Volume 4, Issue 4 Nicholas French, Broker Associate, CRS

Quarterly Review
December 1, 2009

Happy Holidays
Can you believe another year has come and gone? I must say 2009 was not a disappointment:
many unexpected issues, challenges and adventures to keep me on my toes from business to
Nicholas French personal life and everything in between. I’m sure you have had many triumphs and challenges
Broker Associate, CRS
this year and during the holiday season I hope you take time to reflect on your experiences and
make a plan for 2010. The new year will bring many new challenges and successes and we can
369 S. San Antonio Road work together, learn from each other and overcome the obstacles.
Los Altos, CA 94022
The holiday season is a special time for me. Growing up we had large family functions, festive
650 773 8000 (cell) decorations, amazing aromas and yummy food. You could expect someone getting hurt on
650 247 2999 (office) Christmas day and definitely some tears from cousin quarrels. With all the craziness it is a time
of year when the family can take a break from their busy lives and come together to share sto-
650 947 3099 (fax) ries, hugs and laughter and though it is a short period the memories last for a lifetime. I hope
nick@realtornickfrench.com you have special memories of your holiday season and enjoy time with your family. I also take
this time to reflect and truly appreciate my family, friends and good fortunes. We are fortu-
www.realtornickfrench.com
nate to live in such a wonderful community and I am fortunate to have such wonderful family
and friends. So many have come to my support over the past few years and I truly appreciate
it and I too am here to be supportive. It is never too early or late to call me and if I can help,
Inside this issue: even for the weirdest situations, I am here. May your family have a holiday season filled with
laughter, great conversation, decadent foods and a new year of great adventures and success.
Happy Holidays 1

Client Testimonial: Yang Family

Client Testimonial: 1
Yang Family
We consider Nick our real estate strategist, much more than a normal realtor. Nick worked
with us since 2003 in search of our perfect home for the expanded family. During the process,
Visit My Blog 1
he showed us properties in Saratoga, Cupertino, Palo Alto, Menlo Park, Los Altos, and Los Altos
Hills, and helped us to narrow down the community that fits the best to our special work and
The Roaring 20’s: Are 2 school needs. In the process, Nick demonstrated his great local knowledge and amazing pa-
We There Again? tience. After picking the town we want to live in, he guided us through the housing downturn,
and urged us to wait till the trough before pulling the trigger. When it came to the deal time,
Distressed Property 2 Nick leveraged his deep relationship with other realtors in the area, and pulled us a steal after
Statistics
working closely with the seller’s agent. We moved into our new house recently, and are enjoy-
ing it greatly thanks to Nick.
The Roaring 20’s: Are 3
We There Again?
(cont.)

Investment Property 4 Visit My Blog for Updates

Tip
I am working at keeping my blog updated with additional articles about financing,
Share This Newsletter 4 market conditions, community information and pretty much anything else that I think
is interesting. You can find it on my website: www.realtornickfrench.com. If you have
Updated Neighborhood 4 any suggestions for an article or would like my opinion on a topic, feel free to send me
Statistics a note and I’ll get on it.
Quarterly Review
Page 2

The Roaring 20’s: Are We There Again?

I can recall three local three real estate market cycles: 80’s, 90’s and today. Though I was not in the business during the earlier cycles I
recall quite vividly the experiences affecting my family; the only homes selling were those that were turnkey and priced aggressively. We
sold our home in Fremont in the 1980’s and preparing the house was a family affair: from painting, to fence work, and repairs large or
small. The house sold quickly, but it was turnkey and priced aggressively. I share this story because we are in a similar market today – the
homes selling the quickest and for the best prices are turnkey and priced aggressively (relative to prices 12-18 months ago). Granted the
distressed market has its exceptions, but since we have discussed that in previous articles we will focus on the broader market. I would
instead like to focus on real estate cycles and how we can use history to understand where we may be going.

It can be argued that real estate cycles date from the 1800’s during the early boom of the eastern states. The good news: real estate cy-
cles with the peaks and troughs are not a new concept, so we can learn from our elder generations as well as our own experiences and
make educated decisions. The bad news: it is human nature to have short term memory and at some point similar issues that cause peaks
will run amok, we will see golden years where we feel invincible, then a decline and we will look around wondering how this could have
happened. Those that lived through the depression of the 1920’s seem to have a different perspective on wealth: save, save, save. Are
they fixated on saving or do they have experiences that cause them to want security? I have heard many stories of my family in San Fran-
cisco during the depression; from strategy, to emotions and fear—how families adjusted to this sudden evaporation of wealth. Sound
familiar? Many may have experienced similar realizations over the past twenty-four months and been forced to make difficult decisions
that will affect their family today and for a decade to come. I am willing to bet that future generations will look back on us and wonder
why we are now overly conservative with money (and may likely continue for the foreseeable future). Losing significant wealth in your
investments and job instability will do that, but we want to be careful not to swing the pendulum too much one way.

