Notes on Real Estate

This issue:

The Adjusted Market

The adjusted market is here. People are asking me how come home prices are going down. They aren't. Well, how come I can't make as much on my home as I could have last year? You can. This market adjustment is the best thing that could have happened to anybody except Realtors, who were making a lot of money on the sellers market price commissions. We will have to make adjustments, too.

Your home isn't depreciating in value. It may, in fact, be your number one financial investment, returning you more for your dollar than anything else you own. Plus, you get to live in it while it does.

Here's an excerpt from Realty Times.

Read on, read these news releases, and look deeply beneath the surface.

It seems during a slowing market, the last person to get the message that the house needs a lower price is the seller. After all, the seller has the most to lose by "improving" the price and it's a tough decision to let go of a dream of cashing out.

A sellers market builds over time. If new jobs enter a particular area and housing doesn't keep pace, home shortages create a sellers market where prices increase and bidding wars begin. Then, one of two events happen to make a market cool down: the economy stops growing or prices become too expensive (combined with an ample supply of rentals). A normalized/buyers market is born and sellers need to get on board or hit the showers.

For a complete look at Mr. Carr's article, go to Realtytimes.com

As Realtors, we are seeing headlines on our bulletin boards that announce one type of price reduction or another, and many of them are written as if it's a good deal for buyers. It begins to look too much like a used car lot ad.

What is a seller to do? Accept a healthy equity profit offer, if you get one, and don't be greedy. Remember that just as in a sellers market, the house you plan to buy is moving in the same direction, and pretty much at the same speed. When you could sell for more, you had to pay more for the next one. If you sell for less, you will accordingly buy for less (one hopes).

Of course, many buyers are not starting to think they ought to low-ball with their offers, since sellers are "desperate". An insult is still an insult, and a seller is going to shut down those offers on the spot. No, they aren't going to come back with a counter offer. This isn't a game. It's serious business, and as much as one might like to pose as The Great Negotiator (That's the "I never pay full price for anything" posture), look at the numbers, extrapolate them into a reasonable future equity position, and ask yourself, "How much do we want this house?"

The problem with prognostication is that it generalizes. What might be a good market for one type of buyer might not be for another. The same market that favors investors purchasing income properties might have a different look to a first time home buyer. People divesting themselves of a second home, three homes away from retirement, might see a condo purchase differently from the 50-year-old couple thinking of owning in Arizona and Minnesota.

Is it a good market? Depends.

Some fur is going to be flying, and some dust will need to settle. By this time next year we will be sitting in a really good market. That doesn't mean you have to wait a year; but it might mean that a year from now you can look back with a broad smile. Don't listen to what stock market experts have to say about real estate. Don't listen to what part-time economic gurus at the local paper have to say. That's for the water cooler. Check out my web page (see address below) and my predictions since we started, then tell your friends what your real estate analyst has to say.

That’s it for now. Except this:

1. If you have interests or questions, please e-mail me or give me a call.
2. Check out my website HERE

The opinions expressed in this newsletter are solely those of Tom Crone and others being quoted and do not necessarily reflect the opinions of Coldwell Banker Burnet or its affiliates.