With all of the "scary" articles going around about home sales slumping, downward trends nationwide, sub-prime loan fiascos etc., there is finally an explanation for frustrated buyers in certain Bay Area neighborhoods that are still eliciting multiple offers: "The Wealth Effect" In an article in the San Francisco Chronicle (5/17/07), the staff writer, Carolyn Said, hit the nail on the head by explaining that the Bay Area bucks the national trends because of this "wealth effect" It's true! Since the Bay Area has a strong economy and is, of course, the home of "Silicon Valley" the real estate sales here are quite different from the rest of the country. Not everywhere, mind you, but especially in the nicer neighborhoods that are in great school districts.

The problem that is frustrating both buyers and sellers right now is related to this "effect" Buyers read about the "slow" real estate market and think that now is a good time to buy. Yet they all want the same thing: a nice home in a nice neighborhood with good schools and good resale value "not too small of a lot" and hopefully remodeled so that they don't have to do a thing to it. Unfortunately, those homes are few and far between right now, therefore causing multiple offers to occur when they do come on the market...especially with buyers that are looking to buy in a pricey neighborhood, but on the lower end (i.e., for less than $1 million).

Should sellers be careful? Of course, if you think that you're going to get top dollar for your house that needs fixing up, it'll only happen if you price it low and it is on a really good street. Otherwise, there are a lot of dogs on the market right now...which, big surprise, are usually not in the nicer neighborhoods or have some other problem (backing up to a gigantic electrical pole or freeway, for example). It is in this latter scenario where homes are sitting on the market for months and months...reflecting the national trend. As a buyer, if you can find a home that you desire that has been on the market, make an offer! The worst thing that a seller can do is say "no"...and you never know, they might just say "yes".

Bottom line in all of this confusion is this: yes, it is a good time to buy...interest rates are still low and sellers are sometimes willing to make deals...but be prepared if you are looking to buy in the more in-demand markets, such as Palo Alto or Cupertino, because there are a lot of buyers out there looking at the same houses. And...if you're thinking of selling and you're in a desireable neighborhood (i.e. good schools, nice street, nothing unusual or strange about the house and its layout) then by all means, put your house on the market. The many buyers that are out there right now appreciate a turn-key house and will show you how happy they are by jumping on it...assuming that it's priced right.

One last item for buyers: if you're looking to buy a house but feel that you can't afford what you desire, think creatively! Maybe a house with a guest house or private guest quarters that you could rent out might put you into the bracket that you want to be in.

Last, but not least, you should always have an unbiased opinion about your homes value - or the value of the home you are considering purchasing - from a reputable Realtor.