East Bay Blog

Thank for stopping by the East Bay Real Estate Blog. Before I begin today, let me remind you that what you read on our blog are just my OPINIONS on the outlook and direction of the market. Ok, with that out of the way, let’s begin.

If you’ve read my blogs before, you know that I try to keep my topics local. Many of you that read my blog are trying to get an insight into the status and direction of the Real Estate Market in the East Bay. Today however, I am going to write about the larger real estate market as a whole and the macroeconomic conditions which are guiding the real estate market. After all, we all see what is being shown on the news in regards to Real Estate. Like it or not, the macroeconomic conditions will affect our property values and how much we pay for property. No matter how desirable the Bay Area is, we are not immune to what is happening nationwide.

Last week was pretty bleak in terms of economic news. The stock market had one of its worst weeks in recent memory, and the housing data that came out (new home sales, existing home sales, & foreclosure/default notice stat’s for Bay Area) were not very good. What prompted the fall in the stock market last week is the concern that there is a “credit crunch” out there, meaning that it is becoming harder and more expensive for people and companies to borrow money. For the last several years now, interest rates have been low and lenders have been more than willing to lend money. This all began to change earlier this year with the sudden collapse of the sub-prime mortgage market back in February. Then early last week Countrywide came out and said they saw some problems starting to crop up in their second loan holdings. This means that people are starting to default on equity lines and 2^nd mortgages they have on their homes. This bit of news made the market extremely nervous because it is the first sign that trouble may be spreading from the sub-prime market into the “A” paper market. This is making it even more difficult from some borrowers to get loans, and of course is making the bad news we hear about Real Estate seem even worse. So with all this news, it is no wonder that there are a lot of buyers waiting on the sidelines and there are many nervous people out there not knowing in what direction to go with their real estate plans.

Now let’s bring it back to the East Bay. With all of the bleak news of last week, and all of the fear in the market, what is happening here? You may think that Real Estate in the East Bay is dead, but you’d be wrong. What I am seeing is the gradual return of the long term investor. The long term investor is not like the investor that we’ve seen in the last couple of years. The last couple of years we saw a lot of “flippers” looking for a quick buck. Come in, fix a property, and sell for a profit. Toward the end of the boom we saw the extreme of flipping. Where investors would not come in to fix a property, they would just buy and hold for a couple of months. Then, with the market moving up so quickly they would sell at a profit without doing anything to the property. These are really speculators, not investors. When speculators come in, it’s time to get out. So the long term investor that is gradually returning is the investor that plans to purchase and rent out a property for at least 7 to 8 years. This is a good strategy because that gives you enough time to not worry about the short term problems driving the current market. In addition we are starting to see rents rise nicely. This is another byproduct of the current market. As more buyers decide to wait before purchasing, and more former homeowners have to leave their homes due to finances, these people all rent. With more demand for rental property, rents are rising. This is good for the long term investor because in addition to buying a long term asset, the rising rents will help keep cash flow manageable in the event they rent the property out. In addition homeowners receive tax benefits for owning property.

It’s times like these when the smart investors come in to pick up what’s available. FEAR is driving the majority of the real estate market at this point. The best opportunities can be found where most others are scared to go. I truly believe this to be true. I am currently in escrow to buy another property myself. I really think this is a great time to go in where others fear to go and pick up cheap real estate.

As for you sellers, don’t worry. Property that is priced, marketed, and “dressed up” correctly will sell. If you have a proactive agent that is tuned in to what buyers are looking for, you will sell. If you want more info, drop me a line, until next time…