Are You Tired of Hearing Real Estate Doom and Gloom?

I haven't posted for awhile, but I'm back! I have continued to write my monthly column for the Sacramento Union newspaper, trying to present the more positive facts about the real estate market, and here is my most recent column, in the February 22 issue:

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Are You Tired of Hearing Real Estate Doom and Gloom?
By Susan Neal, Real Estate Broker and Realtor
Sacramento Union Real Estate Writer

You can't avoid it. Every day the newspapers and television reporters relate bad news about the housing market, and there is no doubt that the national market over-all has felt different from how it looked in 2005, but those who are experienced in real estate and familiar with regular economic cycles are not as concerned as the media hysteria would suggest. To a large extent, it is difficult to determine whether market conditions are driving the media or if the constant barrage of bad news selectively reported in the media is negatively impacting the market. Many believe that the media has certainly affected perceptions. It is time to consider some solid evidence that contradicts all the doom and gloom.

According to Richard F. Gaylord, 2008 president of the National Association of Realtors (NAR), it is important to remember that real estate is a long-term investment. That is how it has traditionally been considered, but "the boom created a misconception that real estate is a high yield, short term investment. It's not." Gaylord adds, "Regardless of where we are in a cycle, there are always plenty of people ready to buy and sell. In fact 2007 existing home sales surpassed those of 2002 - then a record-breaking year." Bad news should be put in perspective.

Foreclosure is terrible, and a tragedy to someone going through it, but when the media talks about "foreclosure spikes," they should provide context. According to NAR statistics, the foreclosure problem is predominantly with sub-prime loans, which are held by less than ten percent of homeowners. And not all sub-prime loans are in trouble. Only a percentage of troubled loans on which foreclosure is started are actually foreclosed on. The true foreclosure rate on prime loans is just 0.6 percent, according to Gaylord.

Great opportunities exist right now for investors as well as for people buying a family home, and lower prices enable more first time buyers to find affordable homes. Buyers and sellers need professionals who are committed and professional to advise them and assist them with taking advantage of today's market.

Donna Fox, Branch Manager of Eagle Home Mortgage in Gold River, says that now is the time for buyers to act. "If people don't take advantage now, the market is liable to turn," says Fox. But she also advises, "Don't let someone push you into a loan that you can't afford over the long haul. If you are considering buying a home, sit down with a reputable lender and find out what programs are available and what you can afford. Then you can feel confident that you will be able to make a solid offer on the home you choose without getting yourself into financial trouble."

A recent issue of Forbes Magazine had a list of markets where home values were up at the end of 2007, including nine metro areas with percentage increases in double digits. While Sacramento County was not on their top ten list, agents throughout the county are experiencing increased activity at open houses and buyer excitement and enthusiasm is multiplying. More Realtors are reporting that they are receiving multiple offers on properly priced properties. The boom of a few years ago was an anomaly and for the last year, prices have been correcting, but those who bought more than three years ago are still making a profit on their sales. The correction appears to be ending, however, and there is no time like the present to get great deals and financing that is still available at low rates.

NAR is forecasting that the real estate market will stabilize in the second quarter and rise throughout the second half of the year. According to NAR, the median home price for existing homes declined just 1.7 percent in 2007 (although admittedly some markets experienced more or less than that).

In Sacramento County, the median home price in September 1997 was $119,000. It climbed to $140,000 in 1999 and $154,000 in 2000. In September 2001 there was another rise to $180,000, but in the next four years prices rocketed to $385,000! This corrected to $307,000 by September 2007, but those who have owned their homes for 5-10 years have still made an incredible profit. For the most part, it is only those who bought at the market's peak in 2005 who are actually experiencing a loss, and even then only if they must sell now or if they obtained a loan that put their equity at risk.

Leslie-Appleton Young, Chief Economist for the California Association of Realtors (CAR), expects the worst of the California foreclosures to hit during the first part of this year, as most of the sub-prime rates will have adjusted, placing more homeowners in a position of straining to make the higher monthly payments. However, with reduced interest rates, increases in conforming loan limits included in the new economic stimulus package and Congress working on other plans to help those in danger of foreclosure, many of the anticipated foreclosures may be averted.

Most lenders are also more willing than ever right now to work with borrowers. They would rather not foreclose if they can avoid it, but they must also protect the liquidity of their institutions, so it is important to start investigating your options before you get into desperate a situation. If you do not feel that your current lender is willing to work with you, meet with another lender to see if refinancing is a better option. Do not wait until you are in foreclosure to ask for assistance. You would be surprised what help is available if you will just ask.

And keep in mind that if you are a seller who is disappointed in the price at which your current home must be listed, you will likely be moving into another home which will also be priced lower than it would have been a couple of years ago, and your interest rate on the new home will likely be lower than you are now paying, so you are not actually suffering the loss that you may perceive.

Since the housing slowdown began in the second half of 2005, the economy has added some 4 million net new jobs, wages have grown by 8 percent and interest rates have lowered. Things are getting better in many other parts of the economy and the housing market is heading back to normal. Buy now, before the next boom cycle, and you will be one of those investors who profits most from your real estate. Sell now if you are thinking of moving, and you can take advantage of a great opportunity as well. Consult with your Realtor as to how to present your home to get the highest price and how to purchase your new home at the lowest price. Speak with a reputable lender to learn your best financing options. And ignore the doomsayers!

Susan Neal is a broker with Century 21 Noel David Realty in Fair Oaks. She can be reached at (916) 705-8951 or www.SusanNealFineProperties.com. This article is not intended to give legal or tax advice, and you should consult your attorney or financial advisor for additional information.