Apparently the sky is falling over there too, so says the media.
(LAKE TAHOE REAL ESTATE BLOG) Well, what can we say, the media is doing it again. This time it’s us, America, that’s leading the global housing industry astray. (When we all know that all real estate is local, which means things are different here in South Lake Tahoe then they are elsewhere, it is interesting to think of housing as a global industry, though we think few actually do.)
The article this time is “Housing Woes in U.S. Spread Around Globe.” It’s by Mark Landler in the New York Times.
First, just to set the tone, here are some of the choice words and phrases found in the article: “Woe”, “swooning real estate prices”, “increasingly stark”, “wrenching adjustment”, “wholesale collapse”, “American contagion”, “reverberations of the American housing bust”, “a lot more grief than we expected”, “the American vocabulary of misery”, “erosion of confidence” and “the problems of the United States aggravate the world’s problems”.
Basically, here’s the main point in the article: As home financing and credit tightens in response to the problems that began in the subprime mortgage market, analysts worry that other countries could suffer the mortgage defaults and foreclosures that have afflicted the United States. (read the article here)That article also states that In Ireland, Spain, Britain and elsewhere, housing markets have soared over the last decade are now falling back to earth. It also further states that much of the downturn seems to be following the basic law of gravity: what goes up must come down.
As our market soared from 2001 to labor day of 2005, we thought this too. “It’s gravity”, is something we frequently said, “prices can not keep going up forever.”
As a market turns downward, as all real estate markets do from time to time, there are always reasons for it. This time it was “the mortgage crisis”. But the market changed before that. What caused it was a lack of consumer confidence, the onset of which was a confluence of Katrina, a 1-point increase in interest rates, and a spike in the price of gas at all about the same time. Labor day of 2005.
It was then that we realized that home prices had exceeded gravity. So Buyers collectively, and for the most part singularly, and perhaps unconsciously, dusted off Sir Issac Newton and they stopped buying in droves.
By the last quarter of 2005, one could track it statistically. And voila, out of a number of factors, the principal of which was buying behavior, or the lack of it, the real estate market started to correct itself. And yes, it’s a correction, which is very different from a collapse.
The chart above indicates If one bought a house in South Lake Tahoe in 2002, for example, and sold it today, one would make an average of 54% more than they paid for it. If they bought their house in 2000, they would almost make twice what they paid for it. This includes the market correction, or the 10% decline in value we has seen as a result of it.
So why all of the hysteria?
From this article, with all of it’s sensational rhetoric, one might think the housing market is collapsing all around us, and everywhere else too.
Does this mean we’re not far from the prairie again, out on the open range in tents and teepees, and prairie schooners too? And all of Europe is again living in stone age caves? And we made them do it? Well, hardly. All we’re dealing with is a healthy market correction..., before resurgence begins anew.
The article has a picture of a young woman in Dublin. A school administrator whose flat has declined in value by some $100,000, says the NY Times scribe. But she isn’t selling it today, doesn’t even seem to be considering it. She says she will worry about that when she sells. By then, of course, things will be different than the are now. The point being is one has not lost anything if one does not sell, and the deeper point being that if one has owned a home for a time, as the South Lake Tahoe chart indicates above, one still makes a robust return on their investment if they sell now.
About South Lake Tahoe :
As for the South Lake Tahoe real estate market, we may be close to stabilization at present. Which means we are near to that point where the market flattens, as it historically does here, before it goes up again. One more quarter of similar data to what we’re seeing now and we will be able to document it.
The South Lake Tahoe real estate market has seen flat periods of little growth in each decade since 1970. When that happens, it can take years before significant market resurgence, but throughout each flat market in each decade since then, there has been no additional decline.
What characterizes resurgence out of a flat period in the South Lake Tahoe real estate market is an increase in demand. That comes first. An increase in value, or price, comes later as a result of it.
What this means to Buyers is we are very close to seeing no further decline in value. We remain in a buyers market, and buyers should consider taking advantage of it. There are excellent deals to be had in this market right now. And we are seeing more buying activity as a result of it.
It also means that Sellers are still aware we are in a buyers market, and as such some will be more receptive than they will be when their mindset changes along with market stabilization.
So once more we’re back again to the national real estate news, and where it comes from. Sensational rhetoric may not always be factually accurate, or wise, or even considerate of the public, but it sure helps sell newspapers.
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