[Deal of the week] Palo Alto 2/2 Condo for $519k!

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Call me crazy, but this is one deal I would not pass up.  Here is a rare opportunity for an Eicher Condo in downtown Palo Alto.  This place shouts mid-century modern!  This has the original kitchen cabinets, the original closet door sliders, the mahogany wood paneling is still in good shape, and the baths are also untouched.  A retro-cool experience!  Ok, so it needs some modern appliances (cooktop, stove, dishwasher, and washer/dryer), and it could use a flooring update as well.  I don’t know about you, but I can see the vision for this place.  Spend about $15k for some light remodeling and you have a really great place in downtown Palo Alto for under $550k.

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Details:
455 Grant Ave #3, Palo Alto CA 94306
MLS #80844247
2 Bedrooms, 2 Bathrooms
46 years old
906sf living space
943sf lot

Why is it a good deal?
This is an affordable entry point into Palo Alto, centrally and conveniently located with California St. restaurants and weekend farmers market only a block away.  In addition, 2 bedroom units are more desirable so in the long run this will be a better investment for resale than if you went for a 1 bedroom.  Since it looks very original and needs updating you’re not buying a place that has someone else’s tastes that you will just have to remodel anyway.

What is the risk?
Most people will be scared (or shocked) at the HOA being just over $500 per month.  When you find out this includes your gas heat, earthquake insurance, pool, and other typical costs it is not far out of line with other Palo Alto communities.  I have not checked the CC+R’s yet but I would not be surprised if this is a cooperative ownership, which means each unit must be owner-occupied so don’t think about renting it out as an investment property.

Who is the best buyer?
You need to like modern and minimalism and it would be a bonus if you like mid-century retro.  I see this place going to a move up buyer who is looking to move out of San Jose and get further up mid-peninsula; or even a first-time buyer who wants to take their first step on the property ladder.  This is a buyer who would like the challenge of redesigning something while still being able to live in the home, maybe someone up for a little DIY (do-it-yourself) or who wants to go on an Ikea decorating spree?!  If you put a little time into updating the major necessities, I think you will find you have put your own personal touches on a bright and fun place to enjoy for many years to come.

-mark

ps. The same complex also has another condo that has been remodeled.  It listed at $569K, MLS#80832437.  Here are some photos for you to compare.
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What the NEWS doesn’t tell you that you should know

With so much negative news around us, I thought it might be nice to see some facts that may help you keep some perspective on where we are when people start throwing around the “Great Depression” comparisons.

-    More than 1000 banks closed in 1930, yet only 14 banks have been taken over in 2008.
-    There are 76 million households today in the US that own their home and of that, 24 million are owned free and clear — no loan at all.
-    52 million homeowners have a mortgage and 97.2% are NOT in foreclosure and 98.3 are current on their payments.
-    There is about $11.7 trillion currently held in money markets, treasuries, CDs, and cash — this is higher than the accumulative debt of the whole country.

However, because I should be a realist and not Pollyanna about what we are facing, it helps to understand how we got here.  For each decade, we can see how many homes were sold both in the peak year and the average for the whole decade:

        Peak # Homes Sold        Average Homes Sold
        ———————-        ———————–
1970s            3.9 million            3 million
1980s            4 million               3.3 million
1990s            4.9 million            3.9 million
2000s            7.1 million            5.6 million

In 1999 there were a series of laws to expand home ownership beyond where it had historically been for generations — thus the spike in volume of homes being sold.  It became an entitlement, not a privilege.  Instead of working hard to save money and earn the position to own a home, it became somewhat of a gift due to poor lending practices.  Furthermore, people became used to refinancing their homes to support an excessive lifestyle.  We moved away from a tradition that required a person to work hard to save 20% as a down payment to buy a home.

We’re having a necessary adjustment to housing prices so they will come down in line with where they should have been “naturally” had we not made financing changes and incentives in the early 2000s.  It is likely to over-correct, which means a buying opportunity will be created for those who need to and can afford to buy a home.

To deal with the excesses of the 2000s, we’re now facing “distressed sales” — short sales and foreclosures, because:

-    40% of the 7.1 million sales in 2005 were non-owner occupied (investors, second homes, and speculators).
-    40% of all foreclosures are non-owner occupied.
-    Over 20% of homeowners with a mortgage owe more today than their home is worth.

US population growth
However, consider the laws of supply and demand, which continues to be the foundation of every economy no matter what else is happening.

Demand:
-    People are living longer and with continued advances in medicine for the decades to come we will all need a place to live out much longer lives.
-    Population is growing — People are still having babies.  Immigrants are still coming to America for education and jobs.
-    One baby is born every 7 seconds; one person dies every 12 seconds; one immigrant comes to the US every 29 seconds; which means the US population grows by 1 person every 11 seconds, according to USCensus.gov. 
-    On February 11, 2008, the Pew Research Center published their projections for U.S. population growth through 2050. In the last 40 years, the U.S. population has risen from 200 million to
300 million people. Pew estimates that the population of the U.S. will reach 438 million by 2050 or an increase of 48% over the population in 2005.

Supply:
-    Major development loans have been drying up so new construction is slowing.
-    September sales in California were up 68% over 2007, 51% of which were distressed sales.
-    Average supply of homes was 11 months in January and it is now down to 9.9.
-    We will end up with a shortage of housing in 3 years at this pace.

The government is throwing HUGE money at the economy right now.  The new administration coming into the White House is planning to invest in creating jobs and stabilizing housing.  I’m sorry that most of us have been trained to have short-term vision — only being able to see a couple months into the future.  I agree that it looks pretty cold and dark if that’s as far as we can see.  However, if you’ll adjust your “future glasses” just a little and see out a couple of years I think you will see that the seeds of opportunity are being planted right now.

-mark

People are still working…hard

We can do it
I had lunch yesterday with a couple good friends who
are working at big high-tech firms in the Bay Area.  When we spoke of
the economy and their jobs, an interesting discussion emerged.  We are
all standing around looking at increasing unemployment and a declining
economy but they said they feel like they are working hard and have
never been busier.

So as we continued, I pointed out that they must be
working on something important and for which there is some significant
demand.  Nobody is working on “busy-work” at this point because
wasteful spending of corporate resources is too irresponsible.

We are hearing of layoffs everywhere throughout the
Bay Area and the nation — eBay, Yahoo, Cisco, AMD, etc.  Unfortunate
as it may be, this is completely normal and most of us have seen this
cycle before.  I believe that every company has about 10% of their
employees classified as non-performing workers that could be cut should
layoffs be necessary.  Look around the group or team in which you
work.  You could probably point to 1 out of 10 people around you that
the company could lose yet continue to run smoothly.  That’s the nature
of corporate life.

I’d like you to think about this conversation when
the media continues to push unemployment numbers, or when you worry
about our economy. Apply these comments from some hard working friends
of mine and look at others around you.  The positive way to think about
this is that 95 people out of 100 are still working hard to satisfy
customers or provide services.  The ones not working will find ways to
survive by getting involved in a new venture, go back to school or
enroll in more training, or move to another area where jobs are easier
to find.  This is all a natural cycle and it is not as dark as the
media would have us believe.

-mark