So many of our Lafayette real estate and other Lamorinda real estate clients have asked us over the last year or so whether “the time” has arrived to “jump in”, either as a buyer or seller. My answer has always been one tempered with caveats about the unknown elements of world events and the economic implications of the recession that could impact my answer, but I also have always told these clients that one never knows if a market has bottomed until we’re looking at it in the “rear view mirror” after it turns up. Last year, I told clients that I felt we were “bumping along the bottom” of the market and that I couldn’t see more than 5% downside risk as we moved from 2009 to 2010, with most of that risk at the upper end of the market where there had been very little transactional activity in 2009. In retrospect, it appears to have been a pretty good market call.
As reported recently in the Wall St. Journal, the S&P/Case-Schiller survey results “suggest housing prices bottomed out around April 2009, when its 20-city composite index was down 32.6% from its peak reached in June/July 2006.” The article goes on to say that, “Since then it has gained 3% through January 2010, with some markets much stronger, especially San Francisco and Minneapolis.” This is very encouraging, but I would caution clients in their interpretation of local housing statistics that show rising prices, for they can be very misleading. As an example, I mentioned a week or so ago that there were 7 homes over $2M that had gone pending within the Lafayette. CA real estate market inside of about a 14-day period. Assuming most of those homes close escrow in the May time frame, we’ll see the May statistics report a very significant rise in Lafayette’s median price. If the media picks up on our relatively small Lafayette real estate market, it will undoubtedly report a “sharp jump” in prices that won’t be truly reflective of the market. Never take statistics at face value… always interpret them within the proper context.
Bottom line, there are lots of positive reasons to believe that the worst of the market is a ways behind us and that the outlook for the future is much more positive. Other indicators include:
- Sales of new single family homes jumped 27% last month on a nation-wide basis per the Wall St. Journal. Sure, most of this is due to the expiring tax credit for first time buyers, but don’t forget the fact that we need to see this segment firm up to underpin the overall housing market.
- The 30-year fixed-rate mortgage averaged 5.07% for the week ended April 15, down from 5.21% last week. As reported, this rate is only slightly higher than the 4.82% average for a year ago during the depths of the market.
If you haven’t decided to jump in yet, now is probably the time to do so, but be sure to do it with reasonable expectations.
