The Tale Of The Strangest Market

I must admit, writing this article I can’t help but wonder if my data isn’t incorrect.  The back story here is that I follow the inventory data pretty closely for my local marketplace.  (Contact Tim here) And as is the case every month, graphI look at how many active and pending listings there are, as well as the past one and two month closed sales totals.  I also track the percentage of the whole market that is under contract as this is a good leading indicator or future closings.  This month’s numbers are just plain confounding.  Let me explain…

Looking year over year, the Conejo Valley inventory is down 12% from a year ago.  Pending sales are also down 8%.  I suppose it could be that these two are tied together.  It stands to reason that if there are fewer homes for sale, there will be fewer pending sales.  Kinda makes sense.  If there’s nothing to buy then there’s fewer to close.  OK, maybe… What makes this even more confusing is the closed sales data.  Looking at June and July (contracts written April-June) year over year, sales are up, and by no small margin.  June and July combined sales are up 12% year over year.  July sales alone were up a whopping 20%.  I suppose it’s possible that buyers just bought up all the inventory and people haven’t listed to replenish it, but that frankly, is strange and difficult to believe.  Yet there it is.

Low inventory is nothing new.  (Find your dream here) We’ve been dealing with low inventory since the Great Recession broke. Then we had a surplus.  But it’s strange that more people aren’t selling.  There’s been a lot of speculation as to the reasons for this.  For a time the thinking went that because many people had the  very low interest rates of a few years ago, the cost to move up not just higher on price but also the cost to finance.  But that isn’t really true any longer now that rates have come down to 2016 levels.  Some have suggested the lack of inventory is creating its own shortage; making its own weather so to speak.  In other words, if there’s nothing to buy, why would I sell what I have and end up homeless?  This then leads to fewer listings and it creates and perpetuates a continued shortage.  Others still, point to the changes in the tax laws that reduced deductibility IRSof one’s top mortgage amount by 25%.  We do know for example the new tax laws capping state and local income tax (SALT) deductibility to $10,000 do not favor the wealthy in states like California.  Anyone who can afford to buy a $1,000,000 home, has to realize that the new law won’t even allow them to deduct all the property tax let alone the state income tax someone at the required-to-qualify income level, would have to pay.  I really believe that is impacting the high end where sales volume is way off.  The thing is though, if inventory is tight, the economy is pretty good and rates are low, homes should be selling fast.  But they aren’t.  So why aren’t homes flying off the shelves?

The Conejo Valley currently boasts 2.9 month’s inventory.  Said another way, if no new listings came on the market, it would take 2.9 months to sell all the homes available.  By virtually every measure, this is a seller’s market.  But as I mentioned, homes aren’t selling as quickly as they were.  Most attribute this to an affordability crisis; that incomes haven’t risen at the same pace as home prices and buyers are suffering from price fatigue.  Thus we see prices are down in most areas and so are sales.  In fact, only 32% of all available homes are presently under contract.  This is a little lower than last year and an indication of slower activity.  As a point of reference, we dipped briefly below 30% in January but January is a tough read since so many days are lost to holidays.  Admittedly, August is the slowest month of the year and in fact, July has been pretty weak the past few years too.  I attribute this largely to back to school shopping, end of summer vacations etc.  Locally school starts before the 3rd week of August which is why July has become a slow month too I figure.  It used to be school started either right before or right after Labor Day.  But no more.  Anyway, whether it’s the political climate, the economy, affordability or any other host of excuses, it’s a strange market when closings from contracts written in late spring are exceeding the previous year, while actives and pendings are well below.  Time will tell as it always does, if this is a short term blip or a precursor to a more ominous market or even a forth coming recession.

 

 

Posted in Home Buying, Home Selling, Market Conditions, Real Estate, Recession, Tax Reform, Tim Freund | Tagged , , , , , | Leave a comment

Re-Marrying = Re-Evaluating Beneficiaries

Congratulations, you’ve just remarried and you’re thrilled. Did you know that 2nd marriages are on the decline in every demographic but one? Pew Research looked at remarriages in 1960 and compared them to 2013. What they found was surprising. Whether by death or divorce, in 1960 72% of men and woman between the age 18-34 and 35-54 remarried. In 2013 just 42% of 18-34 year old’s remarry while only 60% of 35-54 year old’s. But here’s the interesting part, in 1960 only 42% of people 55 and older remarried but fast forward to 2013 and that number jumps to 57%! More seniors are remarrying than ever.

