Swimming Up Stream

Two men and a woman have to cross a raging river.  If they try to cross, they will surely perish.  Suddenly a voice from heaven says “I will grant you each one wish”.  The first guy says, “Give me the strongest muscles so that I may swim across this river”.  Immediately he turns into a hulking figure, jumps in the water, is almost swept away by the current, but makes to the opposite shore on his last breath.  The 2nd man says, “Make me an Olympic swimmer so that I may swim across this river”.  Like the other he is immediately transformed, this time into a sleek and powerful swimmer.  He dives in and after a fierce struggle; he too barely survives after nearly being swept away by the powerful current, but makes it on his last breath.  At last it is the woman’s turn to make a wish.  Quietly she gazes at the torrent of a river.  Finally the she speaks, “Build me a bridge so that I may cross this raging river”.  Moments later there appears a bridge and she easily walks across.

So what has this story to do with real estate?  Yesterday’s Case-Shiller report highlighted several dismal facts about the current status of the real estate market.  Prices are down almost everywhere from a year ago.  Now that the tax credits are a distant memory, we are seeing a double dip in pricing, almost as if the credits never happened. In fact if you look at a graph you can imagine that we are 2 years ago and the trend line is in the same place it would have been then had the government not instituted tax credits at all.  Yet, as David Blitzer, the S & P spokesman said on CNBC  yesterday, what we are seeing is that location maters.  California, he said unlike the Sun-Belt states, had broken out of the cycle proving once again the three most important words in real estate are not “Price Per Foot”, but rather “Location, Location, Location”.  I like what my manager Chuck Lech said, “The 3 most important words are California, California, California”.

I have been saying that inventory is too low in our market to make this a buyer’s market.  Prices in the LA area are at 2003 levels which, admittedly, is not a great thing, but when seen as remaining 5.4% above the low of Spring 2009, not all that bad either.  In his article in today’s Los Angeles Times, Alejandro Lazo quotes Beacon Economics chief economist Christopher Thornberg as saying, “With a recovering economy, incomes on the move, interest rates low, the fact that affordability is so good relative to the last decade is more or less supporting the market right now.”  I couldn’t agree more.  Lazo also quotes Richard Green of USC’s Lusk Center for Real Estate as saying “California (coastal) cities had begun recovering faster than other cities…because California didn’t overbuild to the same degree as those places.”

Supply matters.

I have been talking about supply for months.  Some of my Realtor friends called me yesterday to challenge me about the lousy numbers in Case-Shiller’s report, and I just said, “So? Just try and find a nice house for your buyers…”  Sure the national numbers are bad, and I don’t want to act like they aren’t, but bouncing along a bottom is a natural and necessary part of any housing recovery, one which should be embraced rather than vilified.  In fact anything else would increase the possibility of another bubble.  Slow and sustained improvement is just what the doctor ordered in my opinion.

So while we may feel like one of the swimmers in the story, fighting the current with all our might and struggling to survive, I believe if we don’t panic and remain patient, we will find our way to the other side.

About Tim Freund

Tim Freund has been a licensed real estate agent/broker since 1990. He spent 14 years as a new home sales rep, ran his own boutique resale brokerage for 5 years and is currently an Estates Director for Dilbeck Estates/Christie's International Estates in Westlake Village, Ca. Tim is a Certified Residential Specialist (CRS), an Accredited Buyer's Representative (ABR), a Corporate Mobilty Specialist (CMS) and a Senior Real Estate Specialist (SRES). Tim has successfully negotiated a loan modification for a client and is a professional short sale negotiator. Tim has been married 28 years, has 2 children, is a native Californian and has been a resident of the Conejo Valley since 1991.
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