So Cal Real Estate News

We’ve got foreclosures, federal “remedies,” a weakening economy, low interest rates, high gas prices, and low home prices, all in a presidential election year.  So it’s impossible to know what’s ahead, but we can make educated guesses.

For several months, we’ve said spring will bring increased home sales.  We also think prices will either slow or stop their decline, at least for the next few months.   Beyond that, things get cloudier, but the odds are that sales will slow again later this year.

Our own experience this February is bearing this out.  We took three listings in the last couple of weeks, and now have all three of them in escrow.  In addition, today we are opening escrow on a new home purchase for one of those sellers; the other two do not plan to purchase at this time.

We’d like to think some of this success is the result of our 30+ years combined experience, but low interest rates and an active market have certainly helped.

Our goal with almost every listing is to get it into a solid escrow within 30 days, and preferably within the first two weekends.   Over the years, we’ve found out that’s the key to getting top dollar.  After a month, buyers and sellers both lose interest.  Buyers figure if nobody’s bought it after a month, it can’t be that great a deal, unless the home has some extremelyy distinctive features.  Most sellers can only keep a home looking it’s best and put up with the hassle of showings for a month, if that.  As one wise Realtor once told me, “If it sells in the first month, everybody’s happy.”

However, in a slow market, it’s a lot harder to get a home sold in a month.  And most of Southern California’s real estate agents had never seen a really slow market until this one hit. Blair & I had to revert to what had worked for me during prior slumps:  1980-82, 1985-86, 1989 and 1991-95.  This time we’ve had to adjust for the internet, technology, & the fact that buyers now have direct access to listings, but the basic principals remain the same.

It takes a skillful combination of preparing and staging the home; accurate pricing; effective, targeted marketing; careful negotiating and screening of buyers, and continual vigilance during escrow.   Doing  dozens and dozens of things right.  We’ve got it down to the day of the week our listings go into the local M.L.S.

But all of that works better when the market’s more active.  Which is why we believe our successes overt the last half of February are a good indicator that this spring may provide a window of opportunity for both sellers and buyers throughout Southern California.

7/15/08 update: Lots has happened since we wrote this post back in February. It has certainly been an interesting ride, and plenty of opportunities are still out there. For our latest posts on what’s going on, simply click “front page” in the upper left corner, then scroll down, or check out the “recent posts” in the upper right below our “search” box. We’ll continue giving you straight talk from real estate’s front lines, with the perspective of 30 years experience.

The Federal Reserve’s latest rate cuts may well have just radically shortened the present housing slump. The “bottom” may be a lot closer than anyone suspected just two weeks ago.

That may mean the time to buy is actually now, for several reasons.

First to get the lowest interest rates. Right now, you can get 30 year fixed mortgages well around 5.7%. That’s outstanding. . . but rates were a little lower a few days earlier. Why? Well, the Fed really can’t control long term rates–they’re set by market forces.

So, when the bond market thinks we’re headed into a recession because the Fed hasn’t lowered short term rates enough, long term rates drop. And when the Federal Reserve reduces the risk of recession by aggressively dropping the rates they control, long term rates move up. That’s one reason all the Fed rate increases back in 2003 - 05 didn’t reduce long term rates. And it’s why that much-expected additional lowering by the Fed could mean today’s mortgage rates may be the lowest we’ll see in a long time.

Second, this may be the time to buy because the best time to buy isn’t at the bottom, but a little before the bottom. I know first hand there are tons of potential buyers waiting to jump in once they think the market bottoms. The trick is to jump in before they do. Because the below market properties are the first to go. Plus, once sellers think things are moving up, they become much harder to negotiate with.

The truth is, almost nobody buys at the very bottom, or sells at the very top. And they didn’t know they were doing it until they looked back. I know–I bought several properties near the bottom of the last cycle around 1995, but I didn’t realize how fortunate I was until several years later. Likewise, I also once locked a long term interest rate at a bottom, but had no way of knowing it at the time. I just knew it was an interest rate I could live with.

A third reason this may be the time to buy relates to what we call the “annual real estate cycle.” You see, the forces of supply and demand are influenced by annual events. Buyers are way too busy to look for a home with the holidays around the corner, so demand slackens in December. Once the New Year begins & they’ve resolved to get that first home, demand picks up. Especially after they see how much they’re paying in taxes. As we move into late spring, the push is on for many to move to a better school district. Parents want to get the home in escrow & lock in the address before the school administration is gone for the summer.

But as good weather & summer vacations kick in, buyers get other things on their mind & demand slows. That’s too bad, because that seller who resolved to get her home on the market in January is finally finishing their pre-listing painting & cleaning, & supply is finally increasing.

All of which means that, all things being equal, prices go up dramatically from Feb. - May, level in the summer, & decline in fall & early winter. Which means the annual cycle just bottomed. Then the Fed dropped rates. Twice. And Congress is working on a stimulus package. And maybe it’s time to start looking for bargains.