 

And your point?”, you ask? Remarrying means you need to re-evaluate your real estate, will or trust, IRA or annuity. When you got remarried did you change how you hold title? If not and something happens to you, your new spouse might not inherit the house. Moreover, if you don’t re-evaluate how your other assets are to be divided amongst your kids, the assets could end up all going to your new spouse and maybe that’s just how you want it.

However, what happens when she passes? Your children could find they’ve been disinherited in favor of your spouse’s children and that may not be what you wanted. Even if you have a will or a trust, if you own an IRA’s or annuities you have to designate a beneficiary. If you don’t change the beneficiary after remarrying, whoever the original beneficiary is, gets it. That could be your Ex or it could your kids and not your new spouse. It could also still be your deceased spouse and then the IRA goes into probate.

In any event, if you remarry, take a moment. Review your assets in this new context and make sure what happens to your assets after your death is how you want it.

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Spotlight: Corelogic Case-Shiller April 2019

To channel Jan Brady of the Brady Bunch, data, data, data… The information out of Corelogic Case-Shiller today shows a slowing real estate market.  Slowing price appreciation anyway.  Sales we know have been slowing nationally for months, but it’s the appreciation slowdown that is garnering the most attention this month.  And for good reason.  Since 2012 the value of real estate has been steadily increasing.  Therefore a slowdown is noteworthy. Right?   Hmmm… maybe not.  Let’s look at what I find to be the most salient point in the Case-Shiller announcement.

graph_LI

As you can see by the red dashes, even with the spectacular rise since the housing recovery began, there have been periods where the value of homes either paused or given a little back.  In fact, if you look at the graph since its inception, as I’ve marked with the purple lines, during the relatively slow growth during the 1990’s, there were similar periods of appreciation moderation and give back.

So what’s the point?  The point is that while we are in a period where the market is slowing, it is neither uncommon nor unexpected.  Moreover, this is a period when the moderation, decline, giveback, or whatever you want to call it, should be viewed in the historical context as what it is: an opportunity.  I don’t think in looking at the Case-Shiller graph you can conclude anything else because look at the trajectory.  With the exception of the Great Recession and the epic collapse of equity value caused by Wall Street and lender greed via no income, no asset loans packaged as Mortgage Backed Securities and sold as solid AAA rated assets instead of the junk that they were, there has never been a sustained decline in real estate values.  Thus what we have here is a periodic opportunity to acquire real estate at a better price than we did a while back.  This “blip” will be looked back on, just as I have demonstrated here with my colored hash marks, as a period where those who recognized this for what it is and buy, will be thankful that they did.   Have questions?  Contact me here.

Posted in Economics, Home Buying, Home Selling, Market Conditions, Market Conditions, Real Estate, Real Estate Correction, Tim Freund | Tagged , , , , , , , | Leave a comment

The Legacy Of 1949: Don Newcome And The 1949 Housing Act

Don Newcome died yesterday. If you’re not a baseball officiando you may not have ever heard of him, but he was an important figure to baseball, the Dodgers, Los Angeles, and our country. You may wonder why a real estate blogger would take the time to write about a baseball player. Don Newcome’s story is the story of a changing America. The attitude of the country was shifting. The integration of baseball was the first step in popular culture towards equality, but when it came to housing, the year of Don Newcome’s arrival would prove to have negative ramifications that we still deal with today.

The year was 1949. Jackie Robinson had broken the “color barrier” of major league baseball just two years earlier. Baseball, America’s game, finally allowed people of color to join in. By 1949 there was still just a handful of black ballplayers, among them was the pitcher Don Newcome. Tall and powerful, Newcome was a man of firsts. He was the first African American pitcher to win a World Series game, the first to win 20 games and the first to win the league’s Most Valuable Player and Cy Young award for the year’s best pitcher in the same year. For the African American communities, seeing ballplayers like Robinson and Newcome excel was a great source of pride. Little did they know that at the same time, the Federal Government was conspiring to segregate America.

