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Be Fearful When Others Are Greedy and Greedy When Others Are Fearful
October 24th, 2008 categories: Real Estate News
THE UNION TRIBUNE SAYS SOMETHING GOOD ABOUT THE MARKET. “Housing downturn could be approaching bottom,” is what it said on the front page of the Business section of Tuesday’s UT. This is the same UT that published an article titled, “S.D. housing market remains 5th weakest” just 20 days prior.
Sure, facts are facts and you can’t deny them. My point is, the UT is in the money making business and you have to think about what you read – don’t just look at the headlines.
In the former article i mentioned, the UT talks about how September saw a huge jump in real estate sales and that compared to September of 2007, there was a 56.4% increase in sales. The drastic increase in activity is primarily due to the increase in foreclosures and short sales. The UT quoted DataQuick’s figures, stating that 47.3% of all resales this last September were foreclosures. This figure was up almost 4% from August and about 20% higher than this time last year.
The other factor to this unusual spike, is that there are more investors out there. The people with cash who’ve anxiously been waiting are now buying. This is a key indicator, signifying the the bottom is here, or at least near. Christopher Thornberg is an economist with Beacon Economics who had predicted the housing slump long before many others. He points out that the increased activity from investors is “a good thing, because these are the guys who will determine where the bottom is.” Thornberg also thinks that the bottom will be in abut 6 months from now and that San Diego will see “substantial” growth in 2010.
Sandicor, San Diego county’s Multiple Listing Service provider, shows that there are about 17,000 listings throughout the county. This figure is down 16% from this time last year and represents about 5.6 months of inventory. According to the UT, “a balanced market between buyers and sellers occurs when there is three to six months of unsold inventory.”
Now what does all this mean? Well, for those of you who can buy and can qualify for loans, my advice is to start looking today. Anyone who’s worked with me know’s that I’m not the hard-sell type. In fact, I hate it. So when I say this, I’m telling you what I’d be doing if I had the money.
Here’s what’s wrong with waiting to buy(and I know there’s a lot of you out there, so please read).
- You won’t notice prices going up quickly enough to get a good deal. If you’re waiting for the absolute bottom, I can guarantee you’ll miss it. The problem with this theory is that there can’t be a bottom until prices go up. Right? Otherwise, it’s all just a downward slope. The only way to pinpoint the bottom, is after prices have gone up and you’re looking back. Ok, so maybe you get that and you agree. But you still want to wait and as soon as you see prices going up, you’ll buy. Read on…
- Interest Rates will more than likely go up. For those of you who can actually qualify for a loan right now, take advantage of it. Do you think it’s going to get easier to qualify for a mortgage? Have you seen what’s been going on with the lending industry? Enough said.
- More buyers = good for sellers. This is basic economics. Today, there aren’t very many buyers, so demand is low. Sellers are at a disadvantage and don’t have much to negotiate with. I tell my clients, “Look, anyone who doesn’t NEED to sell right now, doesn’t have their home on the market – lets go get you a deal.” With that said, once the bottom has come and gone, more buyers will be looking to buy. The means higher demand, which means it’s no longer a buyer’s market. Right now, the pace is slow and with the exception of foreclsoures, there are few multiple offers. Wait another 6 months and I promise you, you’ll see a lot more.
Either way, good luck and let me know if you have any questions. And like the great Warren Buffett says, “Be Fearful when others are Greedy and Greedy when others are Fearful.”
Contact Denny Oh 858–243–2092 dennyoh@prusd.com
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Denny Oh
(858) 243-2092
