Volume 89 - "Batter Up!"
Watching my son come up to bat last week, I was once again reminded how difficult baseball is - a game where even the best players in the world only get on base once out of every three attempts.
Statistically, baseball is a game of failure; a game where every miscalculated step or strike out is painfully on display for all to see. There's no hiding in the pack like with soccer, basketball, lacrosse or rugby (what exactly happens in a "scrum?"). Even water polo has plenty of activity to redirect the eye.
While baseball is theoretically, a team sport, you often stand alone.
So in spite of the atheist in me, like many an anxious parent, I always pray for a little help each time my son approaches the batter's box or whenever a hit sails deep into left field toward his outstretched glove. Fingers crossed, eyes looking toward heaven, I silently pray, "Please, please, please . . ." as I watch him react and race to the ball.
At the risk of offending those who pray for more than baseball, I know that it isn't prayer that makes the difference in my son's success or failure - it's practice. Because so much time is spent waiting between plays, the inescapable truth is that my son will only be ready to act in the moment, if he is adequately prepared before he sets foot on the field. Mastering critical skills should happen before - not during - a game, so that when action is required, the play is automatic!
Preparation is the key in real estate as well so that when the right opportunity comes along, you are set to execute the corresponding play. Preparation starts with clarifying your goals and then qualifying your actions, understanding your finances and then pre-approving your loan, outlining a timeline and then visiting Sunday Opens, selecting an experienced REALTOR and then effectively communicating your needs (and that's just your warm-up). Fine tuning your real estate skills should happen before, you find the right home - not after.
While today's INTERNET generation is more apt to research and explore the market on their own, yesterday's consumer had it right in one important strategic component: they relied much more on their agent's experience and often started with a well-timed phone call to their Realtor FIRST.
Even with today's unrestricted access, there's no doubt that aligning yourself with a local REALTOR from the onset, automatically improves your odds in the game. No one wants to bunt if they should be swinging for the fences (and my husband thinks I don't know baseball!).
As a neighborhood specialist, I am in the best position to know what is coming to the market, what has withdrawn, what is due for a price reduction and which sellers are open to an offer long before the most adept Googler. Like a well-honed athlete (or a boy scout) it is my job to be prepared; to know the players, to understand their strengths and weaknesses and to manage the game from beginning to end.
So while I am more than happy to help the Home Buyer or Seller who waits to contact me until the 7th-inning stretch, YOU are better served by capitalizing on my knowledge and experience from the very first swing. Like Baseball, Real Estate is essentially a team sport; however, unlike baseball - you never have to stand alone.
Just think of me as your personal batting, pitching, and base coach all rolled into one. I am your back up man, your "go to" girl, your supportive trainer and your strategic manager. I study the competition, know the landscape, and do my best to craft a winning game plan.
So whether it's a curve ball, an off-speed pitch or a fast ball crossing the plate (bear with me, I'm on a roll. You can think Tudor, Mid-Century Contemporary or quintessential Brown Shingle). you will be prepared to hit the pitch out of the ballpark, round the bases and arrive safely at home!
I'm sure most of you are all familiar with Aesop's tale of The Tortoise and the Hare - but just in case you don't remember it, here is a quick recap . . . The tortoise challenges the hare to a foot race to teach the bragging rabbit a lesson. The cocky hare is so certain of his ability and the foregone conclusion that he decides to nap along the route while the tortoise methodically plods along and eventually passes the sleeping bunny. By the time the hare wakes up, the tortoise has already crossed the finish line and handily won the foot race. (Oh yes, now I remember it.)
The real estate market often reminds me of that timeless fable. Never more so than last week, when I helped a smart young couple (let's call them Mr. & Mrs. Slow & Steady) secure a promising home here in Piedmont. Like the tortoise, they had patiently waited for a home they could afford and took their time finding it (a fixer with great potential).
While patiently waiting for prices to soften in Piedmont, Mr. and Mrs. S continued to pay down the mortgage on the home in El Cerrito that they had purchased more than a decade ago. Although they have clearly upgraded their El Cerrito home, they never borrowed against it, nor used its growing equity like an ATM machine. As a result, Mr. and Mrs. S were in a position to buy first and sell second! (Doesn't that make life easier?)
Once the El Cerrito home is sold, Mr. and Mrs. S will use the net proceeds to refinance and update their new Piedmont residence. With a plan to move slowly and renovate on a budget, they hope to stay put for the next decade. This is "old school" or Real Estate 101 at its best. It's the way our parents and their parents before them, bought homes - often staying in them until the mortgage was paid in full.
Meanwhile the ambitious hares, hopped from house to house, often increasing their debt and their risk along the way. With tax advantages that rewarded Sellers every two years, aggressive bunnies joined the race and were often well-rewarded (who could blame them for using the market to their advantage?) Many thrill-seeking rabbits even leveraged the appreciation on their burrows to buy vacation homes or investment properties and are now struggling to keep their homes. With little to NO equity to speak of and a market experiencing a significant correction, these overreaching hares are struggling to figure out how and when the race was lost. (Hare today, gone tomorrow).
In the interest of full disclosure, I will share that I have been both a tortoise and a hare over the past 18 years. Often referring to myself as a "serial renovator," my husband and I bought and renovated four homes in 12 quick years, growing our seed money (and our family simultaneously) but also expanding our debt with each successive upgrade (our "hare" phase). Sweat equity, fortuitous timing and advantageous tax laws ultimately provided the down payment on our current Piedmont home.
With a promise to my husband that we would not move again (at least until the boys graduate from high school) and my solemn vow not to "touch anything" until we can pay for it in cash, my husband and I have clearly entered our "tortoise" phase. While we may never fully pay down the 30-year fixed mortgage before we sell, we will have made a sizable dent, hopefully allowing us to realize a substantial profit when we go to sell - years from now.
