Part 1
I am so sick of hearing “bad market” I almost puke. We are not — repeat, not — in a bad market for homebuyers right now. We are in one heck of a good market, regardless of the kind of property you are looking to buy. We are in a bad market if you are a seller. Good for one group and bad for the other. What else is new?
In reality, we are in a slow market, relatively speaking.
Recently I attended a seminar taught by the president of Keller Williams Realty, Mo Anderson. Mo has been in the real estate business for over 25 years in Oklahoma, where she entered the business. She talked about Oklahoma, where real estate has never been as “good” as it has been here in California. She talked about Palo Alto and San Francisco, where prices, even during this downturn in housing, have continued to go up. She talked about Malibu, where prices go up even on homes that are clearly susceptible to mudslides into the Pacific. She talked about cycles in real estate, the stock market, and the national and international economy. Who would have thought one year before the dotcom bust that IBM, HP, Xerox, Google, Intel, and high-tech in general would ever have a “slowdown?” But it happened, just as in real estate.
In Redding, though, our numbers are still not that bad. Over 10 years, most homes have doubled in price. In 2000, we were selling apartment buildings to investors at a price based on $20,000 a door, which is a living unit. Today it is $40,000 a door, if you can get it. Most are $50,000 and up, depending on the complex, condition and location. I can remember when Quail Ridge homes eight years ago were selling for less that $100,000. Now they are $200,000. Not bad for an investment.
We are hearing that we might see a turnaround in the 2nd quarter of 2009. What has happened to the housing industry in general? Basically, we have seen a concept covered in basic college economics called supply and demand. For a number of years throughout the nation, the inventory of new homes was very stable. In about 2000, money became much more available because of the growing international economies, and the homebuying public started to buy. In fact, these buyers started buying faster than ever before, so inventory was rapidly reduced. It became a sellers market. Builders found they had an almost unlimited supply of funds available, and they started doing what they do best. They built at an unprecedented rate, and in three to four years, the inventory of available homes grew rapidly. It grew, though, during a period when buyers were buying also at an even greater rate and this rush of buyers caused home prices to go up significantly, especially in desirable areas like California. Because of development and construction timelines, the demand was still just too great and the supply limited. We saw happen statewide what happened in Redding. Prices shot up almost overnight; homeowners in older, stable neighborhoods saw their home values go up and moved to a newer, more expensive home, and so it went. The rest is history. For 18-24 months, we have been waiting for the balance to be restored.
The housing industry is not home free. The home financing market has to get itself back in balance. This money comes from the world economy in general is affected by other issues, such as the price of oil. Not simple. I hope we are heading in the right direction. In Redding, we are back to a more “normal’ market, with average time on the market for home sales about the average over 10 years. Prices are still a little high, but then the cost of construction materials is higher. Time will balance this out, as it will home financing, and as it will the market in general.
The market might be a little slower than a home seller would like, but it’s not a bad market, especially if you are a buyer. And, the economy is cyclical, so some will have to wait their turn.
There’s more to come in Part 2. Check back again.
Ron Largent is a Realtor, business owner and longtime Redding resident. He can be reached at ronlargent@yahoo.com or ronlargent.yourkwagent.com.
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