In the past month or so, I've talked with economists from the California and National Association of Realtors, Dr. John Husing, the CEO's of Coldwell Banker, Prudential and Re/Max as well as a Deputy Director of the FED. They are all in agreement on the housing situation - they don't know what in hell is going on either. But I've panned a few nuggets from these conversations that might help you better understand where we are and allow you to make more informed decisions on your own housing questions.
#1 - All Housing Is Local. Every market is different with its own unique challenges and opportunities. It's a lot like the weather. It doesn't much matter what's happening in Atlanta or Altoona. That doesn't have anything to do with the weather in California. In fact even the weather in Northern California has little to do with whether the sun's shining in your back yard this afternoon.
Local job growth, housing availability and mortgage fraud determine what your home will sell for today, not how things are in Detroit or Dallas. The ‘national real estate market' is an invention of the mainstream media in an effort to simplify their job and your understanding. Get the facts on things that impact our local market and don't worry that the French aren't buying sub-prime loan paper anymore.
#2 The Media Reports The News - Not Necessarily The Facts. We all know that good news doesn't sell papers. That's why death, disaster and alien abductions are front page features, depending on what you watch or read. The media started predicting the ‘real estate bubble' four years ago. Ooooooh my, it's ready to blow, it's all over - that was 2003. Housing set a record that year for highest number of sales, new homes built and median price hikes. The media was irritated so the next year they redoubled their efforts - twice the doom & gloom per page, bigger bubble, bigger pop, more devastation and chaos. That was 2004 when housing again broke all previous records for sales, prices and new construction.
The media was livid - nobody was buying their story. They were buying houses instead. So they piled on the downsides again - bubbles blowing, hang on, calamity & calumny, right now - whoops - 2005 was another record breaker. More people became homeowners, prices jumped some more - the media was apoplectic.
Guess what - it's 2007 and the media is still wrong. There never was a bubble and it has not burst, there is no nationwide housing crises and the market has not collapsed but you'll never hear that from mainstream media sources. And the few things they were right about were for the wrong reasons. They're like that psychic predicting the demise of a hundred year old actor year after year after year. Finally the old dude dies and the psychic says, ‘See, I predicted that way back in January.'
So for your mental health, take anything you read or hear in the media (excepting this very enlightened columnist) with a grain of salt, or preferably a shot of Jack Daniels. It'll make just as much sense and you'll enjoy it a lot more.
#3. All Real Estate Is Cyclical. If you live on the left coast, the right coast or the bottom coast, real estate goes in cycles. If you live anywhere people want to live, real estate goes in cycles. We've just been through a ten year run of good fortune - in fact between 2001 and 2005 Riverside County was the fastest appreciating housing market in the country at 155%. But it couldn't go on that way indefinitely.
So now we're in a correction phase - taking a breather, adjusting our affordability, working on some lender problems and some Fannie Mae & Freddie Mac issues. If you don't like real estate cycles, then you need to move out to middle America where prices go up ½% a year like clockwork and there's no boom cycle or bust cycle, no 155% bump, no 20% drop. But you live in California where every 4-8 years we repeat this same cycle. You'd think sooner or later you'd figure it out and stop yelling about the sky falling, for heavens sake.
As I've reminded you before, the fundamentals are all in place. Riverside County continues to be one of the largest creators of new jobs in the country. Another 500,000 people will move to California next year, as they have for the past two decades - and again we'll only build enough houses for about 2/3 of them (that's a housing crises, folks). Interest rates remain near historic lows with the Fed likely to cut rates again by the time you read this. There are more homes to choose from than at anytime in my memory of this market so your chances of finding just the right place are excellent.
And don't believe for a minute that there are no loans available - there is money going begging for borrowers right now but they're the ‘old fashioned' kind of loans where you might need an actual down payment and you might have to show you actually have a job and can pay the bank back. The loans that have gone away are those sub-prime, neutron loans - the kind that destroy people but leave the houses intact.
If you're thinking about becoming a homeowner, there's no time like the present to get your piece of the American Dream. Snooze through this cycle and you'll be kicking yourself in a couple years. And I'll still be here to remind you.
Gene Wunderlich is a Realtor with Coldwell Banker Residential Brokerage. Got an opinion? Share it with GeneWunderlich@earthlink.net
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You make some good points. it will take time to people to readjust to being more conserative in spending and having to save. The housing prices were just getting too high for the incomes. Something had to give. Our problems have nothing to do with sub-prime and adjustable rates.