Friday, May 23, 2014

Confusing Times for Buyers and Sellers- May 2014

Dear Real Estate Readers and Mansion Mavens, Hovel Hoarders and Beach House Bathers,

I hope that you are well and that you will forgive my long silence. The market has made its demands and I have had a hard time sitting down at the end of the day to share my thoughts.

2014 is a confusing time for buyers and sellers in the Bay Area and particularly in Santa Cruz! Everyone is trying to determine if this is the new highest market and if they should get in and buy quick, or if they should wait until prices go down. Sellers, on the other hand, have seen the upsurge in prices over the past four years and wonder if they should hold and wait, or sell now- as most Realtors are saying this is the new highest point of the market (I am in this camp). 

Having been in business over thirty five years, I have experienced the effects even a rise of a 1/2 percent in the interest rates can have on prices. I can not imagine interest rates remaining where they are now for more than another 6 months to a year, and when they do rise, if things go as they usually do, prices will drop. It is true that some houses, the "irreplaceable" houses, hold their value better than "average" houses. But even houses in a superior location or with a higher quality of design and construction will be affected as the market as a whole drops.

But here is the rub! Just the fact that we are talking about a market in Santa Cruz (or San Francisco, or Palo Alto, or anywhere in the Bay Area) gives us one factor that is unchangeable. We live where so many people wish to live! So how do we know what effects the coming rise in interest rates will have? We can only guess.

On Monday, a friend, who is a retired mortgage broker, sent me this letter from the Federal Reserve Bank of San Francisco, which states that housing prices are coming down in the Bay Area, and that they will continue to do so! They talk about investors getting out of the market and cite great statistics. Tell that to my client who recently tried to buy a 1000 square foot house on a postage stamp lot with no view in Capitola. Although they offered significantly over the asking price and they were pre-approved for their loan, they lost out to an all cash offer which could close in ten days. They were moving from North Carolina, where their home, in a great neighborhood, was over twice the size on an acre lot. They jumped in with all their hearts and then got their hearts broken!

With the instant awareness that internet marketing creates, the second any home goes on the MLS, every buyer who is looking in an area and in a price range knows the house is for sale. Agents send the listing to the MLS, and through the MLS, it is distributed to sites like RedFin.com, Trulia and Zillow. Agents put their own clients on automatic searches, so that effectively the houses email themselves to the clients (This is so different from even five years ago, when as an agent I would have to find the property and email it to a client. It cuts out any delay in time!). 

This is why the Broker’s Tour is now so often flooded with Buyers as well as agents. The Buyers are sent the information, which includes the tour, automatically, and they go to try to perhaps get in a preemptive offer. It is why, unless the listing agent and seller plan intentionally to hold a house on the market for ten days (which means a Broker’s tour and two weekends of Open House), this is a five day market. If the agents choose to hold the offer process off, it is a two week market. The Buyers who understand this and think the price is right jump in. However, it also means that if all the Buyers think the price is wrong, they wait. This is what happens if a house is overpriced by as little as five percent!

So, as a Buyer, how do you proceed? As a Seller, what is your best strategy to get the highest possible price? I will be back next week to follow up. In the meantime, visit my Facebook page, or register on my website to get updates for the homes and prices you wish to track.

Thanks for reading,

Anina