Tuesday, January 8, 2008

Waiting For The Right Market? Read This!

We all know the importance of timing and its importance is undeniable in all things, even in real estate. So it comes as no suprise that one of the biggest things real estate buyers and home owners agonize over is when to make their move. If Orange and Los Angeles County home buyers and sellers are pondering these same things, the first thing they should do is read our top percentage theory to make sure they understand the current market situation. If they are fairly comfortable looking further into whether the time is right, this guide will help them to make a good decision.

Crystal Balls, Fortune Tellers, Weathermen, and Bar Room Economists

So the paper says I'm crazy to buy real estate, the magazine says I can't sell my house because the market is slumping, the spouse says we just can't stand this little house anymore, my broke friends all somehow claim to be in the middle of buying some foreclosure deal, and the Realtor says that its always a good time to buy real estate, and an even better time to sell my home! What gives?

If there were one topic where almost every American, home owner or not, seems to have some sort of opinion, it would have to be the future of the real estate market. But where do we go for good info, the right answers, and the opinion that will make us rich, or in some cases just less of a dummy.

The short answer is nowhere. The answers to your questions will depend on your personal unique situation and the best thing you can do for yourself right up front, is to be honest with yourself about your situation. Questions that need to be answered are: Why am I looking to move? Where am I going to go? How long do I have? Does this make some financial sense? And how big of a priority is this in my life right now? The next step will be meeting with a trusted professional to further explore your situation and finally seeking a little counsel from only those in your most trusted sphere of influence.

Be cautioned that everybody will have an opinion and none of them hold the crystal ball for predicting the future of real estate. Also keep in mind the old saying that although everybody is entitled to an opinion, not all opinions are created equal. Qualified professional opinions probably have the most potential to be helpful although motivations of those professionals should not go without consideration. lThese opinions can come from your Realtor, accountant, attorney, physician, tax preparer, financial planner, or others.

Opinions of family and friends may have the most potential for keeping your interests in mind, but are often misinformed or simply not up to date on current trends such as market conditions or sale details. One can imagine that it is hard for many of our parents to understand why we would pay todays prices for real estate when they purchased their home many years ago for less than what it costs to buy a car today. Also, we all have that friend who is an "expert" on all topics, and real estate certainly falls within their jurisdiction of "expertise." Realize that no matter what kind of deal you are able to obtain, they are always going have access to a better one.

On a side note, we have in the past helped our clients research their "expert" friend's deals and are always shocked that the proverbial fish seems to always be slightly bigger in story than it is in reality. Nonetheless, we don't recommend spending a bunch of time reasearching your buddy, instead, just humorously concede that their deal will always be "better" and concentrate on your deals...the deals that exist in reality, not fiction and folklore.

The common denominator is that every one of us will need to make decisions for ourselves, albeit some will want a little more help than others. The goal is to sift through the information to find a resolution that makes sense for us on a personal level. Often time it means stepping outside of our comfort zone, and others it means buckling down to earth a bit more. With this in mind, lets now begin to drill down into the details to consider.

The Tide Theory

There was an old thought problem that asked "If a boat sits in a harbor and is tied to a floating dock at high tide, how far will the boat be below the dock when the tide falls six feet?" The answer of course is no further below since both the dock and the boat float, and are therefore equally affected by the rising and falling of the water."

This little problem is key in anaylzing the timing of the real estate market for most home owners. In our case the water is the market, the dock is your current real estate, and the boat is the possibility of buying or selling. In a nutshell, if you are going to buy and sell in the same market, as is most often the case, the relative trend of the market is probably not that big of a factor.

If the market is slow, selling your home will take longer but finding a new home should be easier. If the market is fast paced, selling your home shouldn't be a problem, but finding a home that will fit your needs will take a little extra effort. The same goes for pricing. What you lose in the sale of your home in a slow market, you gain in your new found buying power and vice versa for a hot market.

If a owner of real estate needs to sell a property in order to buy a property, as long as they can qualify for purchase, the market condition should probably not be a major consideration for deciding whether or not to pull the trigger. The following factor may be a more important factor.

Investing In Your Family

If the property your considering buying or selling is a place you will call home, their are internal factors to consider that will usually trump market conditions. The needs of a growing family will make that small home that was once so cozy, close in tighter and tighter as the young ones mature. Also, the constant uncertaintly that comes from a landlord, whether it be in the form of increased rents or possibility of getting notice to leave, make raising a family in a home for rent less and less desireable as we mature and begin to settle in.

It is at these points and others that the security, stability, and comfort of owning the right home begin to really take precedence. There are numerous internal forces such as these that make buying and selling real estate a good or bad decision. Often the best advice regarding these factors are coming directly from your own family. We think it is a great idea to listen.

Selling At The Tip Top, Buying At Rock Bottom

There is an natural obligation that every one of us feels in the bottom of our stomach when the time comes for a big decision. We want to make the right move, the best decision, and often times with real estate, this desire becomes an infatuation.

When we have some real estate to sell, we want to do it at the "top" of the market and when we buy, we only want to do it when prices "bottom out." But does this really make sense? How can you possibly know that prices will continue to rise or fall?

The truth is you can't, and it doesn't matter anyway, because you don't need to sell at the top or buy at the bottom to buy good real estate deals. Consider first the internal and external factors of your own life before getting wrapped in market talk, especially if the subject property is a home and not an investment property.

Sensationalism In The Media

Prospective home buyers and sellers also need to understand the role of our local news outlets with regards to real estate information. Keep in mind that these outlets (T.V., newspaper, and internet) have an obligation to attract viewers in order to gain ratings and advertiser money. As a result, the outlets will focus on and often exaggerate the sensational topics with regards to real estate.

Basically, people will not buy papers or watch newscasts if the headlines read stuf like "Real Estate Market Normal", "Prices Remain Unchanged", or "It's A Good Time To Buy A Home." Instead, headlines like "Real Estate Prices Plummet" and "Massive Foreclosure Epidemic" are what is needed to sell papers and gather advertisers. Consumers should recognize the motives of their favorite news outlets, and the business they are in, and take all stories with a grain of salt.

The Bottom Line

As any prospective home buyer or seller can see, there are numerous things to consider in deciding whether it is a good time for you to buy or sell real estate. This guide should make coming to some sort of decision much easier and effective. If you feel like it might be a good time for you to buy or sell Los Angeles or Orange County real estate it would be a good idea for you to contact us and discuss it further. Regardless of whether the time is right, we look forward to hearing from you.