In our market here, again sorry to break this to you, but statistics become absolutely irrelevant when demand exceeds supply. Doesn’t matter what 10-city index or composite you’re looking at, but when you have 10 buyers all bidding on a house in Palo Alto that will spend whatever it takes, even $300K over asking price so it assures them their kids get into the PA Unified School District – I just can’t imagine that a single one of them is going to offer lower than asking price because a statistic said the trend is going downward. Buyers have mind-numbing money here, and they’re apparently not afraid to spend it, and will ignore what Mr. Shiller has to say in the process.

Sales activity and prices in many desirable neighbhorhoods just have not, on the whole, been crashing in markets like Los Altos, Palo Alto, San Carlos, Menlo Park, Atherton, and many others. If you’ve sold a home in the Bay Area in the last year or two, and especially in one of these markets you’d know that they’re far from slowing down. Sure, there’s peaks and valleys throughout the year, there always are, and to reiterate, I do realize it’s not rosy everywhere – Shoreview in San Mateo, east Menlo Park, Fair Oaks, Alameda County, those areas are not doing so hot. No one knows when those areas will rebound. But to say “it’s already happening here” is just blatantly untrue as a blanket statement for all of our Bay Area markets. Call me overly optimistic, or naïve, but articles like this one – http://www.insidebayarea.com/sanmateocountytimes/ci_9652198 – reinforce what we already know about our region. We hear what you’re selling, Mr. Shiller, but we’re not buying it.

The SF metro area S&P/Case-Shiller nominal prices show -23% from the early 2006 peak; and the most volatile of their composite indices, the 10-city, is -18% from its same time peak. “It can’t happen here” REWRITE — it is already happening.

Please take the time to read the URL’s content, which the news media keep from you for (their advertising revenue) cause.

I don’t discount that the market’s cooling in many areas, nor that our country is not as economically strong as it was. I do get that. If you can wait to buy, then by all means, wait. Sure, you can wait for more blood in the street, but no bell is going to ring when we’ve hit bottom and there’s no more blood. Nobody can predict where & when a bottom is, nobody. Have we hit bottom in Palo Alto, where 9 out of the last 10 homes sold in the last 2 months were all 5-6 figures over asking price? Hmm, doubt it, and doubt we ever will. Have we hit a bottom in the Shoreview area in San Mateo? Probably not. A home in Twin Peaks listed at $4M sold for $5.6M, closed in 10 days, all cash. Has that market hit bottom? If a buyer’s looking for tremendous appreciation in one year, then, no, this is not the time to buy. Every buyer’s situation is unique, and every neighborhood/block has different dynamics and supply/demand issues; but if a buyer is buying for the long term, then my opinion is, yes, it is a good time to buy. You take any 5 year window between 1968 and 2007, and the average (yeesh, I detest using averages sometimes) median price has always, ALWAYS increased. In 2002 the median was $316,130, in 2007 it was $588,970.

Other problem: arguing that because a rise in interest rates can eliminate financing savings from a 10% price reduction. So? While I might be paying the same each month *I am 10% wealthier*. That seems a little important. Equity matters: we can’t all live on debt.

Finally, while there is blood in the street, why not wait for more? If prices keep falling – which will only continue to fall if interest rates rise (the threat trying to induce potential buyers to buy) – why not wait?

Steve McB