Sunday, October 29, 2006

So, is there a Housing Bubble, or what is all the chatter?

There has been a great deal of chatter through the different media outlets over the past 6 months about this doom & gloom of the California Real Estate market. Well, being in the trenches everday, doing the things that Realtors do...I cannot report that I have been hit on the head with a piece of the sky falling.

Are things tougher then they were a year ago? Sure, mostly becasues of the chatter coming from the talking heads-the supposed experts. For every expert with a cup of alaphabet soup after their name that predicts one outcome, there is another just as credible explaining why nothing bad is going to happen to our real estate.

My opinion, is that yes, we are seeing some tough times in Real Estate, but we all knew the ride would not last forever - it would have been impossible to continue with 20-30% appriciation every year.

I believe there are two major economic indicators that were in place in the early 1990's, that just don't exsist today.

First, even if interest rates are higher this year than they were last, they are still historically low. This means the cost of money is still cheep. I remember in 1980 when I was in the service and rotated back stateside after 6 years service in Europe and I wanted to buy a home in Colorado Springs, just outside of Ft.Carson. I entered escrow at 18% for a new home. In those days they did not lock in rates. By the time the construction was completed, interest rates had skyrocketed up to 21%.

The Second economic factor that is not in place today is high unemployment. Again, the numbers today may not be the very best they have ever been, but anyone who has been around more than a couple of decades knows that what we have today is exstremely low and thereby good for society as a whole.

When I am asked these days about the market question, "What should I do?". I say do what you need to.

If you are a buyer, this is a great time to make lowball offers on homes, many of them are now being accepted when the sellers see there is a 8 or 9 month inventory of homes on the market. I tell those interested in selling, sell now as long as you are prepared to hear what the market is saying. After all, most sellers today are taking advantage of huge increases in equity. Yes, they may get a bit less today then when the market actually peaked, but does anyone really have any idea what will happen in the Spring of 2007, the traditional time for Real Estate to rebound after a winter of slow sales.


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