Real Estate Markets Are Local

We all read in the paper and hear on TV and radio news about the decline in residential real estate. It is important to remember that real estate markets are very local in nature.

The news media's reports concern regional, state and national statistics. These statistics are very broad. The value of a specific piece of residential real estate is much more localized and should be studied on the zip code level and even broken down further from there to the neighborhood level.

If you are interested in the current value of your residential real estate ask for a Market Analysis from an experienced local real estate licensee. If you live in the San Diego area I would be happy to do one for you just browse this link http://www.petesaxon.com/Forms/CMARequest.aspx or send me an email.

Mortgage Meltdown?

The media is portraying the current residential real estate market as being in a "Sub Prime Meltdown." Our friends in the media love to label the news and search for victims. This strategy to secure Nielson ratings must work because we all watch the news.

I've been in the Southern California residential real estate business for over thirty years. What the media is calling a "meltdown" has happened twice before in my career. In the 1980's there was a similar event when the FHA was making loans to home buyers that featured negative amortization the first few years. The unpaid principal and interest from the first years of the loan was added to the principal balance that the borrower owed when the property sold or was refinanced.

Sound familiar? Yup, that's exactly what all the current media hysteria is talking about. The current batch of sub prime loans were structured in much the same way. The featured low interest rate, interest only payments for the first year or so of the loan with the unpaid principal and interest added to the balance due at sale or refinance.

The collapse of the Southern California real estate in the mid 1990's was due to the demise of the defense and aerospace industries. Hundreds of thousands of people in the Southern California region lost their jobs. The truck rental companies were paying people to drive their trucks back to Southern California because so many thousands of people were fleeing.

The residential real estate market is like any other market. There are fluctuations both up and down. We are currently experiencing a down turn. It happens. In the long run residential real estate will retain it's value and appreciate.

I expect the market to steady in the next three to four months as the lenders figure out where they stand and become comfortable with new underwriting guidelines they develop for their business models. They will develop new loan programs like they did in the mid 1980's when interest rates were extremely high. That's when the adjustable rate loan programs evolved. I have no problem with adjustable loans. I do have a problem with negatively amortized loans of any kind.

This market will rebound. It always does. If you're in a property now and don't need to sell then just hang on for a while. If you're a prospective home buyer this is the time to be doing your research and getting ready to pounce.

Some Perspective On Foreclosure Rates

The media continues to emphasize the seemingly dramatic increase in California home foreclosure rates. But it is important to remember that during the last five or six years there were literally zero foreclosures. Any statistical difference between zero and some new number will always seem like a huge percentage.

I do think it will be a year, maybe eighteen months before this stops becoming a news item. It will take that long to shake out the people who opted for very low interest only loans to get into a property at the height of the market. As these loans adjust to thirty year fixed rate loans some of these borrowers will not be able to afford the payment increases.

I have seen this same scenario twice before in my thirty year career. It will take some time to work itself out.

Real Estate Sells Because Of Location, Price, Terms, Condition And Accessibility

I have been a licensed real estate broker in California for over thirty years. During those three decades I have witnessed many changes in the way real estate is marketed. For the most part the changes affected organized real estate, not consumers.

The advent of the internet, information technology and the availability of information to the consuming public is causing a profound change in marketing real estate. For the first time the consumer is the beneficiary.

Real property sells because if its location, the price, the terms offered, the property's condition and the ease with which a potential buyer can view it. This has always been the case. Real property does not sell because of the name of the For Sale sign.

When I first started in real estate sales I worked for a small office in La Mesa California. Each Friday the latest edition of the multiple listing service was dropped off on the office's back stoop. We would all gather the information, which consisted of 8.5"x5.5" sheets of paper printed with listing information, and put them in three ring binders. There was also a printed sheet of all the new listings, pending sales, closings, expired and canceled listings. We then had the latest market information.

Over the years technology improved the distribution of this information to members of the MLS. Still, it was the MLS members who had access to the information and they shared it only with each other.

In today's real estate market the consumer has access to almost all the same information that once belonged only to the MLS members. As a result the value of "owning" the information is greatly reduced. MLS members are feeling the same pricing pressure as stock brokers, travel agents, banks and other information services who have lost control of the information they once controlled. The consumer is the beneficiary.

However, of all the various marketing methods available to prospective home sellers the multiple listing service is still the most powerful marketing tool. The MLS is well organized, offers a great deal of information and is subscribed to by real estate licensees who make their business selling homes.

The net result is that today home sellers have more options available to them when marketing their property via the MLS. Several types of MLS listing options are available that result in the home seller saving money on commission expenses. An important question any home seller should ask before listing their property in the MLS is what listing options are available.

Before I end this post I would like to add that I have been a member of the National Association of REALTORS, the California Association of REALTORS and my local board of REALTORS for all of the thirty years I have been in the business. Some members of these organizations will not approve of what I am writing here. But I did not create this situation. I am only responding to what is happening in the market and sharing that information with consumers. That is my job.