to have this newsletter add value and be an information source for my clients, family and friends. Please do not hesitate to contact me if I can help you with any real estate questions, strategies or if you are seeking quality representation.