Answering the crystal ball question

By Joel Persinger
YourRealEstateDude.com

As I was leaving church following the morning service, a friend of mine took me aside and asked, “Do you think home prices are going to continue dropping?” Of course, this is the question that is on everybody’s lips and the one most asked of me. I call it, “The crystal ball question” because only someone with a crystal ball could possibly give you an accurate answer. The rest of us poor mortals simply have to take an educated guess. That is precisely why all those talking heads on TV news can never seem to agree on anything even though they are billed as “experts.” It’s also why we “common” folk should take what they say with a grain of salt.

As if to illustrate the point, recent news stories have fanned the flames of consumer worries about the real estate market. They have pointed the finger of blame at real estate for everything from slow or no job growth and rising unemployment numbers to predictions of a coming recession. But, despite all the “bad market” hype the actual numbers still look pretty good.

According to a recent article in a prominent San Diego publication, unemployment in San Diego increased from 4.2 percent in May to 4.6 percent in June. Although this is only a jump of .4 percent, the article in question positioned the slight increase as a harbinger of doom, blaming the bad news on the real estate downturn and the resulting reduction in lending and construction jobs. When I read the article I couldn’t understand what all the hubbub was about. If 4.6 percent of the people in San Diego are unemployed, that means that 95.4 percent of San Diegans have a job! Almost everybody is working! That’s good news, isn’t it? Shouldn’t we be dancing in the streets?

Even the interest rates on home loans are at historic lows. I checked the rates as I was writing this column. In less than three minutes I found examples of thirty year fixed rate loans as low as 6.85 percent and fifteen year fixed rate loans as low as 6.68 percent.

Sure, home sales have slowed in 2007 compared with 2006, and a bunch of fair weather real estate people who jumped in when it was hot are being forced to find something else to do, but contrary to popular misconceptions, homes are still selling. According to statistics provided by the San Diego Association of Realtors website, 2,859 properties sold in June 2006 while 2,468 properties sold in June of 2007. That is a sales decline of 391 properties or 13.7 percent as reported by the Multiple Listings Service for all of San Diego County. Maybe I’m crazy, but a drop of thirteen or fourteen percent does not rise to a level which justifies panic in my opinion.

So, why do media outlets continue pushing negative stories about the real estate market? The answer can be found when we follow the money. The shocking fact is that news outlets exist to make money and bad news sells.

So what about that crystal ball question I mentioned before? Are prices going to drop even more? The answer is, “maybe and maybe not.” No one really knows for sure and anyone who tells you they do is more smoke and mirrors than crystal ball. All I can tell you for certain is that if history repeats itself, the market will ebb and flow like the tide just as it always has. If the current tide is not right for you, then be patient. Given time, it will change.

Real Estate is a People Business

By Joel Persinger
YourRealEstateDude.com

When I started practicing real estate as a shiny new agent, still packaged in the shrink rap like a new Christmas toy, my grandfather took me aside and said, “Now, always remember, Joel, real estate is a people business.” That was almost eighteen years ago and many things have changed. My grandfather is no longer around to give me his usual great advice, I’ve got a lot more gray hair on my head and technology has changed the way most industries do business. But one thing has not changed; real estate is still a people business.

With the advent of technology many things that used to be considered services have been reduced to commodities. Just one example is the legal industry. It’s no longer necessary to go to an attorney to incorporate or draw up a trust (although, I still advise you to do so). You can find the required documents on the internet, fill them out yourself and download them for a fraction of the fee your attorney would charge.

The same can be said for a host of other “service based” industries, and real estate is no exception. As I write this article, you can go on the web and do everything from getting a rough estimate of your home’s value and searching for homes for sale to placing an ad to sell your home or watching a virtual or video tour of other homes on the market. There are even internet-based real estate companies that are doing their best to make sure that you can buy or sell a house without ever having to see another human being, or not much of one anyway. They are doing their best to turn real estate into a commodity business.

The problem arises when we try to take a home and make it into a house. A refrigerator has always been, and will always be a refrigerator. It’s a commodity pure and simple. But a home is not just a house. It’s the place where you live. It’s the place where you raise your kids, entertain your friends and create a haven from the challenges and difficulties of the world. As the old saying goes, “Be it ever so humble, there’s no place like home.”

I recently ask a client why he decided not to go with an internet-based, discount real estate firm since he had been considering one before he hired me. He said, “This is my home that I’m selling.” That simple statement said volumes. People need people they trust when the things they are trying to do run close to the heart or through uncharted waters. Such is the case when buying or selling a home. It is an emotional and somewhat frightening journey for many of us and we need someone who cares about our welfare and has navigated the treacherous waters to guide us along this journey.

Filling that roll of industry expert, trusted advisor and guide through difficult times is hard to do from a distance. I don’t know about you, but I need the people in my corner right next to me. I need to see them face to face and know that they are there when I need them. That’s why it’s next to impossible to guide someone effectively through one of the most difficult processes of life by email or over the phone, and why many people are not pleased with the experience of using a “virtual” real estate agent.

After all this time and all the technology with widgets galore and more information than any of us could every want or need, the truth of the real estate industry hasn’t changed one bit and Grandpa Charlie was right: “Real estate is a people business.”

Conquering the fear factor

By Joel Persinger
YourRealEstateDude.com

A couple of weeks ago I had the privilege of giving a seminar for home buyers. During the class, I ask the attendees why they thought buyers aren’t buying. As they shouted out the reasons, I scribbled them down. They must have listed a dozen reasons, but what it all boiled down to was fear.

In today’s San Diego real estate market, home loan interest rates are historically low, there are a lot of homes to choose from, sellers are no longer being unreasonable about their asking prices and there are good “deals” to be found if you just take the time to look. So, at first glance being afraid to buy doesn’t seem to make much sense.

It’s only when you take a deeper look at the issue that you discover that buyers really aren’t afraid to buy. They are afraid of making a mistake. They want to buy low so that they can sell high. After all, that’s the old rule isn’t it? They’re just waiting around for prices to hit rock bottom so they can scoop up a deal.

This reminds me of a test I once took when applying for a government job about thirty years ago. It was a test designed to find out if the applicant had some screws loose upstairs. I don’t remember very many of the questions, but there were two that I will never forget. The first asked, “Do you believe that Jesus will return?” Followed by the second which asked, “Do you know the date?” Surprisingly enough, these are the very same questions that many buyers are hoping to answer about real estate! “Do you believe that prices will hit rock bottom at some point?” “Do you know the date?”

The answer to the first questions is easy. We all know that prices will bottom out at some point and the market curve will start climbing back up again. But nobody knows the date and anyone who thinks they do has just as many screws loose as those who thought they could answer the “date” question in the test I took thirty years ago. In fact, today could be the day for all we know and prices might have hit rock bottom just as you started reading this article. The one thing we know for sure is that “timing” the market perfectly is not the answer. The only way it can be done is by blind stupid luck and I have never known anyone who has managed to do it. No, the answer is not “timing”; it’s “time.”

If we take a look at the real estate market in Southern California, we will find that homes have appreciated an average of about seven percent per year for over fifty years. Some years the market was down and other years up. But when averaged over that fifty year time frame, the market has made a steady and reliable climb. So the burning question is not so much when you should by, but how long you should own. As a general rule of thumb, if you are planning to own a home for at least five to seven years, it doesn’t really matter when you buy it. Most likely you’ll come out smelling like a rose regardless.

So take some advice from an old real estate investor. If you’re planning on owning that property for five or more years, get off the fence and make your move. Now is a great time to buy.