BUYING, SELLING PERSPECTIVES
Scott Gibson Analyzes The Housing Market
PALISADES REAL ESTATE
Monthly Updates By Michael Edlen
& NEWS VIEWS Palisadian-Post Real Estate
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Jane Roffis Fujinaka’s Advice for Home Buyers
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Thursday, October 13, 2011
Buying, Selling & Investing in Today’s Market
By SCOTT GIBSON Special to the Palisadian-Post –––––––––––––––––––––––––––– ust give me the real deal. I don’t know about you, but I can barely watch the news anymore. Negative sensationalism has completely taken over, leaving little room for facts but occasionally a little bit for fiction and flair. Tom Ferry, a famous real estate sales coach, has a key phrase that he often cites as one of the most asked questions of a realtor on any given day: “How is the market?” He is famous for encouraging agents to resist knee-jerk responses and instead reply with, “Well that depends on whether you are buying, selling, renting or investing.” Let’s see if I can paint a clearer picture with his model.
It’s Still A Buyer’s Market, But Get It While It’s Hot
Prices continue to fall, but not nearly as fast and far as they did in the two prior years. All across the country, housing markets are seeing slow recovery, even in places that were hardest hit like Florida and Nevada. The Westside of L.A. cannot even be compared to L.A. County when looking at falling prices because we greatly benefit from the fact that there is only so much land this close to the ocean. Couple low prices with the lowest interest rates we have seen since 1960 (when a gallon of gas was $0.25) and I doubt anyone who purchases a home at this time will look back in 10 years and think that it was a bad move. However, buyers shouldn’t get too comfortable because the market can change quickly. An interest rate increase of even 1 percent can change your purchasing power by 14 percent. Additionally, inventory is low and I mean really low. Certain neighborhoods in Los Angeles that had 10-12 months of inventory last year in August have only 4-6 months now, some even lower. Sellers are holding off from listing their homes in the hope that
things will get better, lowering buyer options. A small uptick in demand will at some point put upward pressure on prices. We are already seeing the first-time buyer market (around $500,000) heat up, especially for those homes that are move-in ready. Lastly, a little bit of inflation goes a long way to boosting prices, and there is no telling when we will start to see that in our economy. As you can see, buying a home has been a great way to at least stay even with inflation. Cash is still king, because the biggest obstacle buyers are facing in this market besides low inventory is obtaining financing. In a multiple-offer deal, a seller is still more likely to move forward with the cash buyer even if its not the highest price simply because the deal is less likely to fall through. If you are planning on buying, lock in your loan interest rate early and don’t get purchase crazy and buy a car 10 days before you close escrow. Lenders are way too anxious these days for last-minute changes to your financial profile.
Sellers: Procrastination Is Not Your Friend
If you know you are going to have to sell within the next 12 to 24 months, you probably should put your house on the market sooner than later. Prices are not expected to rise for two years and may even slightly decline in that same period. While we are bottoming out in the cycle there is not a lot of upside for sellers in the near future. The insiders in the real estate business, the owner/brokers who live the industry day in and day out, are looking towards 2015 and 2016 for any real gains. If you are looking to relocate or upgrade, it would be hard to imagine that interest rates won’t be higher in the near future and in fact could be much higher if you choose to wait out the market. If you are planning on retiring, there are no guarantees that your home will sell for a higher price soon, and some of the most dreary forecasters believe it could be as many as 19 years before we see
the prices from the last peak. Politics is not really working in your favor either. Uncertainty is definitely a market recovery killer and election years create a ton of uncertainty for the economic markets. Furthermore, there have been rumblings from cash-strapped Sacramento on new ways the government may look for additional revenue such as limiting the mortgage deduction and changing Prop 13 to increase property taxes. These changes, should they come to fruition, would undoubtedly hurt the recovery of our market.
Rising Rents and Investor Frenzy
Investors are all over the real estate market right now, knowing that money is cheap, rents are rising and that home prices have bottomed or are about to bottom out. Investors are putting tons of money towards buying all types of properties from single-family homes to multi-unit buildings. Being a landlord may not be all that fun at times, but when the rents start coming in and your equity builds, you will see the upside surpasses the occasional headache. Investment property is a longstanding way to build wealth and prior to the craziness of technology and the instant stock millionaires, most of the wealthiest people derived their wealth from acquiring real estate. There probably has not been a better time in that last 20 years to buy investment real estate. In sum, there is no simple answer to “How’s the market?” It’s unique to the individual client’s circumstances and objectives on a financial level and an often-overlooked emotional level. Each side of the market has its pros and cons, and individuals should consider both before moving forward in the market. Pacific Palisades resident Scott Gibson, a 32-year real estate veteran, founded Gibson International in June 2008 in Brentwood. His firm now has 86 sales associates and almost $300 million in annual sales.
Published on Oct 18, 2011
Overview of buying, selling and investing in today's real estate market from Scott Gibson, President of Gibson International.