Realistic Optimism…Our Local Market Overview

As you might imagine, I get asked a lot of questions about the real estate market. It’s big news in the press these days (mostly negative), and the media is quick to make household words out of terms like “sub-prime lenders” and “foreclosure rates”. However, no problem is
generally as large as the media would have you believe, so I have decided to discuss in this newsletter what I would like to call “realistic optimism”. “Realistic” because indeed there have been market changes from the glory days of a few years ago, and “optimism” because you need to understand that the real estate world is not
ending tomorrow. We need to mentally balance-out this housing equation before it gets too crazy.

Unless you have been stranded on the same island as Tom Hanks in Castaway, you must be aware that our local real estate market has changed in the last year or two…but how much? Let’s look at some numbers that pretty much tell the story as it stands right now.

At the end of February 2005, there were 705 homes for sale in Riverside area priced at $3,000,000 or less…and during that same month, there were 280 closings. In February 2006, those numbers had changed to 1505 homes for sale and closings held steady at 281. In February of 2007, the numbers changed again…2230 homes for sale, and only 187 closings. In just 2 years that is an increase of over 200% on the supply side, and a decrease of almost 40% on the demand side. This would explain why in almost any neighborhood you drive, there appears to be so many homes for sale. Not only are there more homes on the market, but they stay on the market longer because there are fewer buyers. That’s our market in a nutshell…too many homes, not enough buyers. However, unlike the media, I will discuss the positive aspects of this market as well.

Certainly the market is down from it’s historic high…and in the big real estate picture of the next 5-10 years, that’s not necessarily a bad thing. The market had to take a breather and slow down for a while, or we would have eventually priced ourselves so ridiculously high, that the ultimate fall would have been equity carnage. History tells us the real estate market will cycle, just as it is doing right now…but the prevalent assumption is that this cycle will be softer and shorter than those of the 80’s and 90’s.

Why? Because our local economy is still strong (construction and real estate are off a bit, but everything else appears to be holding steady), interest rates are incredibly low, and the projected population growth in the Inland Empire over the next 15 years is forecasted to be the 4th largest in the country, behind California as a whole, Florida, and Texas.
That leads to the optimistic side of our real estate equation. First, the short term. If you want to move up or move down, go right ahead…because whatever you “lose” on the sale side, you will “gain” on the buy side! Too many people fixate on “what they have lost” and forget that they gain as much or more when they re-purchase. For those who sell and will not be purchasing right now, that’s OK too. You can still sell your home, and as long as you understand this is 2007 and not 2005, you will be fine…because a number of those 2230 homes for sale are trying to get 2005 prices in a 2007 market…and that simply isn’t going to fly. In the long term, whether you keep the home you are currently in, or purchase a home anytime in the next 5 years, history provides us with one certainty…that 5-10 years from now, you will be glad that you own a home. As I have said in previous newsletters, is there anyone around who would turn down a home priced at the peak prices of 1990…1995…2000? Of course not, and 5-10 years from now, you will feel the same way about 2007.

In the end, the market is what it is, and neither you nor I can change it. However, while I acknowledge these changes, I will not give in to the doom and gloom of the media. I can get your home sold if that is what you desire, or find you a new one if that is your need. I am optimistic about our area, our market now and in the future, and my ability to get results for my clients. As your potential real estate broker, you can be assured that I stand ready to help you at any time your life situation requires the services of a real estate professional. Belief is not a buzzword to me. You have a right to a real estate professional who truly believes in you, the market, and their ability to help. That’s the least I can offer…and the part the media seems to forget.

Take care, and always, I am only a phone call away to assist you with your real estate needs.