The Mercury News has a real estate blog called the Square Foot Blog, that I often read. It has an interesting perspective on the Silicon Valley real estate market. They recently wrote an article, in which they discussed the flattening of our real estate market.

“the volume of existing-home purchases was down sharply in December compared with a year earlier, median prices are holding steady compared with December 2005.”

While the volume of sales dropped, Santa Clara County’s median home price was actually up by 1.4 percent from a year ago. This same phenomenon is evident in many other Bay Area counties. This is reflected in the inherent resiliency of Bay Area sellers. Typically sellers in the Bay Area have strong financial backgrounds and good jobs. As the real estate market slows they tend to have staying power and they ride out rough patches in the market. You can see this effect in the data from my recent California Data Study Part 1 post. I looked at California’s appreciation history versus prime interest rates. In the past, we can see that as interest rates rise California appreciation slows, but interest rates alone have not made property values take a nose dive.

Lately, I have heard many different opinions on the Bay Area real estate market. Some think the sky is falling, or the proverbial bubble is bursting. Others view the flattening of our market as a buying opportunity. I think we all could benefit from a review of the old fable Chicken Little. I encourage buyers to look at the data versus following a feeling. The data shows us that the sky is not falling.

Many people wish they had a crystal ball that could tell us which way the real estate markets would go in the near future. The reality is that the market will go up… then it will go down… Then it will go up again… then it will go down again. The most successful property owners I have seen accept and are comfortable with this fact. So they often buy and hold for the long term (5-10 years). They know that over the last 30 years California’s real estate appreciation average is about 9 percent. We are now seeing a normalizing of our market where there is a healthy amount of inventory, and buyers and sellers have generally equitable power to transact. Successful property owners know that since 1947 average interest rates are around 8-9 percent and that currently 30 year jumbo rates are historically low around 6 percent.

The Bay Area has a robust real estate economy and our current market climate has many opportunities. One thing is for sure, our market is never boring.

Berkeley’s Iceland will be closing after giving the community 70 years of ice skating memories. The story was reported by the Contra Costa Times on January 19, 2007. The owners commented that declining business, demands of maintaining the 1940’s building, and the aging refrigeration system are the reasons for its closure. The rink was put up for sale last year for 6.45 Million, but received no offers.

Iceland will be missed by the community, its patrons, and myself who often skated at the rink as a child. You have given us many fond memories. Hit the ice for the last time before Iceland closes on March 31, 2007.

Orlando based hotel owner CNL announced on late Thursday afternoon that they would take $22.50 per outstanding share of common stock in cash from Morgan Stanley. It is a 6.6 billion dollar deal that will include the Claremont, La Quinta Resort & Club and PGA West in La Quinta, the Grand Wailea Resort Hotel & Spa in Maui, Hawaii, and other well-known resorts. The deal is expected to close in the second quarter of 2007. The deal was noted today on Yahoo Finance.