Is Timing Really Everything?
By now you've no doubt been deluged with stories about the real estate bubble bursting. Whether or not a bubble even exists is a matter of great debate among economists and if in fact it's bursting is even more hotly contested. All of this is somewhat newsworthy, but the fervor with which it is reported and the "spin" which is applied to each piece can affect what potential buyers and sellers do. After all, the mere mention of a "bubble" after the "dot com" era is enough to give any investor jitters.
Is the media fairly reporting what is happening in our local real estate market or are they actually influencing it by their commentary? Currently a local news radio piece is offering this insightful bit to entice you to tune in; "Is the real estate bubble bursting?" Of course this presupposes that there is a bubble and that it may be burst at any minute...stay tuned. For the last several years the media has been reporting the same story of year-over-year increases in home sales so much so that it's become stale and when sales drop at all-no matter how small-it makes for relentless headlines. Why don't the media report more balanced views? Perhaps because they are selling you something they want you to buy-their news. And if the news they have to report is less than sensational, you might turn away-costing them valuable advertising revenue.
One could easily make the argument that a real estate bubble does exist-it's just a much harder case to mount for the Bay Area. Often what are reported are national statistics and one must be careful to distinguish between reports quoted from the National Association of Realtors vs. the California Association of Realtors since their purview is on a different scope. In addition, reports often derive their statistics from Dataquick, the San Diego based company who independently track California sales statistics (and who provide much of the same information to the Realtor associations). This too can be somewhat misleading if the report does not distinguish between local and statewide numbers. Bay Area markets can often times be at odds with statewide statistics due to local economy rebounds or job losses. Statistics that are interesting to watch are not just the number of sales, but inventory, median price, new listings, the days on market and how much a seller receives of their asking price. In recent years sales have decreased during certain times simply because there were fewer homes to sell. This in turn did nothing more than push prices higher. Recently though, several statistical references not surprisingly reveal a cooling off of the super heated market. Looking at the numbers so far this year (through May), in San Mateo county sales have dropped 13% and with more new listings than last year at the same time, inventory has begun to grow; the median price has decreased, the average time it takes to sell a home increase, and the percent of the asking price received decline-though it's still over 100%. In Belmont we've had 15.7% fewer sales while inventory and new listings have each increased 10.6%. In real numbers the percentage drops in Belmont equate to 17 fewer sales, 17 more homes on the market with 17 fewer new listings. A "bubble" typically occurs in any market when irrational behavior is sustained against common sense. While all statistical references indicate a return to a more normal market, a "bubble" might be foreseen if the median price continued to increase at an unsustainable rate-which it has not, as seen by the recent slight decrease in the median Belmont home value. Has the market slowed? You bet. But perhaps not as much as you have been led to believe.
But how does all of this affect you? Predicting market cycles with absolute certainty is clearly impossible. So what's a buyer or seller to do? Here in the Bay Area we tend to be consumed with the housing market. Not surprising since so much of an average person's net worth is a direct result of real estate appreciation. The cost, combined with occasional market volatility, make homeowners view the decision of when to list their home for sale as a decision akin to when to sell a high performing stock, yet many of the reasons for selling or purchasing a new home never change. First and foremost your home is where you live, and where many dreams are fulfilled. Whether it's buying your first home to begin a new life, moving into a larger home to accommodate a growing family, or downsizing for simplicity, buying and selling real estate needs to be viewed as part of a lifestyle, not just an investment.
In real estate, timing a market perfectly is pure luck. Let real estate enhance your life, not dictate it.
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