Segregation was nothing new in 1949. The landmark legislation of 1954, Brown vs. The Board of Education outlawing segregation in schools, was still 5 years away. Following World War II, where black soldiers fought and died with distinction, returning servicemen found little had changed back home. The South still lynched black men for looking at  white women, had white and colored only bathrooms, restaurants and hotels. But the South wasn’t the only place segregation and inequality existed. In fact, the Federal Government itself began a systematic push to restrict black homeownership. The 1949 Housing Act was designed under the guise of helping Americans buy homes by easing the ability to finance a home purchase. But it also gave the FHA tacit approval to rank neighborhoods for the purpose of restricting lending to white only neighborhoods and not just in the South. This happened in every city across America. Communities like Levittown in New York sold to whites only. This has been referred to as “White Flight” and lead to the creation of the modern American Suburb, the modern American white -only -suburb.

It’s hard to imagine today that a Government of the People and for the People would create a system that would specifically suppress a large segment of the people but that’s exactly what the 1949 Housing Act did. It allowed the FHA to create a color coded map which ranked geographic areas for lending, restricting which areas would be eligible for FHA insured loans. This served to restrict access to financing for many urban areas that had higher level of nonwhite residents. Today we call this Redlining and this phrase comes from the lines drawn around certain neighborhoods (check out local neighborhood sales here ). The effect of restricting the ability to finance meant, people of color couldn’t buy, couldn’t finance to make repairs and as a result neighborhoods rapidly deteriorated. The Act also had a provision that lead to the demolition of slums that supposedly was to spur building in declining neighborhoods but actually removed housing instead of creating it.

The impact of The Housing Act of 1949 is still felt today. As history has shown, people who own their homes have more wealth and pass that wealth to future generations. Since blacks weren’t allowed to buy, there was less wealth to pass and this is in large part why African American household wealth is so much lower today than that of the white population. Drop a stone in a lake and the ripples go all the way to the shore.

It is in this context that we look to a man like Don Newcome. He broke down barriers that would eventually culminate in the Civil Rights Act of 1964 and the Fair Housing Act of 1968. This is Don Newcome’s legacy and his contribution to this nation is invaluable. Want to chat about this article or real estate, just give me a call or send me an email.

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Interpreting What The Early 2019 Housing Data Means

The housing data that came out of the National Association of Realtors yesterday morning was not good. Sales were down 6.4% from last year, similar to the sales pace to 2000 which if you recall was in a mini recession after the dot-com bubble burst.  If you’re me, or follow me, the data is not the least bit surprising. I’ve said for months that you can not have a booming economy while simultaneously having a sagging real estate market and we’ve had a sagging real estate market since early summer.  According to me then, this by my definition means that the economy may not be  as strong as some would have us believe.  I’ll even go a step farther and say that the real estate market is a leading economic indicator and is telling us where the economy as a whole is headed.  OK, maybe not exactly a leading indicator rather an early reflection or a collective indicator that foreshadows undercurrents within the economy that are not yet articulated by Wall Street or The Federal Reserve but increasingly being felt on Main Street.   The slightest insecurity due to domestic politics, geo-politics, uncertainty at the workplace or in the stock market manifests real estate activity.  So, what does that mean for the spring buying season?

You may think that negative data means the start of something ominous.  The fact is, if you are looking for ominous, it started several months ago as the Fed raised rates while also selling off their balance sheet.  This raised the cost to buy and borrow and buyer’s hit the ceiling on affordability.  The decline in sales, heck even showing activity has created longer “on market” times.  The result has been a lot more price reductions and inventory has increased making selection in many markets, the best it’s been in some time. “Is that everywhere,” you ask?  No actually, not everywhere but it is pervasive.  I just spent considerable time researching and showing a $1.5M client properties on the Westside (of Los Angeles).  If you’re familiar with West LA, you know it’s very expensive. The uber expensive Platinum Triangle of Brentwood, Bel Air and Beverly Hills plus Pacific Palisades and the Beaches have listing prices in the middle 7 and even 8 figures.  There’s even some in the 9.  For our search we were looking more Mid City, think Mar Vista, Culver City, Beverlywood, Larchmont etc.  Here’s what we found: A single family new construction (torn down and rebuilt) at about 2,200 SF is starting around $1.8M.  At our price point of $1.5-1.6M, you find 1300-1800 SF with good locations in exciting, re-gentrified neighborhoods.  The problem is that there are 3-5 offers on anything great within days of listing.  $1.5M in  a nice location and nicely improved is viewed as just modestly above entry level on the Westside.  For example, we wrote an offer at full price on a lovely home in Culver City.  My buyer has 25% down and is well qualified.  The home was already $150,000 above where we had started looking but it was a terrific neighborhood.  Alas, the agent told us that while they appreciated the full price offer, we weren’t the highest. He asked if we wanted a counter but then added it would be over $1.7.  My clients said, no thank you, it was over their budget and that was that. Back to the drawing board.  What was that old adage about real estate…? Oh yeah, location, location, location.  The Westside of Los Angeles is home to Google (they just leased the Westside Pavilion, an entire mall in West LA to house their growing presence in So Cal) and Youtube, Amazon Pictures, Netfilx content, Hulu… am I missing anyone, oh yeah, the rest of the entire entertainment industry that doesn’t stream.  It’s home to finance, has several universities, aerospace and is a growing presence in biotech.  In other words, this area is exploding with high paying, good quality positions and the demand for turnkey, ready-to-go homes is at a premium.  Turnkey is still a big factor.  Overpriced, under appointed or fixers are a misleading indicator of available property. This is true in every market I find by the way.  Mis-priced properties given the amount of work the require, is often the inventory sitting, even on the red-hot Westside.

