Archive for May, 2013

API SCORE

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I’m currently working with several buyers and finding an overwhelming interest in API scores for any interesting properties.

In researching multiple School Districts I detect an interesting pattern across all areas. Elementary Scores* are significantly higher than Middle Schools, which in turn are significantly higher than High Schools.

Hexham Middle School

Hexham Middle School (Photo credit: Wikipedia)

On average the difference is about 10% from one group to the next.

One thing that could cause this would of course be a lowering of aptitude as kids get older. I don’t like this concept.

A more likely cause is that today’s Middle and High School pupils did not have the benefit of the current higher quality Elementary education now in place.

If so it’s reasonable to assume that Middle and High Schools scores will steadily improve as better prepared students come through the system. This would lead to a steady year to Year improvement in API Scores in the Middle and High categories.

Assuming that the API is really measuring what it was designed for this will lead straight in to better qualified students going into College and/or vocational training.

*NOTE: Few people know that for Elementary Schools API is only calculated on 2 subjects. Math and English. Considering all of the other components of a good school experience, API has a very limited value at this level.

Any thoughts or opinions will be welcome.

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THE MUTIPLE OFFER PROBLEM

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THE MUTIPLE OFFER PROBLEM

To Bid or Not to Bid?

In Silicon Valley we are now about 12 months into the latest outbreak of “Multiple Offer Syndrome”.

English: This is one of the huge welcoming sig...

English: This is one of the huge welcoming signs for Google plex in the silicon valley. (Photo credit: Wikipedia)

A large majority of homes are currently being listed on Wed, hold Open Houses Sat and Sun, schedule offers for mid week, and are sold to the best of multiple offers by Friday.

The reason for this is very simple.

There are too many Buyers chasing too few houses. This is a direct result of historically low interest rates which will not start rising till early 1014 at the soonest.

As any Economist will tell you, in a free market the solution to this is equally simple. The law of Supply and Demand will automatically correct the problem.

If there is a shortage of any product more of that product will be brought to market.

In this case where there is a shortage of Houses for Sale, prices will be driven up. As this happens more homeowners will decide to sell, and Builders will accelerate getting new homes into the market. Obviously these things do not happen quickly so you can be sure the current price escalation will continue for at least 12 months and then probably just slow down to the historical norm for Silicon Valley i.e. 5% per year.

 

Looking west over northern San Jose (downtown ...

Looking west over northern San Jose (downtown is at far left) and other parts of Silicon Valley (Photo credit: Wikipedia)

If you are a Buyer who has several times lost out to higher bids you might wonder if it’s better to hold off till the market turns.

Consider the following:

Demand will not slow down for at least 12 months.

Each new sale sets a higher price for the next one in the same area.

In 12 months time it’s a near certainty that interest rates will be higher.

When things slow down and you decide to come back into the market you will be paying 12% to 15% more than today. (Based on price increases over the past 18 months in Silicon Valley.

In the meantime you are paying close to cost of a mortgage (which has major tax benefits) for rent which gives those same tax benefits to a Landlord.

Think carefully before holding off.

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