Picking up the pieces
housing slump offers opportunities to the ‘qualified’ buyer
By Joanna Beresford 12/31/2008
First of all, I spent half a day researching real estate predictions for 2008, then realized I was 12 months off and three hours closer to my extremely tight, excruciatingly fixed holiday deadline. While it’s enlightening to compare last year’s predictions against some semblance of reality, that particular project inched me no closer to my own personal resolution: to meet or beat every deadline. Besides, my kitty keeps sneaking across my keypad, sending me even further into digital chaos.
Begin again. There are tons of New Year’s predictions out there (from friends, shoppers, colleagues, experts and online all-of-the-above) regarding everything from baseball stats to baby names, and including of course, real estate activity. Most of the real estate forebodings — I mean, forecasts — resemble each other, with a few interesting exceptions.
Here’s a huge surprise for which you may even want to sit down: home prices will continue to fall and home owners will experience little or no appreciation, at least early in 2009. The California Association of Realtors (CAR) estimates a conservative drop of 6 percent in median price on a California home, to roughly $358,000. Elizabeth Weintraub, Sacramento-based real estate writer and veteran of the industry, points out the potential benefits of the situation: “On the bright side, employed home buyers with good credit will find 2009 is an excellent time to buy.”
I find that ‘employed” restriction a little stuffy and obnoxious, but hey, I don’t run a bank. I can barely belong to one.
Also, almost everyone agrees that the number of home sales will continue to fall. According to the National Association of Realtors (NAR), roughly 4.98 million existing homes were sold in 2008. In 2007, 5.65 million homes were sold, and NAR predicts that 2009 will be the fourth consecutive year in which such transactions continue to slow.
The industry itself will shrink. Agents and realtors who struggle to maintain or satisfy their client lists may seek their profits and passions elsewhere. Related businesses, like mortgage and escrow companies, are expected to close, consolidate or downsize.
Competition, particularly among homebuyers and investors, may increase. Strictly investment-minded buyers will view the market as a lucrative opportunity, while home buyers seek a wise investment, but more importantly, a comfortable home. Cash will always conquer in these instances, meaning that investors will enjoy the advantage in the game.
To buy, to sell or to rent? The pundits vary on their evaluation of the buy/rent/sell scenario. Many people who want to sell their homes, but refuse to lose money in the process, may choose to rent their properties for the moment. And people who just can’t meet the strict requirements of banks and lenders, or who can’t afford to make an investment in a home at this time, for whatever reason, will need to rent rather than buy a home. Trying to measure how the numbers and relationships will balance out in this realm is like looking through a glass darkly. The rental market by nature tends toward more instability and unpredictability than the home sales market. In any case, the market will be active, and Elizabeth Weintraub predicts that 2009 will be a good time to “be a landlord.”
Optimists like to mention Obama, politics, and a new order of things. Most industry veterans suspect that consumers will resist paying commissions to agents, while agents will find it necessary to raise their commission rates. And everyone seems to agree that the Internet will continue to surge in relevance to the business. Systems and websites will become more efficient and essential to the real estate process. In 2008 more than 32 percent of home buyers claim to have initially found their homes on the Web rather than through a real estate professional, according to NAR tracking.
Some sources praise increased commitments to green living and building. Consumers want to live in smaller houses, and they want to walk to school, work, stores, etc. Pasadena, in this case, cuts a swath ahead of many communities — one of the greatest places in the world to walk along city streets or through tree-lined neighborhoods, past railroad tracks and ravines, and still be free to lift your eyes and glimpse a city skyline in one direction, smell the ocean in the other.
Contact Joanna Dehn Beresford at truewrite@yahoo.com.
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