Los Altos Real Estate Blog

You see those numbers published for your area and know they're off. Like clockwork, the S&P/Case-Shiller index of 20 metropolitan regions publishes their results, mostly declines, and the media eats it up.  What's wrong is that when you look at actual sales performance in those same regions, the figures published by S&P/Case-Shiller are wrong.  Very wrong.  Worse yet, they're misleading.  Let's take a look at why.

Incomplete metropolitan regions:  In California, the San Francisco Bay Area metro region is defined by San Francisco and immediately surrounding areas, including some troubled markets in the East Bay.  What's missing, and typically included by local market analysis, is the lower Peninsula and all of Silicon Valley.  That means the analysis they use to talk about the region as a whole, doesn't include any of the area's strong markets and over 1 milion residents.  Nationally recognized hot spots like Palo Alto are completely excluded.  Look at other regions they use across the country and you'll see similar exclusions.

Paired sales analysis flaws:  The core of their analysis is "paired sales".  That's when they compare the sale of a home in the past with the sale of the exact same home now.  That method misses micro-market dynamics that impact broader sales averages.

• Compare a home that sold in the past and then sold again recently
• Compare the variance of that sale with the average and median sales in the same area
• You'll see gaps where the sales pairs only account for certain price ranges, home sizes, or neighborhoods

I had an argument with someone two years ago (2010) about paired sales in Palo Alto.  They claimed paired sales showed a decline, which was true.  However, when looking at average and median sales it showed increases that year as well as 2011.  The broader markets improve while the pairs show a different picture.  I'll take the averages any day - much more accurate.

Reports are too late:  There are indvidual metro areas and the 20-city composite is calculated monthly but accurate details are reported 2 months later.  Telling a buyer in April that the market is slow, based on February data, is part of what has held back recovery because the reports cast doubt on a market that, at the moment, may be perfectly fine.

The market reports of a local agent will provide a more accurate picture of the broader trend than Case-Shiller.  While they claim that the index accounts for home quality and other factors (such as reducing relevance based on time between sales), it appears that S&P/Case-Shiller shows a very skewed impression of the market.

What do you need to do to counter these errors?  Split single-family homes from condos/townhouses.  They're two completely different markets.  Educate consumers with...

• Publish monthly stats and show averages and medians, not just one or the other.
• Show the 3-month moving trend and year-over-year monthly comparison.
• Break out towns and neighborhoods, if possible.  Micro-markets are key.

How many times have you called on a rental only to find out they have a "no pets" policy?  I'll bet it's 90% of the time or more.  Dogs are the biggest rejects and cats rarely fare better.  It doesn't matter if the dog is tiny and has a bag attached to his rear-end to guarantee no messes, most landlords refuse to allow pets.  As a renter, you're probably a bit angry (feeling discriminated against), frustrated, and wondering "Why do they do that!?".  Well, let me clarify that last question a bit.  I'll give you some insight into what's in the minds of the landlords - since I represent quite a few of them.

DAMAGE!  Yes, that's right, damage.  Your darling little pet does a lot of damage, little bits at a time and you don't notice it but the landlord does.  Plus, there are ACCIDENTS which happen from time to time.  For dogs, it's peeing or pooing on the carpet.  For cats, it's hairballs and vomit.  Either way, both will leave stains on carpets that can't always be removed.  The most common damage done by pets is:

• Urine/feces on carpets leaving stains and/or odors
• Hair, dander and mites in carpet
• Scratches to doors, walls, windows, and casings
• Claw damage to screen doors/windows
• Pet odors that can't be easily removed
• Damage to plants, grass, and trees in the yard

Damage to yards includes holes, clawing on trees/fences, plants killed by feces/urine, and plants killed by animals repeatedly walking over them.  This is one area where time will tell how much damage your pet has done.

So you can understand why a landlord doesn't want to have your well mannered pet running around their house.  When they consider the cost to clean and repair, that's why you can't get a pet in most rentals.  Carpet cleaning alone will cost $300+ for an average size house.  Replaceing a screen door will run another $40.  Replacing a small plant, another $20.  It adds up quickly.  If a wall needs to be repainted due to pet damage, that'll run $100.

My suggestion, and this is just the best advice for Silicon Valley, is to offer a prospective landlord a generous deposit for each pet, usually $400.  That will cover the most common damage.  Keep in mind that your cat will do that much damage in a year, easily.  So, don't count on getting the deposit back.  Even if it's a house cat, the cost of carpet cleaning and possible replacement will eat up that deposit quick.

Just consider that the price of having pets.