Friday, August 27, 2010

My Market Thoughts

Unlike many of my fellow Realtors, I have always preached that you buy a home because you feel strongly that you are going to enjoy living in it, like the location, and it fits you and or your family’s needs. The “steroid” era of the home market caused a distorted picture of home ownership and the correction we are currently going through is strongly preaching that. Owning a home is a beautiful thing and over time a great, leveraged investment, but it should only be done if the fundamentals make sense and you can see yourself in the property at least for a 5 to 10 year period. We are just reaching the bottom of the avalanche of the Mt. St. Helen’s of real estate run-ups, which it reached its peak in late 2006.

The market will eventually rise again and I believe the next 18 months will provide great buying opportunities. However, in my opinion, the Westside market has at least another 10% left on the downside. As long as mortgage rates continue to decline at unprecedented levels, we may not see the drop right away but recent market activity has been very slow on the high end indicating the drop could be coming sooner rather than later.

Until the fundamentals of what people earn vs. what they can afford properly matches up and the economy picks up some sort of steam, the current housing prices in the jumbo loan market are still a bit high. I say this with one caveat. If you can afford to buy and have a great credit score, history will look back on this time as a great time to buy since it is extremely rare to have prices dropping along with mortgage rates that are trending toward 4%...in 1981, rates were above 18%.

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