The last year has been one of opposites – the lending market has gone from loaning billions of dollars to those without any actual assets
to requiring practically a family tree and blood sample before they will lend (I personally find it ridiculous to call it lending – even with the
government bailout of money the banks are not lending to the consumer, but that is another issue and I would be glad to discuss that with
anyone at their convenience). The job market went from having multiple job offers in one day to employers holding back job requisitions
not knowing what will come in the following quarters. The point is we have swung the pendulum the opposite direction and this offers
opportunity for those willing to get their hands dirty. A friend once told me he was waiting to buy real estate until there is blood in the
streets. This real estate proprietor had been sitting on the sidelines for the past eight years watching the craziness of property values and
patiently awaiting his opportunity; investing in real estate over the past thirty years provided great insight with personal experience to
previous market cycles. A kid in a candy store is the best way to describe the prudent investor in the current market.

Many will say, but Nick, how do I know if we are at the bottom or I am going to keep waiting for the market to go down more. These are
both reasonable questions and of course no one has a crystal ball, but let’s address some of the historical factors that I use in my under-
standing of market cycles. One issue that became very clear during 2001/02 was the realization that government regulation and interfer-
ence could manipulate the excesses of booms and busts. After the dot.com bust and mass exodus of jobs we were experiencing interest
rates around eight percent and there weren’t buyers standing in line to buy property. This was after a large run of property values and a
point which I expected to see a market correction, but the unheard happened. The Fed lowered the key interest rate to historical loans,
banks were giving out money like water and many were buying property with funny money. This significant increase was inflated from a
manipulation of the market which took on a life of its own and we are now feeling it. The best news: now is time to seriously consider
buying investment property, your first house, or upgrade to a more desirable home. The current market, irrespective of area, has
(continued page 3)

Notices of New Trustee

Nov 09
Default Sales
REOs SOLD Updated Distressed
2009 YTD 11,750 10,156 2,507 478
2008 YTD 10,518 6,990 6,415 265
Property Statistics:
2007 YTD 5,243 3,034 1,167 150
2006 YTD 2,407 735 119 98
Santa Clara County
 Volume 4, Issue 4
Page 3

The Roaring 20’s: Are We There Again? (cont.)

adjusted from peak prices, interest rates are at a ridiculous low and your competition is minimal in most cases as many people are still
shell-shocked from the previous eighteen months. But if you are upgrading or buying your first home do not just run out and buy the first
property you see. Please be diligent, know the market, neighborhoods, values, as many variables as possible because it is very likely that
prices will stay relatively the same for some time; if you buy a house tomorrow and don’t like it next year, you may be in a position forced
to take a loss to move homes. Be prudent now, find the right home and enjoy every day. Of course if you or your friends and family are
looking to buy real estate I would work very hard to understand and obtain what it best for your family’s purchase.

There have been many recent news articles discussing the increase in sales activity. When you read these articles please consider a few
points: 1) Sales are up but prices are down, so if homes are priced at the current market value they will sell at the market price, 2) You will
continue to see increases in activity because the comparison data was prior to price adjustments – let me provide more detail. I recall
early 2008 when areas such as central, south and east San Jose had stalled. If you hadn’t sold it was too late. Transactions were signifi-
cantly down because the market had adjusted 30-40% but the banks did not have proper support or understanding of the market change
so homes were on the market for over a year without mort-
New Current Closed Average Average Median
gages being paid or house upkeep. Even the County of Qtr 3
Listings Inventory Sales DOM Sales Price Sales Price
Santa Clara did not understand the market change. In 2007 322 340 78 60 697,602 651,000
2008, if you bought a house in distress the county typically -10.87% -2.35% 58.97% 63.33% -31.16% -33.96%
did not adjust your taxes to your purchase price because 2008 287 332 124 98 480,261 429,950
they felt your purchase was distressed and not the current -13.94% -39.46% 29.84% -24.49% -14.69% -13.94%
market value, needless to say that has been proven wrong. 2009 247 201 161 74 409,725 370,000
Late 2008 and early 2009 began a selloff of properties as *Central San Jose Statistics

banks unloaded at the adjusting prices, so as we are now one year plus after that fact we are seeing significantly lower volume of inven-
tory and greater sales with the new pricing. Using this data I am expecting that in the coming year we will see a flatting of inventory and
prices as the market has adjusted. There is a great deal of noise about a huge surge of inventory coming to market, but that has been
discussed all year and there is talk the banks may cycle through new inventory more methodically with a new strategy. There is a great
deal of cash and investors on the side looking to gain from the real estate crash in certain areas and I think that a good amount of inven-
tory can be absorbed. Time will tell so stay tuned either by calling, emailing, my blog, newsletters, etc.

We don’t have to make a move tomorrow, but start thinking seriously about it. We know the variables today and there are many moving
parts that will play into our strategy: government incentives, unemployment, uncertainty, and inflationary concerns to name a few. From
the first-time buyer incentives to capital gains exemptions, we may be seeing some significant changes in the coming year. We are also
hearing several jobless numbers from ten to eighteen percent up from the healthy four percent range. Over the past few years the gov-
ernment has spent more money than ever and this has to get repaid in some manner, but how? Will we inflate the dollar, default on our
debt, or raise taxes – none of these answers sound good to me. So as investors, whether in our primary home or secondary properties we
need to be mindful of the current climate and make sound decisions. One factor through history is that following a real estate trough and
prior to a real estate increase the economy experiences a period of increased inflation, followed by higher rents and higher property val-
ues. Be mindful of hedging what may happen in the financing world because real estate can be a powerful tool to protecting your wealth.

