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Although volatility in the stock market is making buyers nervous, real estate experts claim Silicon Valley’s housing market will stay strong.

Veteran appraiser Roger Miller with Taketa Miller & Associates told members of SILVAR’s Los Gatos/Saratoga District in January that he doesn’t believe fluctuations in the stock market will affect Silicon Valley’s housing market. Miller said the market will continue to be hot, at least for the next six months. The only bad news is traffic will get worse in the region.

According to Miller, Facebook, Google, Intuit and other major companies in the area are expanding production and employment. These companies are not like the start-ups in 2000; they are big companies with infrastructure. These companies have made the valley their home and they want to stay here. Add the current state of China’s economy to the picture and you have the “perfect storm” creating a boom in the market, said Miller.

Miller explained China’s economic slowdown and uncertainty in what the communist government will do is prompting the Chinese to invest more of their money abroad. They are buying high-end residential and commercial real estate here. According to Miller, the hottest market right now is Mountain View, where home prices are “ridiculous,” said Miller. Other hot markets are Cupertino, Sunnyvale and Los Altos. He described land values in Los Altos as “insane,” and in Palo Alto, a 1,400 sq. ft. fixer-upper is selling for $2 million dollars.

“If you are thinking of selling your home, put it on the market now; don’t wait,” said Miller.

At the February Palo Alto District tour meeting, Bay Area real estate analyst Carole Rodoni also said real estate in Silicon Valley will continue to be a hot item. Rodoni, who formerly served as president of Alain Pinel Realtors and now operates Bamboo Consulting, Inc. explained what happens around the world affects the perception of business and real estate. She expects the economy to grow just 2.3 to 2.4 percent and projects only a single-digit appreciation in homes this year

Despite “choppiness” in the economy, Rodoni said, “All will be well in Silicon Valley because this is Silicon Valley. It’s a place everyone aspires to be at, to work and live in, and be.”

Like Miller, Rodoni believes now is a good time to sell, but she noted the real estate market is undergoing a transition. She sees the high-end market slowing, but the lower end will be “on fire.”

Due to fluctuations in the stock market, buyers will be skittish this year. REALTORS® will have to “re-educate” their clients. “Buyers are watching, hesitating, and standing by. They are still interested, but they know the market is changing. They already get it; sellers don’t,” said Rodoni.

For sellers, the key is pricing. “Do not overprice. Sellers need to get real. Sellers cannot play games. The market rules are different now,” she warned.

Despite the high-end market slowing, Rodoni believes Silicon Valley, with its location and booming technology, will continue to grow. While not all start-ups will succeed, like Miller, Rodoni believes companies like Google, Hewlett Packard, Facebook will continue to do well.

“Real estate is still an asset people aspire to buy. It will be a choppy year, but we’re still the engine driving the world and everything will be okay,” Rodoni told SILVAR REALTORS®.

 

Carole Rodoni spoke to REALTORS® in Palo Alto early this month.

Carole Rodoni spoke to REALTORS® in Palo Alto early this month.


The current slowdown in home sales is attributed to seasonal factors, combined with higher home prices and a rise in interest rates. This development does not disturb some experts in the real estate industry.

According to Carole Rodoni, president of Bamboo Consulting, Inc. and formerly president of Fox and Carskadon Real Estate, chief operating officer of Cornish and Carey Real Estate, and president of Alain Pinel Realtors home prices have come back an average of 24 percent in the Bay Area. In Silicon Valley, she said the market has been “on fire.” In some places like Palo Alto, prices are up 40 percent.

A speaker at the Palo Alto District’s January tour meeting, Rodoni said the San Francisco Bay Area is experiencing an “economic revolution,” attracting investors, international buyers and those with cash. Compared to the rest of the state and nation, real estate in Silicon Valley moves at a different pace.

“Silicon Valley is the heart of technology. At the end of the day, it’s a good thing because you cannot own or run a business today without technology,” said Rodoni.

Many baby incubator tech companies are sprouting in the region and mammoth giant companies based here, like Apple, Google and Yahoo, are acquiring more companies and workers every day. Start-ups that succeed will go public and give birth to more millionaires, according to Rodoni.

Rodoni predicts this year Silicon Valley will continue to have multiple segment markets, depending on price point, location and area. Buyers need to decide which type of market they are in – is it a negotiable market or a multiple offer market. If it is the latter, are they willing to pay the premium price?

It is still a very good time to buy. While an interest rate of 2.5 percent last year would be better than 3 or 4 percent this year, it is still better than the average 7 percent, said Rodoni.

“At these still very low interest rates, you gain equity on your property and it doesn’t have to appreciate,” explained Rodoni.

Rodoni said she has been asked if the slowdown is a sign of a bubble bursting. She believes not. The market is merely “taking a breath” for now. It doesn’t mean it is in a bad state; it is merely readjusting, said Rodoni. Expect more action in the spring. It will be a good market moving forward, she said.

Carole Rodoni

Real estate consultant Carole Rodoni didn’t mince words when she talked to Silicon Valley REALTORS® at SILVAR’s Palo Alto District this morning. She is appalled at how lawmakers have handled the budget, the deficit, short sales and foreclosures, and even the war in Libya, but with regard to Silicon Valley real estate, Rodoni is upbeat.

The former president of Fox & Carskadon Realtors, former COO of Cornish and Carey Real Estate and Alain Pinel Realtors, and now president of Bamboo Consulting Inc. says the media can talk about a slump in the housing market, but the San Francisco Bay Area is an “oasis in the desert.” This region is the gateway to the Pacific Rim, with the best universities, diversity of culture and education.

“People aspire to live here and there is no more land here. Land is valuable and land here will keep its value,” says Rodoni. “At the end of the day, how can anyone say Silicon Valley isn’t alive and well?”

What should REALTORS® tell buyers? “Tell them they are getting a free gift right now,” Rodoni says.

Prices have come down a bit, interest rates have edged up from 3 percent to about 4 percent, but they are still low. She predicts rates will rise even more by the end of this year, possibly to 5 percent or more, and perhaps 6 and 7 percent in three years because of inflation. “The stars have aligned here,” according to Rodoni. “Where do you find this affordability?”

Rodoni says buyers should “buy it, hold it – don’t spin it, and keep it for at least five years.” Also, while buyers should pay attention to interest rates, she says they should also watch out for lending fees because she is sure they will increase.

“Loans will be 5 to 8 percent more expensive than last year,” Rodoni says. “At the end of the day interest counts, but understand that everything is going up because of loan fees. If you are a buyer, while it’s good to look at price, look also at loan fees. Match interest rate to the loan product.”

She says buyers should ask themselves these questions: Is it the right price? Is it the right place? Examine where you are looking. Will it appraise for that price? Is the lender going to like it? Then she cautions: Do not attempt to low ball when you’re facing a multiple offer situation. How high are you going to go? Especially in this region, you cannot sit with terms and conditions.

“It would be like playing football in a baseball diamond,” she says. “Investors know there is value here and they will continue to come in. Silicon Valley is the bread and butter market. They see the sweet spot and will fight to get it.”

October 2020
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