Real Estate

I was going to write a piece on staging your home, but that seems irrelevant this week. I feel obliged to write on the economic news and its impact on the local housing market. But, truth be told, I don’t know what the local impact will be. I am not sure anyone does yet.

That being said, I can suggest the following preliminary comments. Regardless of the government rescue plan, loans will be much harder to obtain. I am hearing talk of 15-20% minimum down payments. If this is the case, fewer buyers will qualify for loans, hence the number of buyers in the already diminished buyer pool will grow smaller. This is obviously bad for sellers. Fewer buyers means fewer opportunities to sell, higher inventory, and more downward pressure on pricing.

What if I just bought a home? Am I going to lose value? Those are reasonable questions, but reasonable answers to them require some sense of context, i.e., where is your home and what kind of price did you pay? The local real estate markets in California have been relatively stable with regard to pricing. This stability has been largely defined by a lack of appreciation or low appreciation over the last couple years, but we haven’t seen plummeting values except in a few cases where buyers overpaid in the ‘05 boom. Also, if you paid list or close to list, you probably paid too much (unless the home was priced exceptionally well, which does happen; check the comps). Homes in California are selling at an average of 93-96% on the real estate market.

I do not know what the next couple years will bring; however, I can tell you this. My husband and I bought a home last year and we don’t regret it. We needed a place to live, and we wanted a nice place to live with good schools and nice neighbors. Our home is worth about the same today as what we paid for it last year, but we are happy with our decision. We don’t plan on moving for 5+ years, and so the “value” of our home today is not important to us. Current value is meaningful only if you’re intending to sell in the current market.

Also, we did get a good deal on our home, and we bought after the boom years. People who paid too much in 2004 and ‘05 and need to move now due to a job loss, a job transfer, or a bad mortgage are the ones who are truly faced with lost value.