"I feel like the market is over inflated right now..."

Yesterday's question from my client:

"I feel like that the market is over inflated right now.  What are your thoughts on that? We don't want to buy during a rebound just to find out that housing prices will come down next year."

My response:

"I wish I had a definitive answer for you, but no crystal ball here. What keeps the Peninsula market consistently strong is the shortage of inventory, the lack of land for building new large scale developments, and the strong, diverse employment opportunities, ones with high-paying jobs. People want to live here and the prices reflect that.

Generally the market softens a bit this time of year--prices might not decline, but the demand wanes and buyers can negotiate some. We're not seeing that this year at all. Extremely low interest rates and pent-up demand from buyers who held off the last few years due to feelings of uncertainty have created high demand.

Short of a world-wide depression, or a cataclysmic earthquake, if one is buying to make a home for the long term, my belief is that it makes a lot of sense to buy."

Perhaps this chart from Steve Harney and KCM (Keeping Current Matters) best explains that it's the cost of an investment that's important, rather than the price.

Graph cost of homes 2001 & 2012

I'm practicing what I preach: we're actively looking for investment property to purchase on the mid-Peninsula.

 

--- Come for a visit; Stay for a lifetime!

Lottie Kendall, Realtor®

Pacific Union International

CA DRE#10215160; 650-465-4547

Lottie@LottieKendall.com

www.LottieKendall.com

Peninsula Living Business Page

www.SFCondosForMe.com

 

 

Comment balloon 33 commentsLottie Kendall • September 07 2012 11:59AM

Comments

Thoughtful post...your description of your area also applies to mine.   Low inventory is definitely part of  the recovery.

Posted by Li Read, Caring expertise...knowledge for you! (Sea to Sky Premier Properties (Salt Spring)) over 6 years ago

I like your answer very much Lottie - and it rings true here as well.  Buyers aren't buying because they perceive they will somehow make a ton of money by buying and reselling right away.  They are buying because they want to live in the community and find a house that fits their needs.  Kind of like the way real estate used to be viewed as shelter, not a piggy bank, back before the crazy years!

Posted by Nancy Conner, Olympia/Thurston County WA over 6 years ago

Perfect answer Lottie............something many can learn from too.  Suggested.

Posted by Roger D. Mucci, Lets shake things up at your home today! (Shaken...with a Twist 216.633.2092) over 6 years ago

You know the grass is always greener on the other side....someone who is thinking about buying should go ahead and buy now. I don't think the market will change for the better but I think the rates will go up slowly and start soon.

Posted by Sussie Sutton, UTR TEXAS Realtors - Rep for buyers and sellers. (UTR Texas Realtors) over 6 years ago

Lottie - Great response to your buyer.  You did an excellent job of explaining why the market is moving up and why it should stay there.  In the absence of a world-wide financial collapse, or world disaster, the market is moving higher.  Suggested too!

Posted by Laura Allen, Lake Tahoe - Truckee Real Estate for Sale www.TahoeLauraLuxuryHomes.com, Tahoe Real Estate Agent Helping Buyers and Sellers (Coldwell Banker, Tahoe City, CA (530) 414-1260) over 6 years ago

Lottie, some people will do do anything not to take the big step.  This is a great time to purchase a home.

Posted by Sharon Parisi, Dallas Homes (United Real Estate Dallas ) over 6 years ago

Hi Lottie, I do understand the buyer asking that question since our Bay Area market seemingly changed quickly. In fact I think it has been changing slowly and building momentum since 2009.  Our prices are still not as high as they were at the peak of the market.  The difference between South Bay and Penninsula rents and mortgage payments is as small as it has been for 30 years, which is probably why you're looking for a rental yourself.  Best wishes.

Posted by Lloyd Binen, Silicon Valley Realtor since 1976; 408-373-4411 (Certified Realty Services) over 6 years ago

The market has been in a terrible rut here SC but it is good to hear that other areas are improving.  Hopefully we will catch up one of these days.

Posted by Amada Slade (Island Realty of the Lowcountry) over 6 years ago

Lottie, sometimes I wish we did have a crystal ball, but it is not to be. You know what they say about people who snooze.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA over 6 years ago

In regards to the title of your post, I feel that way after a big meal too

Posted by Richie Alan Naggar, agent & author (people first...then business Ran Right Realty ) over 6 years ago

The Bay Area market is so hot right now that you can't afford to waste time with buyers that can't make a decision. If your buyers are questioning the decision to buy, then drop them like a rock and move on. It's hard enough to get a home for the buyers I have that are looking every day, I don't have time for anyone who is "thinking".

 

Posted by Andrew Martin (REMAX Accord) over 6 years ago
That's a good response for your buyer. I've been telling mine similar things.
Posted by Kevin Mackessy, Dedicated. Qualified. Local. (Blue Olive Properties, LLC) over 6 years ago

Hello Li and Nancy - we seem to have a widespread phenomena, with too few homes for sale. Buyers feel beaten up!

Roger - thanks for the suggest, and I'm glad you liked my answer.

Sussie - and when rates go up, the cost of buying immediately rises

 

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) over 6 years ago

The market is what it is and it is best to accept the market and move on to purchase a home

Posted by Harry F. D'Elia, Investor , Mentor, GRI, Radio, CIPS, REOs, ABR (Real Estate and Beyond, LLC) over 6 years ago

Lottie.. it should be something that a buyer asks, but with your explanation it should make sense for them to see that this area is not what they are hearing in the news for the entire country. Real estate is forever local and that is what matters. It is important to be a realtor that knows the particular market and just what the market numbers are.

