Monday, November 26, 2007

The Final Stretch

Your nice long and hopefully restful weekend has come to an end, and it is time to get back to on finding your new home that is! The end of the year is finally here, and to be in by the holidays or enjoy the 2007 tax break, you really must act now. You need to find the right home in the next two weeks and have an offer accepted in order to leave enough time for escrow and close by the end of the year.

In our open house yesterday, which was surprisingly busy by the way, there were still many people saying that they were just trying to figure out what the market is doing. Why is that so hard for people to figure out? The first reason is, of course, that we cannot see into the future. The second reason is that people are listening to the media. We're not saying you shouldn't listen to it, just to take it with a grain of salt.

DataQuick is a research service which gathers data and statistics for the real estate market. They produce many different types of reports. One such report gives the number of properties sold, and another reports the average price of the properties. This past October was the slowest October in terms of number of sales in Dataquick's history which goes back to 1988. Before that, the slowest October was in 1990, and the busiest was in 2003.

On the flip side, also according to DataQuick, the average price for a home in San Francisco has gone up 3.9% from October 2006 to October 2007. In the Bay Area as a whole, it is up 2.4%.

To listen to the media, you would assume that prices have fallen, and they have in some spots, but not all, and certainly not in San Francisco as a whole. Consumers are being scared away from buying, thus the "We are trying to figure out what the market is doing". The best way to figure it out is to look at statistics; not turn on the six o'clock news. The news will never talk specifically about Noe Valley, Potrero Hill, Glen Park, Pacific Heights, or any other neighborhood you are thinking of purchasing in. Trulia is a great source for year to year neighborhood statistics. We are not saying the number will always be positive; just that you should have all of the correct data when making this kind of decision.

I received an email from a friend at a title company that chronicled real estate headlines over the years. Where would we be if we had listened? Here are a few examples:

“Financial planners agree that houses will continue to be a poor investment.”
– Kiplinger’s Personal Financial Magazine, 1993

“We’re starting to go back to the time when you bought a home not for its potential money-making abilities, but rather as a nesting spot.”
– Los Angeles Times, 1993 (Note: 1993 was the absolute low-point for real estate values in Los Angeles. Priced have sky-rocketed since.)

“Most economists agree...a home will become little more than a roof and a tax deduction, certainly mot the lucrative investment it was....”
– Money Magazine, 1986

“If you are looking to buy, be careful. Rising home values are not a sure thing anymore.”
– Miami Herald, 1985

“The era of easy profits in real estate may be drawing to a close.” (Average price at the time: $28,000)
– Money Magazine, 1981

Of course there are no guarantees in life and being cautious is absolutely commendable. If you buy real estate as a home first and an investment second there is no losing.

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