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I spent the morning meeting with clients who are thinking about purchasing a home in Manhattan Beach. I first met them in 2005 at an open house. After searching for 6 months and not finding the right home they decided to rent until they had more money saved.
What a difference a few years can make. In 2005 homes were selling as fast as they came on the market. A nice home, priced right.. in good condition and in a good location... could easily sell in one day with multiple offers...The list price was where you started.. not ended. It was fast and furious as the inventory was very limited. If you saw something you liked you had to be quick... Oh... how we longed for a little breathing space and a bit more inventory.
Today we were talking about how much the market has changed. While the inventory is still not large compared to other areas... you definitely have more choices. You can actually take some time to decide how much you really like a property... or not. While prices are not cheap by any means they have come down. The listing price is still a place to start... but now the biggest question isn't how much over the listing price to offer but rather how much under the listing price is a fair offer.
A lot has changed in our market since 2005. But it seems that what we were praying to see in 2005.. a slower market without so much volatility in price is seen as the gateway to the market falling into the abyss. I'm sure there will be more adjustments over the next few months but probably not as much or as many as some are hoping to see.
The economic news isn't great but some things are looking slightly better. Not all financial intuitions are hovering on the brink of bankruptcy. The FED is making a real effort to keep markets steady but not too enthusiastic. The stock market is up... then down... then up... seemingly out of bear territory for the moment... but no bulls in sight. No one knows what's happening with oil.. can you say hurricane.. but demand has gone down which may be a very good thing in the long run.
To quote Mr. Dylan... The times they are a changin'....
10 comments:
Kaye
I'm sure this thing is going to take a lot more than a few months to play out. I have said this before on your site and I will say it again, anyone who rushes into buying a home right now is crazy. There is not one thing to indicate that we are anywhere near a bottom, no matter how rosie of a picture you try to paint. This mess could go on for years!
Anonymous 5:17,
Of course this is going to take time to resolve... You have to do what is best for you.. and if not buyimg a home is the right thing then that is what you should do. However people buy homes for a lot of reasons.. and some people, contrary to your view, need to buy now.
Some people think buying a home is a lot smarter then renting. My mother went through the depression and would never rent as she thinks it's a waste of money.
I'm not painting a rosy view. I have beeen very upfront about the change in the market... In fact I think that's what this post was about... or at least that 's what it was supposed to be about.
What I believe you are missing is that I have seen bad markets. While this one is down it is nothing like some of the other markets I have been through since 1979.
For you this market may be the most horrible thing you have encountered... but from my view it's not bad until 3 out of every 4 people who live on your block are unemployed.
A bad market is when interest rates bump up 6% in 6 weeks and banks don't have enough money to make loans on more then 2 days per week. A bad financial market is when 100 banks go bust in a week.
You are right we could have problems for a long time... and if we do then I will be one of the first to note it.
A recession is when you neighbor is layed-off
A depression is when you are layed-off.
I hopped jobs for several years after the tech bust to keep employed....that was tough and wrenching for my family. Had to move to stay employed.
Now that was tough.
Watching house prices drop while keeping my job?
That's not tough at all.
Anonymous 9:17,
...and that's the point.. prices will drop gradually and orderly while people are employed... when prices start crashing in the Beach Cities it's usually because people are not employed...
Right now we are seeing an orderly decline in prices which is normal and had to happen... that's part of the market cycle.
Kaye,
If prices will continue to drop as you state in your 9:17 post, why would anyone buy now?
The reductions in MB are just starting. Several factors, such as likely Federal and State income tax increases for the top brackets in 2009, are on the horizon. All the "buy now" blogging won;t change the market.....
Anonymous 7:07,
Why do people buy... death, divorce, pregnancy, parents, nesting, interest rates. tired of renting...you name it. There are hundreds of reasons people buy a home...it's not always about doubling your investment in 2 years.
If taxes on income increase then the deduction for home ownership might be more valuable then it has been...
Sorry..I don't do "buy now" blogs...The choice about buying a home is a very personal decision.. I only make that decision if it's my money.
I post about how the market is.. not how some consumers want it to be. So far our local market has held up pretty well... If I see that changing I'll be posting about that.
Bottom line is that prices are declining...but in a very normal and orderly manner in the Beach Cities. That can't be said for many parts of the country or the state. Will that change... maybe ... but read 9:17 again.. he's very smart..
Kaye -
WRT to your reply to the comment on taxes, keep in mind that the vast majority of new homebuyers in MB will be subject to the AMT. Most of them will be able to deduct only a small portion (if any) of their mortgage interest. You are incorrect in citing a mortgage benefit to buying high priced real estate in a period of higher taxation. The return of sane mortgage underwriting standards reinforces this fact. To buy a $1.5M or $2.5M home, many buyers will need to be earning $400k or $500k per year or more. Smack in AMT territory. Don't forget that prop 13 will force a disproportionate level of property tax on these new buyers as well.
Peope SELL houses when there is a death, divorce, or a new addition to the family and they need a bigger house. Sellers are the ones whose hands are most often forced by the life events you mention. Buyers always have the option of renting.
Anonymous 9:30,
It's true that many people in our area may be subject to AMT.. but not all. However the AMT isn't a reason not to buy a home for most people. Renting is not a solution to AMT. The solution to that one lies with Congress.
People buy and sell for exactly the same reasons... This won't make sense to you but a lot of people just do not like renting.
731 Longfellow reduced to $980,000. I guess the bank has seen the error of their ways. It looks like refusing to bargain with your buyers earlier has cost the bank at least $50,000. What do you think?
Pat,
Today the agent called to let us know about the price reduction and ask if we were still interested... Seems they like us a bit more now... Is it a sign of the times..
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