Is It Time To Buy? Is It Time To Sell?
These are difficult questions, especially in an uncertain market. There are so many statistics pouring in right now, and so many variables to consider. Buyers and sellers are being told that interest rates may go up soon, that these may be unprecedented lows, and that a rise in rates will negatively affect our market. Understandably, people respond to claims of ‘the best ever' with skepticism. Everywhere we go we are bombarded with advertising, and what we are sold is always ‘better than before', ‘new and improved', or ‘the next best thing'. It's not surprising that we are jaded and guarded. However, it is a fact that these low interest rates effectively increase buying power and this, in turn, has stabilized prices for sellers by driving buyer demand.
Should I Buy Now?
A significant majority of owners can easily answer this question. They are most comfortable owning because their home is a high priority. It's where they hang their hats at night and hug their loved ones. It's their place of refuge and regeneration. In recent times, however, prices and market conditions have become a key component of the conversation. From an economic standpoint, real estate is an asset that one needs in their portfolio. As a limited resource, in Santa Cruz in particular, there is usually greater demand than supply, so if the investment is purchased carefully (by location and condition) it will eventually appreciate. For decades people have turned to both the stock market and the real estate market as the co-arbiters of our economy. Stock brokers pointed to high returns on investment that did not require maintenance and upkeep, and proponents of real estate investments pointed to rising house values that required only a 10%-20% outlay of cash to realize gain. However as we are reminded again and again in our frenetic news cycles, times have changed.
Traditionally we purchase to be in a particular area for work, schools or neighborhood amenities. So why not just rent in that particular neighborhood, especially now when you are required to usually provide at least 10% on a purchase? A renter decides that at $2,500 a month with first last and security deposit, they will come out ahead just renting versus purchasing with 10% down payment on a home. However, at this moment, with interest rates where they are now, and home prices down 15%-40%, depending on the area and neighborhood, one could find a home with a payment comparable to what they would pay in rent. If you have the liquid assets to make your down payment, then this is the equation that works for buyers right now, and in the long term it will still be a means of building wealth. If we find our way back to a reasonable market, then over a five-ten year period an owner can ‘fund' where they live. Renting builds the financial portfolio of the investor, and owning builds the financial portfolio of the occupant, with the added benefit that your house investment also serves to keep you warm through our chilly Santa Cruz winter nights.
Should I Sell Now?
In all markets there will be property owners that decide to sell. There are dozens of reasons that go beyond market conditions, and relate more to lifestyle changes and life circumstance changes. Some may need a larger home, or a smaller home, or a house is part of an estate that needs to be divided. Most often, people decide to move to another area because of a change of jobs, or to be closer to someone they love. Whatever the incentive or the purpose, the most common question remains; ‘when is the best time to put my house on the market?' The graph alongside this article illustrates the relative season-to-season consistency of the Santa Cruz market. Most feel that their home will show better in the Spring and the Summer, but those markets are more competitive for the seller. Given that inventory is down in the Fall and the Winter, it also makes sense to have your home on the market during these months. People still move because they need a home, and they buy houses here throughout the year.
The Lateral Move
If you are considering selling your home with the idea you will subsequently buy a new house, then market conditions are less relevant. The lateral move usually works for sellers. If the market dictates that you sell lower than expected, the chances are that you will be able to negotiate a better price when you buy. However, if you may need to move in the next three to five years you may be risking your down payment funds. No one ever knows if the market will go up or down, but for decades back we can point to an average of somewhere between 2% and 3% appreciation per year. The normal timelines for moving into and out of a home was 7-10 years. Owning was a medium term commitment, and people moved to more expensive homes less quickly that during boom times. The ‘two years and flip' days are over.
Who Dictates the Selling Prices?
It is a fact that investors have re-entered the market. They are paying all cash for distressed foreclosure properties and these sales are affecting the overall market by setting new lows for otherwise well-kept neighborhoods. For a seller who has kept their home in near perfect condition, it is frustrating that the buyer's appraiser must use these sales as a comparable to the home they are selling. In the end, the majority of buyers are real people looking to move into their home. These buyers are the true referees of the market, and they expect to be treated accordingly. The smartest sellers are effectively competing with the distressed short sale and the bank owned properties by delivering their house in excellent move-in condition. These transactions are characterized by civility and respect on both sides of the transaction, and that's the good news in this otherwise uncertain market.
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Coldwell Banker Residential Brokerage
824 B Mission Street, Santa Cruz, CA 95602
831.420.2618 Direct | 831.239.1255 Cell
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