Westcoe Realtors, Riverside California…Nice to be back avid readers, and welcome to 2013. We took a little “R & R” for the holidays, and we are ready to rock and roll in a new year…and from what we can see, rock and roll is the applicable term. To quote a famous Bette Davis line…”Fasten your seat belts, it’s gonna be a bumpy ride”.
So…what do we see ahead for our local Riverside real estate in the New Year?
In a nutshell, more of 2012, but just faster. Let us explain.
As a seller, there will be two words waltzing back into your real estate vocabulary in 2013…and they are the almost extinct words “equity” and “appreciation”. That’s right, Toto. We’re not in Kansas anymore, and neither are we in 2007-2011. Real estate prices will come roaring back in 2013 like wide ties and shorter skirts. Do not be shocked if those homes priced in the “breadbasket” of buyer demand ($350,000 and below) see appreciation in 2013 near 15%. Some really smart people are predicting upwards of 20% price increases, but let’s not get too crazy here. Besides, after what home owners have endured this past 5 years, 15% sounds crazy enough.
Why the massive jump in prices?
Simple…and this is the continuation of a trend that began last year, but will really pick up speed in the year to come. Prices will jump because of the low interest rates the Fed seems committed to maintain, and the total and complete lack of housing inventory available for all those buyers who want to take advantage of said low interest rates.
Housing inventory is at rediculously low levels…and until sellers with equity (that is code for fewer short sales and foreclosures…although foreclosures have dried up like Aunt Alices holiday fruitcake) really make a return to the market, we will have way too many buyers fighting over way too few homes for sale. This will continue to lead to multiple offers for many sellers, eventual sale prices at over the list price (and over the appraisal price as well), as the frenzy bids up the prices. Eventually, this will even out (markets always self-correct), but it will take time…well after the passage of 2013…so welcome back sellers. It’s nice to see you in the game again.
As for buyers, here is your world. You must come to grips with the reality that you are in a competition, and that if you don’t step up your game, you will remain on the sidelines for quite some time…years to be blunt. Your time to drive a bargain has passed. That was the real estate market of 2007-early 2012. Now, it’s the sellers turn. We are not being negative here, but someone has to tell it like it is.
If you are a buyer that thinks the appraisal price is the “end-all-be-all” determination of value, then you will remain a renter for the next few years, as this market will leave you in the rear view mirror like Taylor Swift leaving her latest boyfriend. In 2013, homes will be selling for more than the appraisal price, because the appraisers cannot keep pace with the quickly rising prices.
Don’t believe me? Just make an offer on a home listed for sale at $225,000, count the number of other buyers who are doing the same thing (it’s not unusual to see over a dozen offers within a few days), and watch the eventual sales price. Your choice is to continue to offer the list price and continue to lose out to someone else, or step up, pay more than the list price, and get yourself a home at the lowest interest rates since Luke Skywalker discovered his real Dad!
And before you go nuts here lamenting how you are getting “screwed”, consider this. If conservatively we figure appreciation in 2013 at 12% (remember, experts are thinking 20% for the Riverside area), then that home you bid $225,000 and lost because someone else bid $230,000 is gaining value at the rate of $2,300 per month!
So who is really getting the short end of the stick? The guy who “saved” $5,000 by not overbidding, and is therefore watching homes go up in value while still renting (and seeing the homes he wants getting out of his price range)….or the guy who stepped-up, adjusted to the changing market, and now is getting $2,300 in equity every month?
The bottom line here is that waiting out the market is what buyers did the past few years…it’s not what they will be doing in the next few…unless you like where you are. Sorry to appear harsh here, but we don’t make the rules to the game…we simply interpret the rules if you want to play…and trust us, the rules have changed from a few years ago.
So…you now all know your roles to win this game. Good luck, and go get ’em…as we said, 2013 will be an interesting, but bumpy ride.