It appears that our current cycle position is in the trough, being that prices are hovering near the bottom offering an amazing opportunity
to take advantage of low prices, interest rates and respective competition. Granted we may be in the trough position for several quarters
or years, but as interest rates rise, confidence increases, inflation grows and rents rise you want to already have either your investments
or upgraded home. Many economists will agree that prior to a boom there is an increase in inflation, resulting in a net income rise and
increased capital to the market creating more development and competition. The next few years are going to be a very exciting time for
real estate and I will work hard to stay on top of the market trends for my clients. Please do not hesitate to contact me anytime as there
will constantly be new variables in the market to analyze.
Page 4 Nicholas French, Broker Associate, CRS

Investment Updated Neighborhood Statistics

No. of Closed % of List Median Average Avg
City Year Qtr
Sales Price Price Price DOM
Property Tip: Campbell 2009 Q3 56 98.17 680,000 707,268 50
I get several magazines Campbell 2009 Q2 78 96.73 675,000 703,441 83
Campbell 2009 Q1 32 96.94 610,000 641,598 75
on a monthly basis but Campbell 2008 Q3 56 97.45 775,000 785,344 58
the only one I read con- Cupertino 2009 Q3 115 96.74 1,060,000 1,073,864 58
Cupertino 2009 Q2 94 95.52 1,056,000 1,121,735 58
sistently is the Apart- Cupertino 2009 Q1 30 96.24 1,039,000 1,109,909 63
ment Owners Associa- Cupertino 2008 Q3 95 98.47 1,180,000 1,221,998 41
Los Altos 2009 Q3 87 96.10 1,606,340 1,720,916 67
tion News. I am an AOA Los Altos 2009 Q2 75 94.94 1,500,000 1,598,876 54
member and it is worth Los Altos 2009 Q1 27 93.56 1,410,000 1,606,805 67
Los Altos 2008 Q3 68 99.04 1,950,000 2,017,432 48
the membership. If any- Los Altos Hills 2009 Q3 19 92.69 2,255,000 2,226,688 79
one is interested I can Los Altos Hills 2009 Q2 18 95.71 2,800,000 2,921,140 100
Los Altos Hills 2009 Q1 5 94.39 3,400,000 4,325,000 111
scan interesting articles Los Altos Hills 2008 Q3 18 94.23 2,425,000 2,743,647 78
and email monthly Los Gatos 2009 Q3 77 96.16 1,120,000 1,237,877 91
Los Gatos 2009 Q2 72 95.01 1,005,000 1,074,057 83
Los Gatos 2009 Q1 35 94.39 1,210,000 1,394,234 102
Please Send this Los Gatos 2008 Q3 76 95.71 1,265,000 1,577,520 74
Newsletter to my Menlo Park 2009 Q3 77 96.96 1,115,000 1,270,045 52

Family and Friends Menlo Park 2009 Q2 102 96.20 1,137,500 1,373,503 60
Menlo Park 2009 Q1 50 96.77 915,000 932,095 72
If you know someone who Menlo Park 2008 Q3 77 98.88 1,340,000 1,385,125 53

would like to receive this news- Monte Sereno 2009 Q3 12 92.53 1,782,000 2,100,818 105
Monte Sereno 2009 Q2 7 95.86 1,699,000 1,883,586 86
letter I would like to send it to
Monte Sereno 2009 Q1 3 95.83 1,322,500 1,322,500 188
them. Please either have them Monte Sereno 2008 Q3 8 96.75 2,505,000 2,768,000 74
contact me or provide me their Palo Alto 2009 Q3 111 96.81 1,298,000 1,430,655 57
information and I will make Palo Alto 2009 Q2 114 97.63 1,372,500 1,568,627 44
contact. My goal is to have this Palo Alto 2009 Q1 50 97.17 1,287,500 1,451,818 56
Palo Alto 2008 Q3 99 101.10 1,700,000 1,793,510 32
newsletter add value and be an
Saratoga 2009 Q3 88 95.40 1,402,000 1,601,718 104
information source for my cli-
Saratoga 2009 Q2 64 94.0 1,467,500 1,515,139 92
ents, family and friends. Please Saratoga 2009 Q1 21 89.58 1,200,000 1,412,446 103
do not hesitate to contact me if Saratoga 2008 Q3 72 96.41 1,676,500 1,938,044 57
I can help you with any real Sunnyvale 2009 Q3 186 98.37 777,000 745,116 56
estate questions, strategies or Sunnyvale 2009 Q2 132 97.57 740,000 707,024 70
Sunnyvale 2009 Q1 85 97.08 533,000 625,307 77
if you are seeking higher quality
Sunnyvale 2008 Q3 175 99.43 875,000 835,940 47
representation