OK, so while entry level is still pretty strong, the market is soft in many other price points and it’s especially soft for less than perfect. Ironically, these are the properties we used to think of as wealth creating/equity building opportunities.  I wrote an offer for another buyer  on a home in the Conejo Valley that needs pretty much everything.  It has a 1960’s kitchen, original aluminum windows, really old and tired carpet and floors.  Pretty much a high 7 on the icky scale except for its solid location in the area my client wants. Unfortunately, it’s also grossly overpriced.  What did we do then? We did the unthinkable, we wrote an offer for what we thought it was worth. The seller’s been on the market for 208 days and the market has only deteriorated during that time. (Memo to all sellers: don’t do this, it only costs you in the end.)  As is typically the case with this kind of property, the seller wasn’t very receptive to the initial offer, but I think my client will go up and we’ll see if we can make a deal.  My point here is that we wrote an offer.  This is the place I feel the Southern California market is generally at: regardless of where a buyer is looking right now, there are opportunities to make a good buy, but you have to write the offer.  In many ways, this is the best opportunity we’ve had in several years because there is softness in the marketplace and sitting sellers are going to have to negotiate if they want to sell.

I wrote yet a 3rd offer for a buyer this week, on a condo that was a turnkey “flip” that had been on the market 9 days already.  We asked for some credit towards closing costs, the flipper countered, and we settled in between. The flipper thought he was going to get multiple offers, then when he didn’t and made the best deal he could so he could go on to the next project.  This is a good example because a flipper is in the business of moving properties.  Sitting and waiting is not his strategy.  Again, the point here is that buyers can make deals, not on every home and not in every market obviously, but there are deals to be made.

When you have a pretty healthy economy like we’ve had but there are headwinds and uncertainties, real estate points towards the direction that things are heading.  As I said earlier, real estate is kind of a leading economic indicator.  People will always buy and sell real estate, but they do so with vigor when they are confident in their job security, income and the nature of the world as a whole. (Search listings here). When they are lacking these elements, there is hesitation. This leads to all the factors I’ve just described. There’s not question that entry level is hot (even when $1.5M means entry level-ish for a nice single family home in West LA) but everything else is slower.  The serious sellers are going to sell their properties and the serious buyers are need to write offers.  As the data comes in over the coming months, don’t be surprised to see that sales are still off, and that price appreciation continues to slow. We may even give a little back.  None of this is out of the ordinary when it comes to the cycle of real estate and for that matter, the cycle of the economy as a whole. Nothing goes up forever. That doesn’t mean we are in for a significant correction or even necessarily headed towards a recession (2 consecutive months of negative GDP) rather, that we are experiencing the natural course of economic behavior. Economic cycles are a part of life and real estate is a cyclical business. There’s always a correction coming, not if, just when?  But with that correction comes opportunity for the savvy buyers and sellers.
Have something to sell or thinking of buying, give me a call.  (Contact Tim Here).

#realestate #luxuryrealestate #theeconomy #thefederalreserve #allrealestateislocal #dilbeck #christiesinternationalrealestate #luxuryportfolio #leadingre #interestrates #taxcuts #thousandoaksrealestate #westlkevillagerealestate #conejovalleyrealestate #agourarealestate #calabasasrealestate #oakpakrealestate #theconejovalley

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Real Estate, The Economy and Predictions for 2019

If you’re like me you are listening to the prognosticators making their predictions for 2019.  Not one to be left behind, here are my predictions on what you can expect from real estate and the economy at large in 2019.