Posted by Janis Borgueta, LIC RE Salesperson (Key Properties of the Hudson Valley ) over 6 years ago

Laura, we get it, but buyers don't always. I try to get the message out as often as I can. Thanks for the suggest!

Sharon, this timing works for me!

Lloyd, you nailed it!

Amanda, it's only a matter of time

Michael, I hate it when buyers wait too long and lose out in a rapidly rising market.

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) over 6 years ago

Richie - LOL! Too often I feel that way myself!

Andrew, you're right about our Bay Area market sizzling. The client who is concerned bought a house about 3 years ago; they're ready for their move-up home but feel beaten up. We put an offer in on one place--we offered more than 8% over asking, were 1 of 11 offers received, and didn't make the top 5! I'll be here for them, and hope I can allay some of their worries. Being a buyer here isn't easy.

Kevin, it sounds like your market is a carbon copy of ours.

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) over 6 years ago

Harry and Janis - thanks for sharing your wisdom.

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) over 6 years ago
To often buyers focus on the wrong thing. Pointing out the difference in 10k in sales price at today's mortgage rates is often an eye opener. They don't realize it is a small change in the monthly payment. .
Posted by Cindy Jones, Pentagon, Fort Belvoir & Quantico Real Estate News (Integrity Real Estate Group) over 6 years ago

It is amazing to me to think that anyone thinks that this market is over inflated... seriously? 

Posted by Melissa Marro, Jacksonville Real Estate and Home Staging (Keller Williams First Coast Realty - The Marro Team) over 6 years ago

That was a wonderful answer.  My clients say that a lot - they feel everything is overpriced.  I think it's just a distraction or a throwaway objection.

Posted by Debbie Cook, Silver Spring and Takoma Park Maryland Real Estate (Long & Foster Real Estate, Inc) over 6 years ago

Every market is different. In my area, we have an abunadance of good middle class housing and so that is not a problem. 

Posted by Erica Ramus, MRE, Schuylkill County PA Real Estate (Erica Ramus - Ramus Realty Group - Pottsville, PA ) over 6 years ago

The lower inventory in my area is putting some pressure on buyers to be prepared and to make decisions on what they want to purchase.   If a property is in good condtion and priced for the market, we are seeing multiple offers.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) over 6 years ago

Lottie:

I agree with you about buying income property.  Don't wait buy now.  I have been trying to talk my husband into buying more income property.  The chart you show is a good picture of the market today. 

Posted by Evelyn Kennedy, Alameda, Real Estate, Alameda, CA (Alain Pinel Realtors) over 6 years ago

I know more people who are reluctant to get on the merry go round, and as a matter of fact, they will probably miss out again.  

Posted by Gary Frimann, CRS, GRI, REALTOR and Broker (Eagle Ridge Realty / Signature Homes & Estates) over 6 years ago

Lottie - great answer ..... short term thinking is not something one should practice when buying a long term investment, especially one that you can live in while your investment grows.

Posted by Kathy Clulow, Trusted For Experience - Respected For Results (RE/MAX All-Stars Realty Inc. Brokerage) over 6 years ago

It sure does make a lot of sense. Bottom line...if they are making that house a home and their personal circumstances allow....then it IS time.

Posted by Celeste "SALLY" Cheeseman, (RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE (Liberty Homes) over 6 years ago

Optimism, pessimism, skepticism...all exist in the real estate market.  Ask a dozen people and my guess is you will find it all.  And occasionally you will even find realism!

Posted by Gary L. Waters Broker Associate, Bucci Realty, Fifteen Years Experience in Brevard County (Bucci Realty, Inc.) over 6 years ago
Same here, it is a sellers market. Anything that is attractive and well priced can expect multiple full or close to full price contracts. The day of low ball offers getting traction are gone. Buyers need to recognize the new reality.
Posted by Laura Murray, Search Montgomery Co., MD for homes www.MDRealEstateOnline.com (Weichert) over 6 years ago

Very thoughtful answer Lottie. Since real estate is one of the most major purchases in one's life, it just doesn't make sense to to not do it for the long term.

Posted by Peggy Hughes/pha logistix, inc., SF NYC LA (pha logistix inc) over 6 years ago

Cindy, I try to help people think of the cost of a purchase, not just the price. Sometimes you can see the lightbulb light up when they 'get it.'

Melissa, real estate is definitely local; I can understand my buyers' frustration and worry; when every place you investigate gets snapped up in a matter of days, with multiple offers, all over asking, it's hard for them not to be discouraged.

Debbie -- those statements sometimes help people feel better, even when they don't believe them.

Erica, a balanced market is delightful!

Joan, your motivated buyers should have no trouble in finding a good home--if they act decisively.

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) about 6 years ago

I still run into folks worried about the "double dip" economy.  I just move on.  They don't want to see statistics and numbers.  As you say, we don't have crystal balls, but we can make informed decisions based on the history and current market scenarios.  Those same voices have told me about this year's "End of Days" as well.  Guess I don't want to live only looking at the negatives.

Posted by Cara Marcelle Mancuso, Call a Marana neighbor, I'm THERE! LONG REALTY (Long Realty - Dove Mountain, Marana AZ) about 6 years ago

Cara, we can try to educate buyers, help them remember why they wish to purchase that next home. Ultimately, finding the courage to act is in their ballpark.

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) about 6 years ago

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