By John Polson

January 2009

Where are we and where do we go from here?

 Right now the general consensus seems to be that the economy and the housing market are teetering somewhere near the bottom.  This is both good news and … uncertain news.  I’ll leave the bad news for the media to talk about.  Good news is, well, better times are ahead!  YEAH!!!  Allright!!!

 Uncertain news … because, well, frankly… we’re pretty likely to be hovering around the bottom of this thing for a while yet.  This one’s not going to recover with a bang and things will just start taking off again.  So what does this mean for home buyers and home sellers??

 For home buyers… now is an AWESOME Time to be buying a home.  Primarily (as is usually the case) if you’re planning on staying in the home for more than a couple of years.  If you buy a house now, assuming you meet the requirements to borrow the money such as good credit, stable job, verifiable income, and low debt to income ratio’s then you’ll be able to negotiate a pretty good deal on a house, whether it’s new or existing. 

 For sellers, well… if you’re selling in this market you already know this.  This is a time for intestinal fortitude.  Gut check time if you’re selling in this market.  What’s your motivation, how bad do you need to sell?  Ask yourself these questions because buyers (if they look at your house at all) are going to test you on this IF they consider making an offer on your home. 

 What is selling?  Lower price ranges are showing some strength in numbers of sales, where the higher price ranges (over $250,000) are showing a lot of weakness.  Typically the lower price ranges appeal to first time home buyers and others in the market place who don’t have to sell another home.  The higher ranges are usually markets where buyers for one home have to sell another home, sometimes they’re downsizing so they’re selling a more expensive home (Really hard to sell) or maybe they’re moving up and selling a less expensive home (not quite as bad).  And if they have cash… then they have gotten (reasonably so at this point) really picky and…they have a LOT To choose from. 

 Inventory continues to be high in both cases and in some price ranges the glut is so bad that the market is no longer behaving in a normal way.  Homes that may at one time have been valued upwards of $600,000 may have to be sold now for $400,000 because the market (buyers) is So thin and the inventory is so huge, and buyers are so cautious about investing this kind of money when they’re portfolio’s have taken such a huge hit.  The troubling thing is… where did these $600,000 valuations come from??  Because if they’re selling for $400,000 then… what on Earth made us think they were ever $600,000??? 

 Realistically… they never really were $600,000 properties… and that’s the reality we’re hit with now.  The hallucination that was the Real Estate Market of 2004-2006 (where the peak buying frenzy and sales volume seems to have been at it’s highest) prices were hitting places that normal market conditions (a reasonably balanced supply and demand) would never have allowed them to reach in terms of price. 

That just is what it is so to speak. 

 My message if you’re in this Real Estate Market is this.  Know what your strategy is and know why you’re selling.  If you’re buying, be in it for the longer term (2 years plus) and not to flip.  Bargains are out there… and there are some tremendous deals.  Usually these are NOT for the faint of heart…we’re talking about foreclosures and rehabs and sometimes short-sales.  But some of these are tricky situations and can be difficult for first time home buyers to deal with both from figuring out how to remodel the rehab, to knowing how much other money’s will need to be tied up in the process.  Short sales are tough at times because they’re uncertainty with who you’re negotiating with (the bank) and what kind of title they can provide.

 If you’re a buyer… and you find something you like.  If you can afford it…if you’re comfortable with it… if you like the price, if you could see someone else buying it for that price… Confirm these opinions with your REALTOR® and make sure that you’re working with someone you trust.  And when you find it, don’t be afraid to buy it.  It’ll be your home.  And it’s a secure investment.  Are you paying Rent?? If you’re renting, who are you giving your money to?  Someone else…  If you own, then you’ll still be making a payment, but … who’s that money ultimately go to?  Part of it goes to the bank for interest, yes, but the other part is going to you.  And even that part that goes to interest, you get that back in the form of a tax deduction for primary residence or 2^nd home. 

 If you’re a seller.  Price Price Price… Price your home right, and price it below your competition.  Look at your comp’s (Comparables) and review them with your REALTOR®.  If you’re not sure, go on a market tour with your REALTOR® and see what else is out there for competition.  It WILL Take time to sell your home, but if you price it right, you’re VERY Likely to get it sold in realistic time.  And Don’t be afraid to be aggressive when it comes time to lower your price.  If nothing’s happening in the first 60 days, it’s time to lower the price.  Figure out what’s the least you can take… and be willing to put your price at or below this number.  Seriously… if you’re selling in this market, would you rather hang on to it, and put the rest of your life on hold, or would you rather be done with it and get it sold.  Of course there’s lots of factors to take into account, so be diligent, your listing agent is there for you and wants to get you the best possible price.  We’re here to help but we are subject to the confines of what the market is doing, and the market is not behaving normally now, so sometimes you have do be willing to do things you wouldn’t otherwise be willing to do.  Lower your price, sell, and put yourself in a position to fight anther day rather than be stuck. 

So often I hear sellers who had unrealistic ideas for pricing say “I’m not just going to give it away” when we start talking about lowering the price.  In today’s market, that mindset has to go away.  You’re selling it, not giving it away, so please don’t look at it that way.  What you REALLY Don’t want… is to keep the price too high, not sell it… and that have the bank come in and Take it away.  SOOO Many sellers in this market have learned this very difficult lesson, you may not want to give it away, but many times sellers have found that their bank doesn’t feel the same way… and they’ve ended up taking it away.  Don’t let that happen to you.  Work with your lender and make sure they know everything you’re doing, particularly if you’re in a desperate situation financially.  Most lenders today want to work with homeowners and don’t want to foreclose, but sometimes there’s no other choice, particularly when the owner feels pressured to do something he/ she doesn’t want to do. 

 Stick with it folks.  We’re going to be bouncing along the bottom here for a while, but we do believe there is improvement ahead.  I’m looking to 2^nd half of 2009 to see some improvements in certain sectors of the economy and I do believe it will be led by housing in many ways.  Interest rates should remain low, job growth will occur in some areas, housing will once again be seen as a safe investment as owners once again realize that their home is more than just a bank account, but it’s a place for family, for safety, security in addition to an investment. 

 Thanks for reading…

I would love to hear your thoughts on this blog entry.  Feel free to e-mail me at johnpolson@pleasantlife.com with any feedback or questions you might have.  My web site is www.JohnPolson.com

 John Polson