Starting with what I know best, let me speculate of real estate first. (Contact Tim Here)

  • I think real estate pricing will be down a little as the effect of higher rates and lack of income growth conspire to keep buyers on the sideline and push sellers to lower their prices if they want to sell.
  • Inventory will stay on the market longer actually giving buyers better selection than they’ve had these past few years, but the total number of units for sale will remain historically low.
  • I think transactional volume will continue its slightly downward trend as owners with low rates and/or low property taxes, choose to stay put keeping inventory low, which in turn forces many sellers/buyers-to-be to wait when hopefully selection improves.
  • I expect rents to remain flat to slightly lower. That said, the ripple effect of the loss of units due to the California Fires could force rents higher in fire affected areas but I think flat is the more general scenario.
  • I believe mortgage interest rates are going to stay flat from here and may even go down should the Fed cut rates instead of raise as they’ve indicated they are leaning towards.
  • I think the stock market will continue to trend lower as the global economy slows and the effects on consumer and business owner confidence becomes more unsteady.
  • I see a 50/50 chance of a recession in 2019 (Negative growth for 2 successive quarters). I think either way, it will feel like a recession because the decline in growth in domestic GDP from 2018 is going to scare people into more conservative behavior.  Slowing spending as the wealth effect or lack thereof enters the psyche of business owners and consumers alike.

If you only wanted my predictions stop reading here but if you want to understand my reasoning, keep going!

The backdrop is that rates shot up in 2018 following 4 Fed hikes and The Fed’s simultaneous shrinking of their balance sheet.  This was like a double, triple or quadruple whammy.  It’s the shrinking of the balance sheet along with the largely ineffective yet very expensive tax cut, that is the fly in the ointment of the whole economy and why equities have been so volatile and why the economy is not on stronger footing.  Let me explain…

Following the financial crisis, the Federal Reserve began a course of aggressively stimulating the economy to avoid a depression.  They did this by reducing the rates banks charge one another for short term borrowing (The Fed Funds Rate) and what they charge banks to borrow directly from the Fed (Fed Discount Rate) down to zero.  Unfortunately, the economy was in such a free fall that that strategy proved insufficient in both stimulating the economy and adding liquidity.  Liquidity is a word used to describe how much cash is floating around for lending and borrowing.  The lack of liquidity was the result of the vast amounts wealth that evaporated when housing market crashed, and trillions of dollars of equity vanished.  To combat the lack of liquidity The Fed began a process of buying debt (Mortgage Backed Securities, US Treasury Bonds and Mortgages from Freddie Mac, Fannie and Ginnie Mae).  This they called, Quantitative Easing or QE for short.  Historically the Fed had always maintained some balance of debt that they owned and in 2008 that amount stood around $1 Trillion.  When QE still wasn’t enough to stave off the economic free fall, The Fed embarked on additional rounds of easing monetary policy by buying more debt (QE II, III and IV) adding several more $ Trillion to what they owned.  By 2018 that amount stood at $4,000,000,000,000.  

Now you’re probably thinking, “So what?  What’s the significance of The Fed buying and holding debt?  The significance is that by being a buyer of debt they effectively created artificial demand.  They were buying huge amounts of debt so the price they paid went higher and higher.  Basic Econ 101 tells us that as demand goes up, so do the prices.  In the case of bonds, when the price goes up, the yield goes down and thus rates came down (the whole point).  This stimulated the economy, the recovery in housing (Search listings here) and saved us from a repeat of the 1930’s.  Phew!

