Welcome to 2008!

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Welcome everyone to 2008! It’s been a good six weeks since my last blog posting, and I apologize for that! I had a lot of blog postings rattling around in my head, and I even wrote a few drafts, but each time I started writing an entry, something else popped up! 2007 was a tough year in the real estate business – but you know what they say: when the going gets tough, the tough get going! The last few weeks of 2007 especially had me very busy, and then of course came the holiday time, which I spent with my wife and her family in Peru.

I just got back a couple of days ago, and already, I’m working hard on making 2008 a great year for myself, my family, and for my clients. There are a lot of opportunities out there for buyers this year – and for sellers, too, if you’ve got the kind of property that’s in demand. But really, all properties in demand, provided that the pricing is right.

What are the experts saying about 2008? Every year at the California Association of Realtors (C.A.R.) Conference & Exposition, they put on a huge PowerPoint presentation with their forecast for the next year. Most of the slideshow is a history lesson – what happened in the current year and past years. It’s very comprehensive, but it’s just a lot of charts and graphs, which is great when there is a live presenter explaining what it all really means. Without the audio track, though, it’s harder to make sense of the charts and graphs in the PowerPoint presentation, which is made available to the public after the presentation. To make things more succinct, I have copied out the part that deals just with 2008, and made it available as a PDF – it’s only a few pages. You can download that here:

California Association of Realtors 2008 Forecast

They’re predicting a 4% decrease in the median price of Single-Family Residences (SFR) in California this year, and a 9% decrease in sales volume from 2007. In other words, they’re saying that the median price in 2008 will be just a twitch lower than it was in 2006 ($553K in 2008 vs. $556K in 2006). What’s interesting to me is the unit sales – the peak was in 2005, when 625,000 SFRs were sold – now they are predicting that 334,500 will be sold in 2008 – that’s 46% fewer homes than were sold a few years ago, and it’s 9% less than were sold last year in 2007. That says two things to me: 2008 will be more of a buyer’s market than 2007, and that we’ll be needing 46% fewer Realtors than we did in 2005. 🙂

Of course, it could be argued that the California Association of Realtors has a bias, and that they’ve been known to be a bit, shall we say, optimistic with their numbers. Here’s an article I found on SFGate.com:

Experts expect real estate slump to last well into 2008

Does all this mean that 2008 is a bad year to buy real estate? I disagree – I think 2008 is a great year to buy real estate, certainly a much better year than 2006 or 2007 proved to be. Yes, I expect prices to continue to drift downwards for many properties – but “prime” properties (and Santa Cruz county is loaded with prime real estate!) will hold their values and in many cases post slight gains. Everyone wants to “time the market” – to buy when prices are at rock bottom. It’s really difficult to know, at the time, when we reach rock bottom – this is something that is best seen in hindsight.

I do think the market will bottom out this year, and that 2009 will see a recovery. Demand should begin to pick up then. The time to buy, though, is before demand picks up. The time to sell is when demand picks up. Right now, there are all kinds of great opportunities for first time buyers and investors.

Just take a look at Watsonville. There are many homes for sale there at prices which mean that the mortgage payment is not so much higher than rent. And rents are going up – as people there lose their homes to foreclosure, they need to move into rental properties, which pushes those prices up, even as sale prices are in steep decline. With a 20% cash down payment, it’s easy to find properties nowadays that will cash flow, pre-tax! That was simply unimaginable a few years ago, when you’d typically need 50-60% down at least to get a cash-flow-positive investment property.

What’s true for Watsonville is true in other pockets of the county as well – you just have to look. For those of you who have been waiting, the light at the end of the tunnel is getting brighter.

I wish all of you much happiness and success in 2008!

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