The Media and Truth
I often find myself asking, where are they getting this information? My angst is usually over some article I have just read where statistics and facts are presented that have no relationship to what we know is actually going on. Being someone who is often quoted as an expert in the press, I’m realistic in trying to understand what other so called “experts” are quoted as saying. I know how much I guess in my prognostications and my opinions are usually worth what they pay to get them (nothing!). This allows me to put the soothsayers of doom in proper perspective. Most of them don’t have a clue what is taking place in our markets at the moment. With that said, let me respond to some recent stories that have appeared in the national media. First, some weeks ago an article was published stating that the Central California market would experience a drop in values of over 20% for calendar year 2009. Where did that come from? How can someone make a prediction like that when we have had such a dramatic increase in sales activity that started in early 2008 and continues today? Isn’t it a supply and demand question? Our supply is starting to decline and demand is growing, don’t the writers know that? Well, the bottom line is that the person making the prediction is on the east coast and does not have access to the most current data. Without the current market data and a comprehensive understanding of the local market, the analyst can make predictions that make sense given the data they have but turn out grossly inaccurate. Such is the case with the article referenced above.
Let’s look at the current market in the central valley. The impact of the mortgage crisis and resultant foreclosure wave has significantly suppressed home values. We now see home values at about a 2003 level. We all know how significantly this has impacted our market. But, the news isn’t all gloomy. With the suppressed home prices, buyers have re-entered the market in dramatic numbers. Just ask an agent with a well priced home; multiple offers are becoming more the rule than the exception in the current market. Investors and first-time homebuyers are swarming to these values creating a near “feeding frenzy” for nice homes priced properly. As an example, I recently made an offer (at more than the asking price) on a nice property. I was one of 26 offers on that property and never even got the chance to buy it, as the demand was so great. Granted, the price of a home must be realistic given our current environment, but if aggressively priced and well presented, a home will sell!
Finally, one more thing about recent press regarding the median price of homes falling: Of course that’s true. It isn’t that difficult to understand that investors and others are fueling our market purchasing well priced homes at the entry level of our market. So, looking at just the statistic, the median price is certainly down but that doesn’t mean that all segments of the market have declined equally. It just means that, of all our sales, half are less than the median and half are greater. Understanding the true meaning of this statistic gives you confidence in the fact that our recovery has already started. More lower priced homes are selling than upper end homes. Well, yea! This is where market recovery must start. It won’t be quick, but it will be sure.