No one got through last week without wondering where the failure of Lehman Brothers and other iconic financial institutions will personally leave us. The news seemed unrelenting on top of the government takeover of Frannie and Freddie Mac and the controversial taxpayer bailout of AIG. All of us are waiting to see what this week will bring and whether or not that news will improve the country's financial outlook or add to the strain . . .
Like many of you, I have just seen my family's retirement and my boys' college funds take a substantial beating. (Ouch! ) And like you, I have worried about the long-term investment of my own home. On Friday I went to hear Leslie Appleton Young speak at the Oakland Association of Realtors. Ms. Appleton-Young is the chief economist for the California Association of Realtors and had this to say (I'm paraphrasing):
1. The decline of the market began roughly three years ago. Declining cycles in real estate typically last 5-6 years so we are more than half way through.
2. Investment opportunities will be abundant for those seeking to move dollars out of the stock market and into real estate - especially in the Central Valley. (Foreclosure sales are up 42% in the last three months!)
3. Foreign investors will be drawn to California's housing market - especially cities in and around San Francisco (that's us) due to the strength of their currency.
4. More entry-level Buyers will enter the market due to increased affordability.
5. The sooner the bad debts are removed from the books, the faster liquidity should be made available and the faster the economy will experience a recovery. ("Hitting bottom quickly allows us to bounce back more quickly.")
6. REAL ESTATE MARKETS ARE LOCAL! HEADLINES ARE NATIONAL. PAY ATTENTION TO YOUR LOCAL MARKET!
(And that's good news for those of us here in Oakland, Piedmont, Rockridge, Montclair and Berkeley. Locally, we remain relatively strong!)
Is there a silver lining? Yes! Historically, responsible home ownership has proven a very sound financial choice and Ms. Appleton-Young expects it to remain so.
The key word here is "responsible." In hindsight, mistakes were made and many people bought homes who were not qualified. Lured by the promise of cheap money, anticipated appreciation and the desire to own a piece of the "American Dream," banks, mortgage brokers, Wall Street and dare I say it - some Realtors - all contributed to the idea that everyone could (and should) own a home. Together, it created a "house of cards" that, sooner or later, was bound to collapse. And so it has.
Let's hope the steps taken last week and in the next few, help calm the markets and reestablish trust. In the meantime, if you have been waiting to purchase a home, you are in luck! There is real value to be found in this more affordable housing market!
Are you selling? Let's look at this practically. While you may have missed the top of the market, it is important to remember that markets are RELATIVE! You will also be buying your next home at a discounted rate.
Do we have a marketplace? Absolutely! The "fixer" on Highland Avenue received double-digit offers yesterday!
Now, what can I do for you?
Julie Gardner, has been writing The Perspective for 15 years and has published more than 500 essays. She is also a frequent contributor to the Sound Off column in the Real Estate section of The San Francisco Chronicle.