The headlines make it sound like the world is coming to an end–as if we have never before experienced the same types of economic trials that we are going through today. However, while the headlines may be factual, they are not accurate. Headlines are, understandably, written to sell newspapers. When it comes to our real estate markets though, those same headlines are perpetuating misconceptions about our markets and not providing proper and detailed perspective to the reader.  There is another side to the story.

An adjustment in the local real estate markets was not unforeseen. Experts noted at that time that a 20 to 25 percent annual increase in values over a 5-year period could not be sustained. While Sacramento County as a whole has seen a 13.7% decline in median home prices from September 2006 to September 2007, not every city in the area experienced such a steep decline. Although median prices have corrected themselves somewhat, they are still well above median prices of 10 years ago. 

A correcting market is historically followed by an improving market. Real estate is a long-term investment. The 2008 California Association of REALTORSâ Economic Forecast indicates that an individual buying a home in 1995 during the last turndown has, on average, realized equity growth of approximately 250%, in spite of the market’s current correction. According to CAR statistics, across California the average home seller put $180,000 of cash into his/her pocket through August 2007.

Markets that are tough for sellers are bonanzas for buyers. In the current market, opportunities abound. With median prices mitigated somewhat, homes are less expensive than they have been in several years. Interest rates remain at close to their historical lows. Inventory remains at higher levels than at any time during the first five years of the decade, allowing for multiple choices for those desiring to own a home. Despite the headlines we read every day, there are plenty of loan products available. Buying a home now may prove to be one of the best long-term investments available in years.

No one knows how long this current window of opportunity will remain open. When the market changes, it will likely change relatively quickly. No one will ring a bell to let us know we have hit the bottom of the market and an upswing is taking place.  It will take several months before the statistics catch up with the market and we can say, “That was the bottom”, just as it took several months to know exactly when the top of the market occurred.

So what does this mean to the average consumer?  Do you know someone who would like to purchase a home? Advise them to contact their professional Realtor so they can begin to understand the home buying process. A Realtor is in the best position to educate about the process; keeping the needs of the buyer in mind, helping to find the ideal property, and prepared to see opportunities that are ready to be taken advantage of.

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)

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.