HOME SALES SAG DESPITE PRICE CUTS

This has been an interesting month for anyone watching this real estate market, which has definitely transitioned to a new pace.  Now that sales have slowed significantly for 6 months in a row, we can officially call the market changed.  The Federal Reserve Chairman himself declared we are “in for a soft landing.”  There will be no bubble bursting, but rather an adjustment as this newsletter has been forecasting for months.  There were 3,276 total sales in April (The most current numbers that is available.)  Although this number is off 28% from a year ago April, to be fair, we must remember that ’05 was a banner year.  One thing is sure; sellers are facing more competition and must be accurately priced to keep their home from sitting on the market.  And that is exactly what is happening.  Don’t let the median price increase of 11% fool you into thinking prices are surging.  What is really happening is that properties that were overpriced got reduced and sold for less than the original list price, but because of the high number of sales over $700,000 the median price went up.

THIS MARKET IS RETURNING TO A NORMAL MARKET

Buyers now have more choices and more time with which to make their decision.  There is a slight chasm between seller and buyer right now which is slowing the market.  Sellers are in disbelief that they can’t get the price they thought they would get.  That is a bitter pill to swallow, but one that ultimately must be swallowed.  Buyers on the other hand, think that because a house has been on the market more than 30 days (does anyone remember that in a normal market, your days on market average 90 to 120 days?), they can go in and “low ball” an offer.  Both sides are being unrealistic.  This is normal for a market that transitioned quickly.  There is a “gap” period when sellers get real and buyers get reasonable.  That is where we are, so yes, sales will pick up.

WHAT WERE THE ACTUAL NUMBERS

The total number of 3,276 was off only 12% from March.  There were 1,915 single-family resales, 984 condos and 377 new homes.  The median price for a single-family was $705,000 and for condos $460,000.  Year over year appreciation comes in at a modest 9% and you can expect that number to hover there and perhaps go lower as the year goes on.  It was stated before in this newsletter that we needed appreciation to slow down for the overall health of the market.  Look to the breakdown of sales by price range to explain the median increase.  The under $400,000 range had 429 sales, followed by the $400,000 to $500,000 at 469, and barely higher than that was $500,000 to $600,000 with 505 and nearly constant with that was $600,000 to $700,000 with 597, all to be blasted out with the over $700,000 price range which had 1,255.

PROTECTING YOUR EQUITY FROM LAWSUIT DAMAGES

Many people of wealth have known about umbrella policies for a long time.  Umbrella policies are additional policies that work just the way they sound, to wrap around coverage you already have through homeowners and auto, to offer additional coverage against personal lawsuits.  Because of enormous increases in home equity thanks to the last eight years, people now have substantial wealth in their homes and rentals.  There was an interesting article in the LA Times talking about umbrella policies and how they aid where normal policy coverage ends.  It may be worth talking to an insurance agent about.  If you would like a copy of the article, please give me a call.

REALTORS DO NOT DRIVE THE MARKET

The truth is the market drives the market.  Realtors do not decide what houses will sell for anymore than a stockbroker decides what stocks will sell for.  Simply put, a house is worth what someone is willing to pay for it at a given point in time.  But our homes are emotional whereas stocks are not.  Right now, housing starts have fallen 7.4% to its lowest in 17 months.  Demand is high for the new high-rise condos coming soon to many of our cities.  Interest rates remain fairly steady at 6 ½ to 6 ¾ depending on product.  The Federal Reserve says inflation is “under control” although we all know oil affects everything from deliveries to tires, to plastic wrap, to air travel.  Notices of Default are up 50% from a year ago with 374 last month but foreclosures were still not even a blip with 22.  All of these factors affect the real estate market.  So whatever you need please let me know.  I am here for the long term and it is my job to communicate the market pulse to you.  Thank you for the opportunity to serve you, your family and your friends.