You’re probably wondering at this point, where did the money come from to buy that debt?  Simple, they printed more money and all that money improved liquidity and in turn all that extra money helped us climb out of the Great Recession and helped the DOW Jones Industrial Average go up from a low of a 6,500 in March 2009 to over 27,000 in October 2018.  However, by inserting themselves into the daily functionality of the market place, they warped the market.  They weren’t alone  either.  Central banks around the world did the same and this massive world wide debt is contributing in part to the global economic slowdown we are experiencing now.  At some point all “good things” come to an end and as the U.S. economy strengthened The Fed announced in June 2015, an end to QE.  They stopped being a buyer.  By October 2017 The Fed began the process of “Unwinding” the balance sheet (selling off their debt) $75B at a time.  But this amounted to the equivalent of many rate hikes.  Remember, as the Fed became a seller not a buyer of debt, the demand for debt decreased.  Again, Econ 101 teaches as demand wanes for a good or service, prices decline.  Since interest rates move in the opposite direction of prices, by backing out Quantitative Easing, the Fed caused rates to rise.  As a result a 30 mortgage went from about 4% to over 5% by fall 2018.  And while the rates have recently come down as investors are betting we are now closer to a recession than an economic expansion, the cost to borrow is still .5-.75% higher than it was.  This has lead to a decline in real estate affordability and that has turned into a decline in demand for homes.  I maintain this axiom remains true: Housing is the engine of the economy and you can’t have a booming economy with  a contracting real estate market.  It is for this reason that I am leaning towards a Fed that keeps on pace in reducing their balance sheet of debt, but holds rates steady or if need be, even lowers them in 2019.  In the absence of inflation, (inflation is still running below The Fed’s stated optimal annual inflation rate of 2%) there is little justification to continue a path towards raising rates.  Rates are raised to stave of the danger of inflation which once accelerating, is very hard to slow down – think the late 1970’s.  No significant inflation, no need to raise rates.  That said, The Fed cut rates to zero and then added debt with the QE’s.  To walk that back, I believe they should have accelerated the unwinding component and then raise rates; think about Jack Nicholson chasing the boy  in The Shining where the little boy had to walk backwards in his footsteps and then hide.  Walking back in his footsteps happened before the hiding part.  The Fed probably should have gotten rid of more debt first and waited to raise rates, letting the market place return to some form of normal.

As for the 2018 tax cuts, the Federal deficit has now ballooned an additional $1.5T.  And what happens when supply is greater than demand?  Prices decline and then rates go… up.  In this case that means the amount of money the Federal Government must pay in interest payments goes up because there’s so much debt and only a limited amount of countries buying it (ie: China and to a lesser extent Japan.)  That means rates have to go up on the debt to attract buyers and that makes paying off the debt that much harder.  The corporate tax cut to 20% was supposedly designed to spur economic expansion through investment by corporate America, as well as increase wages since profits would be higher with a lower corporate tax rate and employers would pass some of that profit to workers in the form of higher pay.  And since they’d have to compete for workers in a tight job market, historically wages went up.  We got the tight labor market, but wages haven’t gone up.  Too much global competition.  Unfortunately then, the predictable happened which was that instead of getting pay raises, some employees got one-time bonuses while most didn’t even get that.  Amazon made headlines for example by raising the minimum wage to $15 but then cut other perks like stock options.  Meanwhile, instead of using the windfall of cash on capital expenditures, Corporate America engaged in massive stock buyback programs the likes of which has never been seen before, fattening the pocket books of the shareholders.  Said another way, Corporate America used the money to buy back stock boosting the stock’s value by tightening supply rather than by improving actual capacity, making capital improvements or increasing Research and Development which ultimately contributes to economic expansion.  Capital investment and R & D lead to far greater economic growth, job creation, income and prosperity, than stock buybacks which tend to boost the stock price for benefit the very few rather than the many and accomplishes very little else.  Sadly, the President and Congress awarded massive corporate tax-cuts without any strings attached linking the cut to desired behavior, ie: investment.  Some of you won’t agree with my assessment especially on the effectiveness or lack thereof of the tax cut, perhaps pointing to a timeline down the road not yet visible, but I’m pretty sure I’m right on this and 2019 and 2020 will bear that out.

So that’s it.  It’s going to be a continued year of volatility in equities and housing.  If there’s a take away for real estate it’s this: as home prices give back a little of the 2012-1018 gains and interest rates drop due to a slowing economy, there’s going to be an opportunity to “buy the dip.” And because supply is still very low and demand is only going to increase in the years to come with the bulk of the Millennials just now beginning their household formation home buying cycle, 2019 is going to prove a great year to buy real estate.

