The real estate market is a hot topic of conversation amongst friends and co-workers. If you talk with someone that may be interested in getting in or out of this market, I would love to talk to them too. Please don’t keep me a secret. I’m willing to work with buyers long-term until they find the right property and are ready to buy, and I’m always enthusiastic to work with sellers in getting their homes ready, marketing the home and help them negotiate the best possible price and terms.
I’m calling 2008 the year of opportunity. Scores of investment experts are saying that the next 12 to 18 months will be the best period for picking up depressed properties since the early 1990s. For those continuing to “sit on the fence”, they may wait too long and lose out on getting the best price possible for their investment. That's because the real estate down cycle is close to running its course in many local markets, where prices today are 10 to 25 percent below their peak levels of two and three years ago. Serious investors understand that real estate is an all-weather, cyclical business: When times are tough for some owners, the opposite is true for investors with the knowledge, negotiating skills and vision to help distressed owners out of their jams.
On Tuesday, January 22, 2008, The FED (the nation’s central bank) cut the federal funds rate – the interest rate banks charge each other on overnight loans – by three-quarters of a percentage point (to 3.50%), the largest cut in 23-years, and has since cut the rate several more times to help real estate growth. This was an aggressive move that is needed to instill confidence in the U.S. financial markets.
This will help borrowers purchase great investment properties at lower interest rates, but the biggest impact is that there will be more credit available. For borrowers with good credit, the cut will likely provide relief on some home mortgages, and for home-owners with adjustable-rate mortgages, they will either see their loans reset at lower rates or may be able to refinance at lower fixed rates. Those with bad or poor credit stuck in subprime loans probably won’t benefit because banks are tightening up their lending standards, and subprime ARMs are usually pegged to a different rate, so foreclosures could continue to climb.
We currently have over 2200 properties for sale in the Santa Clarita Valley. Many of these properties are bank owned, some are fixers, and a vast majority are in excellent condition at great prices. Sellers are willing to negotiate and with the amount of choice out there, buyers are able to get about 25% more house for their money, and at lower rates.
The question I’m being asked by many people is when the market will bottom out. It’s impossible to answer that question with any certainty. No one knew when our market was at our peak high, and once we do hit bottom, our market will start appreciating again. With rates so good and prices low, I tell my buyers that we should search for the home they want and then negotiate the best price possible for them. They may have a better chance of getting the deal they want now than they could if the market turns and everyone else starts jumping in too. If they plan on owning the home for at least 3 to 5 years, they should feel confident that time is on their side. It may take years to get back to the high we experienced in mid-2006, but with the opportunities in the market now and with such great interest rates, buyers have an excellent chance at starting their investment on a sound foundation.
All the best,
Jason Cook |