Happy New Year

January 2008 Newsletter

HAPPY NEW YEAR! DESPITE SLOWDOWN THINGS COULD BE LOOKING UP IN '08... Let's face it. 2007 was a terrible year for real estate. Never mind that we had 10 years of growth beyond prosperity and that we homeowners had achieved more equity than was due us. Still, 2007 rocked the real estate world from seasoned investor, to casual home "flipper," to longtime homeowner and first time buyer. What happened? What didn't happen to the market? Homeowners lost $160 billion in net equity, foreclosures on single-family hit 1.69% by the third quarter of '07, the worst in decades and 5.6% of all home mortgages in the country were delinquent by 30 days or more. (Obviously due to sub-prime mortgages.) Sales tanked in almost every market that had seen hyperinflation in home prices from 2001 to 2005. The national inventory of unsold houses jumped to 10.8%. Finally, job losses in housing and lending related industries have been staggering and extend to the highest executive ranks of Wall Street and banking's most prominent firms. (Source: LA Times)

ENOUGH!! CAN 2008 BE BETTER? A RESOUNDING YES!... According to Kenneth Harney from the Washington Post Writers Group, there are a number of positive underlying economic factors propping up real estate. Harney reasons that if these forces continue, they should, "help cut the time needed for the correction cycle to bottom out and the historically inevitable recovery cycle to begin." I agree with Harney. During this past year in real estate, there has been cataclysmic press coverage by the media bordering on the irresponsible. The press has the power to start a panic and very nearly succeeded this past year. But the facts are finally floating to the surface of the buyer's consciousness and that will spice things up for 2008. What are those facts? Number one is great interest rates. Secondly is the steady, moderate growth of jobs followed by economic expansion and low inflation. All these factors add up to coming pent up demand. These things add up to potential buyers realizing that not just price should determine their purchase. Interest rates, for example, will have a much more long term impact on their decision than initial price.

WHAT WERE THE ACTUAL NUMBERS... Before I get into the local numbers for November, (the latest month available), let me give you another number that may surprise you. Although prices softened, as expected, sales of existing and new homes in 2007 totaled an estimated 6.5 million, which would make it the fifth-largest sales year in U.S. real estate history. The press would have you believe that the market was a nightmare. Yes, the sub-prime meltdown is a major event. Yes, prices declined. But many people realized that right now is a buyer's market and took action. The total number of sales for November was 1,567. That number includes single-family, condos and new home sales. Collectively that number was 7% lower than October and 45% lower than November '06. The median price for all was $582,750 which is a -6.5% adjustment over the previous year. The greatest number of sales occurred in the over $700,000 price range with 518. The total number of defaults was 933, a 40% increase over '06 and foreclosures numbered 364 and that is a 256% increase over the same month in '06. (Source: Dataquick)

DON'T MISS YOUR GOLDEN OPPORTUNITY... If you need to sell right now, you may not think it the most opportune time. Perhaps it isn't when compared to 2005. However, the equity adjustment you will make is still proportionately less than the appreciation you received during the last 10 years. But if you are thinking of buying, what are you waiting for? This is the buyer's part of the cycle. People are not properly defining this part of the real estate cycle. It's called the "down" cycle, or the "bust" cycle, and people get scared and stay away. The proper definition of this cycle is "buyer cycle." When else should you buy? When housing prices are going up? True, that's when most people buy, but most people buy in a seller's market because they perceive that the market is good. Right now is the buyer's time. This is their part of the cycle when prices are adjusting. Of course, everyone wants to time the bottom perfectly. Even Donald Trump has said it is impossible to do so. Take your best guess, but also take advantage of ample inventory, low interest rates, and motivated sellers. Buyers beware; it won't be your time forever. In fact, in California, your time is limited. I can help you find that property. If you need to sell, I can make sure we market your property in the best possible way. If you have real estate questions, I've got answers.