Here's the irony. Had we held onto our very first flat off Lake Street in San Francisco and never hopped at all, we would have realized almost the same gain and maintained a much lower tax base . Hmmm. . .
Lucky rabbit's foot aside, slow and steady wins the race!
My favorite part of the week is when I hear back from you after sending out The Perspective on Wednesday. Admittedly, more of you respond when there's a contest involved (see below) but each of you brings something new and relevant to the discussion that I really appreciate and value. It isn't easy to be the trumpeter in a market where people want (and need) to hear only good news. But I know that your future decisions are often based on what you can realistically expect today.
One complimentary reader summed it up best, "The only thing worse than cranky pessimism is blind optimism . . . you remain upbeat but realistic." Thank you LK, I'm doing my best (and I really appreciate the kudos although my husband might say that "cranky" applies a little more than he'd prefer.)
Still, there are good reasons to be optimistic right now. The super-conforming loan limit of $729,750 is once again available (though only through FHA for the moment) making homes on the higher-end of the scale more attainable for many. Homes priced below $1,000,000 are truly going to enjoy the "sweet spot" for the next several months.
I barely had time to mention the new listings on Buckeye and Broadway Terrace in Rockridge last week, before they went pending in quick order! Meanwhile, I was very busy negotiating for the successful sale of the stately home at 34 Manor Drive in Piedmont, aggressively listed for $950,000 (under $1,000,000 - the magic number!).
In ALL of these cases, buyers did not wait for validation or for permission from other buyers - they stepped in and took advantage of the momentary lull. Paying attention to their own internal starting gun, they capitalized on a fantastic purchasing opportunity. Smart! (Or as my Brooklyn born mother-in-law would say, "Schmart!")
What's the moral of the story? (This is the part where I get to speak in metaphors - and who doesn't love a good metaphor?) 'A bird in the hand is worth two in the bush?' No. 'Don't beat a dead horse?' No. 'A rolling stone gathers no moss?' No. 'He who hesitates is lost?' Yes! That one will do nicely (as will - 'A stitch in time, saves nine').
In other words, don't wait when you find the home that meets your needs or you will risk losing it to more aggressive buyers OR potentially end up paying MORE in competition. Note, even the most seasoned pros haven't figured out how to "time the bottom." Whoops, there it went! Now for those of you willing to play along, send me a metaphor I haven't used that applies and I'll spring for lattes at Mulberry Market to the first ten respondents. (Chad and Laura, can you set me up?)
Is it so wrong to enjoy the fact that the sun peaked out from behind the clouds today and gave us all a much-needed respite from the rain? Coming off of a tw0-year drought and acknowledging that California desperately needs to refill its near-empty reservoirs, the rain has been an incredibly welcome sight (except during Sunday Opens). Still, I lost NO time taking advantage of the clear skies to get out and stretch my legs a bit and walk my black Lab, Buck, who was even happier than me to bounce along the road - his tail (not mine) wagging along at top speed.
Most of the headlines these days seem to be a lot like the storm clouds of late. None of them have been good and ALL of them have played into the fear of the consumer and the homeowner - even those on solid ground. Consume a steady diet of the mainstream media and like Chicken Little, you're bound to think the sky is falling! Gather your information from national news or Internet sites alone and you are sure to be misled as to the reality of your specific neighborhood.
To hear national media reports, one might think that every home in America has lost 25-50% of its value and that's just not true. As I have repeatedly said, real estate values are largely dependent on their geographical location. In our East Bay Market, home values are further defined neighborhood to neighborhood and block to block. Moreover, our market has remained more stable than most!
According to GRUBB Broker and co-owner, John Karnay (who tracks our local sales statistics religiously) "our market is in remarkably good shape." John compared The GRUBB Co's market share - which account for sales above $500,000 - from July-Dec. 2007 to July-Dec. 2008 - in El Cerrito, Kensington, Albany, Berkeley, Oakland and Piedmont and here's what he found : the average sales price has dropped 5%, the median sales prices is down 2.2% and the average price per square foot is off by 6.5%. So while we're not exactly in the positive column just yet, it's positive news in light of national reports that would have you believe an entirely different story.
Which isn't to say that I'm not sensitive to the headlines. Of course I am. REALTORS are working on the front lines. Like many of you, I have kids to put through college and retirement to plan for as well, so I hear you and understand your concerns.
Nor could I responsibly and effectively guide you in your most important financial decision, without reading, watching and absorbing everything that affects my profession, our market and your outcome. BUT I try to balance out the mainstream news by forming opinions on what is truly relevant to our community and to our experience. Your particular experience may be entirely unique but in general, here's the skinny . . .
For those of you who bought real estate within the last five years, chances are you bought in competition and paid for your appreciation up front. Having now lost that appreciation, there may not be a soft landing for you at this time. Stay put if possible.
For homeowners who bought prior to 2004, you are quite likely, in fine form. Even if your home lost some appreciation during the last few years, you bought before prices really took off and while you may have lost some additional gain in the last few years, you haven't really lost intrinsic value.
Finally, more affordable housing stock represents real opportunity. While buying down may be less advantageous, buying UP makes a whole lot of sense (and cents) in this market. While some are selling at a loss, others are expanding their income property portfolios. While some are leaving the area, others are flocking in to take advantage of the public schools and more attractive pricing.
There are two sides to every coin. In the meantime, try not to obsess about the headlines and turn off the news! The sky isn't falling - it's just raining a bit - and we need the rain! (Remember, the sun often follows the clouds.)
In the meantime, can I offer you an umbrella?
Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.