 

#realestate #luxuryrealestate #theeconomy #thefederalreserve #allrealestateislocal #dilbeck #christiesinternationalrealestate #luxuryportfolio #leadingre #interestrates #taxcuts #thousandoaksrealestate #westlkevillagerealestate #conejovalleyrealestate #agourarealestate #calabasasrealestate #oakpakrealestate #theconejovalley

Posted in Demographics, Economics, Home Buying, Home Selling, Real Estate | Tagged , , , , , , , , , , | Leave a comment

Timing The Housing Market

You’re a would be home buyer and you’re wondering about timing the housing market when that market is showing signs of slowing.  This begs the question, can you as a buyer, time the real estate market?  The answer is yes but that doesn’t mean what you think.  It’s not timing the bottom.  What then exactly do I then mean by yes you can time the market?  Let me explain…

If you are a buyer today and you want to buy your family home, timing means by as soon as you find a home you love.  That’s timing, that’s your timing and if you’ve ever planned for a big life change you know, timing is everything (if this is the right time for you, check out listings in your area here).  If you want to get in for the kids before school starts, that’s timing too.  It’s timing subject to a set of priorities you’ve assembled.  Same is true if your career has certain times of year that may be slower, when you have a little more time to move.  For me that is fall because spring is always crazy in my business and I couldn’t imagine trying to move in spring.  For my insurance buddy that’s spring because the last part and first part of every year is open enrollment and renewal.  For my accountant that’s May-June, after tax season and after a much needed vacation.  Perhaps you have been looking in spring and felt that everything nice was disappearing.  There were multiple offers and prices seemed to be running away from you so you decide to hold off until fall.  That’s timing of a different sort too, that’s timing the seasonality of the housing market.

OK, that’s not what you mean when you refer to timing.  You were thinking about timing the bottom or timing the decline.  Jumping in at the exact moment that you can buy at the lowest price, to gain the lowest payment and obtain the greatest return on investment.  If you are a buyer and the market is soft for the first time in 6 years and you can negotiate a little better deal, that’s timing.  That’s timing the market and that’s what you should be looking at doing now.  Don’t misunderstand, I’m not suggesting like all the investors on CNBC do that “You should buy now, buy now!”  I hate it when I hear that because what do you expect them to say?  Don’t buy?  They never do.  Same can be said for a Realtor, but when you are in the market for a home and you know that sales are slowing it’s important to realize that while you may not be at or even near bottom, a home is so much more than an investment.  If you can find a home you love and you know that the price is softer now than it was just a few months ago, write your offer. Write a lower offer.  Test that seller.  How motivated are they?  Do they really want to sell today or are they willing to wait?  This is especially true if that home has been on the market a while and the seller has already had a couple price reductions.

Prices typically rebound in the spring, but maybe this year they don’t or maybe they do.  This timing thing swings both ways for buyers and sellers.

My point is this.  If you find the right home (click here to search for homes ), can get it at an improved price from a few months ago, buy it.  Even if prices go down some more, so what?  It’s you home and when you are looking at buying your home, you don’t pass on your Shangri La over a fist full of dollars.  So long as you feel confident in your employment and you’ve assessed your ability to repay the loan that you’ll undoubtedly be taking out, don’t worry about the possibility that there could have been an extra $10,000 or even $30,000 that you might be able to save.  This is a few hundred dollars a month if it were to drop that additional amount.  If…  Right now, there are signs the market is correcting.  The headwinds of rate hikes, lack of wage growth and a potential slowdown in the global economy is putting pressure on prices.  Some sellers are still pricing their homes like the market is going up.  For most of these sellers, they’re in for a rude awakening and your low offer after they’ve languished a few months is that wake up call.  As a buyer you should be watching and lying in wait.  You’re getting the opportunity that many buyers only 6 months ago, longed for.  Don’t lose the home that you wanted, if and when it comes available.  Timing the market bottom is a sucker’s bet.  Sure, you might wait another year and the market corrects substantially, anything’s possible.  Equally possible is that rates continue to rise in the face of a declining Fed balance sheet and ever increasing government spending and borrowing.  In the absence of substantial wage inflation, your buying power actually decreases even with a marginal decline in property value.  For each percent of interest rise, a property has to decline roughly 10% in value for your buying power to remain neutral.  The reality however is that a perpetual shortage of supply in the face of a generational cycle of increasing demand as Millennials age into buyers, means any decline or correction is likely to be measured.

So timing the market?  Heck yeah, you can time it but don’t confuse timing the market with timing the bottom. If you have questions or would like to know if it’s the right time for you, give me a call 805.427.3008 or contact me.

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