Gary Watts, a renowed real estate industry economist, recently spoke about the real state of the real estate market, especially as it relates to the Sacramento region. I thought I would share with you the good news he has for people considering real estate investments. For more information about Mr. Watts, visit his website at www.impactre.com.

Real estate markets are always cyclical, and effective real estate investments are held for the long term. Regardless of what the media headlines scream about the terrible shape of the housing market, the astute investor will look beyond the headlines and discover that today’s market offers opportunities that may not be available again in the near future.

Hardly a day goes by that headlines don’t trumpet the implosion of the subprime lending market, the lackluster sales of homes in the area or the radical increase of foreclosures. Newspapers sell more papers with negative headlines. While the headlines may be factual, lets explore why they are usually not accurate. A little historical perspective is in order.

In 1969, Business Week said in an article about the housing market, “The goal of owning a home seems to be getting beyond the reach of more and more Americans. The typical new house today costs about $28,000.” And, in 1977, National Business stated, “The median price of a home today is approaching $50,000…housing experts predict price rises in the future won’t be that great.” A decade later, by 1980, home prices in California had risen an average of 11.5% per year. While the headlines may have been factual, history shows they were not accurate.

In the early 1980s, inflation was running about 21.5% and 30 year fixed rate home loans ranged from 16% to 18%. In 1985, Money Magazine wrote, “The golden-age of risk free run-ups in home prices is gone.”At the end of the decade, California home prices had risen by an average of 7.95% annually. While the headlines may have been factual, history shows they were not accurate.

From 1990 to 1996 California home prices declined less than 2% annually, for a total of 12%. The San Francisco Examiner in 1996 wrote, “A home is where the bad investment is.” While the headlines may have been factual, history shows they were not accurate. From 1998-1999, Sacramento area home prices increased 38%! According to the California Association of REALTORSâ, the average annual rate of appreciation for California homes since 1968 is 7.75%.

While today’s headlines may be factual, they are not accurate. California is poised to realize a huge jump in real estate values over the next several years, just as they have done in the past, for several reasons:

1. The population of California is expected to double by the year 2050—from 36.5 million residents today to a population of 60 million. Many of those people will settle in the Sacramento region.
2. California’s economy is large and diversified. We are home to many of the most creative and innovative companies in the world—think Google, Apple, HP and many, many more. California is home to 1 out of every 11 workers and produces 15% of the Gross Domestic Product in the United States.
3. Northern California is home to over 30% of California’s entire diversified workforce: trade, a growing service sector, expanding electronics, manufacturing, high-tech, bio-tech, construction, tourism, agriculture and government, are among the many industries employing our workforce.

As more and more people call California home, the housing industry will not able to keep up with the need for new housing units. With a mild climate, lots of recreational opportunities, relatively low housing prices and a highly educated workforce, the Sacramento region will continue to be a magnet for highly productive jobs. Sacramento is forecasted to be in the top 15 markets for both population and growth over the next five years.

Currently, home prices have dropped a bit, interest rates are at historical lows, and the large number of homes on the market allows for more choice than any time in the recent past. Now is the time to consider purchasing real estate. Whether your first home, a second home or part of a long term investment strategy, Sacramento area real estate will be a strong cornerstone for your financial future. Don’t look back in several years and say, “I wish I had taken advantage of the opportunity.”

-Kathy Fox

(reprinted from The Sacramento Union with permission)

Most of us sell our homes only once every several years, so we are not really in touch with the procedures and realities of today’s market. Selling your home involves a variety of skills—and a lack in any area could mean that your house does not sell, or sells for less than it could. How does one go about looking for an agent to help? Whether from a friend’s recommendation or from contacting a local real estate office, you should interview prospective agents prior to making the final decision as to who is best suited for the job. When interviewing an agent to represent you in one of life’s most important financial transactions, asking and getting answers to the following questions should help you be as prepared as possible.

1. Tell me about your experience and philosophy of doing business. Understanding how many years the agent has been in business will help you know whether the agent is capable of bringing an offer for your home. In most cases, another agent will be representing the buyer. Is the agent capable of seeing the process through to completion? How many escrows did the agent close last year? What percentage of buyers and/or sellers does the agent work with? Some agents only work with sellers, some agents only work with buyers and some agents work with both. Listen to the answers and decide which philosophy will work best in your situation.
2. What resources does your company provide to help get my home sold and closed? When marketing one of the most expensive items you may ever sell, the greater the support brought to the table, the greater the likelihood more people will see your home. Many companies have websites to draw buyers to listings as well as technological tools that assist agents in mobilizing the real estate community and providing your home with maximum exposure. What sort of resources does the agent’s office have to help assure an escrow will get closed? Many companies have transaction coordinators to help with the paperwork. Who provides coverage if an agent is away from the office for a few days? Should an offer come in while an agent is away, how is it handled
3. What is your marketing strategy? You are asking what the agent is going to do to get your home sold, to manage the escrow and make sure the escrow closes. The best agents know they need a plan to effectively market a home. Professional agents will be happy to share how they market listings. This should include advertising, networking, Internet strategy, public and industry viewing schedules as well as a variety of other activities to get your home exposed to the largest number of prospective buyers possible.

Next week, we will discuss some additional questions to ask a real estate professional before determining which one is best equipped to help you sell your home.

-Kathy Fox

(reprinted from The Sacramento Union with permission)

Regardless of what you hear in the news, today’s local real estate market offers a variety of opportunities to build wealth and realize long-term investment goals. The following are some windows that are currently open:

• Retirement Investments: By owning real estate as part of your overall investment portfolio, you can realize much of your retirement being funded by others. Tax advantages and appreciation can be maximized to be extremely effective in helping fund your retirement. If we could find you a home for a couple of hundred dollars a month, would you be interested?
• Dream Home Purchase: Are you in the market for a larger home, a home on acreage, or a home in a better neighborhood? Would you like to live on a golf course, in the mountains or in a home with a view? Would you like to be able to walk to work, have a guest house or live in a better school district? Have you ever dreamed about owning land and building your dream home? Have you ever dreamed of owing a vacation home in an exotic locale? Now is a great time to purchase an lock in the lower prices currently available.
• Additional Income: Have you thought about owning rental income property? Have you ever wanted to buy a fixer and do a complete makeover? Have you thought about owning land in a rural area? When you retire, would you like to have a monthly income stream to augment your pension?
• College Education Funding: If your children or grandchildren are young, have you thought about buying a home to fund their college educations? Would you like to be in a position to help children and/or grandchildren buy their first home?
• Tired of Making Someone Else’s House Payment?: Opportunities abound for the first-time home buyer. Interest rates are at historical lows, selection of homes on the market are at historical highs, the possibility of incentives will decrease as the market finds its balance and prices have stabilized. How long this perfect storm may last is anyone’s guess, but the opportunity for the first-time buyer is the best it has been in years.
• Buy Low and Sell High is an old adage that we’ve heard forever. However, often people do just the opposite: Buy high and sell low. Today’s real estate market is one of the best in several years for those wishing to move up, buy investment property, plan for retirement, buy their first home, or increasing their net worth. Take a look on the back of this sheet, contemplate the questions, and give us a call if we can be of help. Historically, long term real estate investments have paid off.

At Coldwell Banker’s Fox Team, we are ready to help you analyze the possibilities for your circumstances and explain how you can best use the current real estate market to your advantage. Whether adding to your investment portfolio, purchasing that dream home or just making sure your real estate investments make the most sense for you, we are ready to help! Just give us a call.