Ignore starts and stops in favor of the long view in real
estate
Just for the grins I went to my trusty computer and Googled (I
heard that on the radio
– it must be a verb)
”
real estate bubble.
”
In the space of half an hour I discovered concurrently:
– Unequivocally the bubble is huge and ugly and scary and headed
our way;
– There is no bubble so quit squawking like Chicken Little;
– The bubble is leaking air but in no danger of flying around
the room like a released balloon at a kid’s party.
So what are you going to believe?
Just for the grins I went to my trusty computer and Googled (I heard that on the radio – it must be a verb) “real estate bubble.” In the space of half an hour I discovered concurrently:
– Unequivocally the bubble is huge and ugly and scary and headed our way;
– There is no bubble so quit squawking like Chicken Little;
– The bubble is leaking air but in no danger of flying around the room like a released balloon at a kid’s party.
So what are you going to believe?
The 2006 real estate market analysis by Leslie Appleton-Young, vice-president and chief economist for the California Association of Realtors, claims home prices are high right now because of the basic market conditions. We don’t have enough housing stock to meet the needs of all the people seeking homes. Inventories are low. In addition, many communities seek to conserve a quality of life by implementation of growth restrictions and constraints. So supply can’t keep up with demand.
And why is demand so high? California has long been a destination for dreamers and adventurers seeking a better life. Face it, you live where people in Ohio and Kansas dream of living. In addition, the Baby Boomers are buying second homes and investment properties in record numbers as an alternative investment strategy.
Interest rates are still low, and many creative options exist for getting into a first home or using the equity of one property to purchase another. Thus the financial environment is rich with opportunity even if the brick and mortar options are limited.
When people talk of a national housing bubble they are assuming that there is a national housing market. Whoa, doggies! Of course there is not. Instead there is a web of real estate economies covering our nation from coast to coast. Some have impacts on others, but not one is able to send a ripple from sea to shining sea.
After Sept. 11, 2001 there was a definite stop to the market for a few days, but the rest of the country stopped, too. Grief and shock had every industry reeling. It took awhile to get one’s bearings. Certainly after Loma Prieta earthquake the real estate industry stopped for a while, too. You can imagine what it’s like in the Hurricane Katrina region right now. Acts of God and national disasters make it hard to focus on the day-to-day functions with a modicum of concentration, but thus far they have not had long-term effects on the housing market.
These are temporary fits and starts. The housing market is not like the stock market. Remember Black Friday in October 1929? Okay, maybe you’re too young, but surely you heard about it in U.S. History class. And you probably do remember the dot.com stock dump. Well, this is a different situation entirely. In both cases, there were no economic principles which could explain the situation. Speculation was fueled by greed and the fear that if you didn’t jump in with both feet you’d be left behind. Not so with the housing situation. We are dealing with a finite commodity: Land.
Can you get yourself in trouble with an investment in real estate? You betcha! First of all, real estate is not as easy to dispose of as a stock investment. It could take a long time to unload a property in a cooling market. You can watch the prices slowly sink in the west while you wait for a buyer. The real estate has its ebbs and flows all the time.
Second, some people are currently holding homes they can barely afford, counting on the equity coming in the future to have the whole situation make sense. If the prices drop, they could be left having to sell a property for less than the mortgage they owe the lender. This is called a short sale. We haven’t seen many lately, but they could be coming back to us with a vengeance. If interest rates rise, folks who barely qualified for the minimum payment on an interest-only loan may find it difficult to make ends meet.
Most people who hold their real estate long-term will find a steady growth in the asset. If you can choose your time to sell, you’ll almost always do well with your real estate investment over the long haul despite the daily trials and tribulations.
But enough of all that. Let’s look at market activity. In San Benito County 21 new properties came on to the market and 12 accepted contracts, 4 with the pending release clause. There were 10 properties changing hands, and 17 properties removed from the inventory by the sellers for a variety of reasons. The inventory is down a bit from last week, checking in at 196.
In South Santa Clara County we find an inventory of 296. Last week 46 new properties popped onto the inventory. Contracts were accepted on 28 homes, 3 with a pending release clause. Matching San Benito County, 17 properties were removed by sellers. Only 16 homes closed escrow.
Not much change in our market: No sign of a bubble. Need more info? Call your local Realtor. And be kind to your Realtor!
