Right after I received my real estate license, I went out and bought several books about the housing market, investing in real estate, and how to sell buy real estate in Northern California. I remember when I first read John Talbott’s book titled, “The Coming Crash in the Housing Market”. I sat back and thought to myself, “Oh no”. Of course at the time, many people were calling folks like John Talbott “Chicken Little”. How could the bottom fall out of the housing market?
We can’t really say the housing market has hit rock bottom but talk to folks in Alum Rock and they are feeling like the fault line may not be the only thing shaking their home values. Some homes have lost nearly 20% of their value. The last time I ran the stats, some homes were getting close to 1999 price levels. Particularly hard hit were first time buyer units in East San Jose. Two years ago you could not find a 2BR condo under $400,000. Now you can find over 100 units. Some are now reaching the $350,000 price range.
You could say, good for buyers. But the lenders have got their fist so tight around their loan approvals that the type of buyers being approved aren’t in the market for a first time condo in East San Jose. With 20% down and a FICO score over 720, they are looking at neighborhoods as close to Cupertino as they can find to insure their children’s public education and the value of their investment.
John Talbott has some valuable tips listed in his recent article on “Five Ways to Survive the Housing Slump”. John’s an expert but it didn’t take a wise person to advise that it is better to secure a fixed interest loan if you can. Most folks in Northern California dream they might someday afford the payments on a fixed rate loan. Interest only loans came about for a reason. Housing afford- ability far exceeds the average Bay Area residents’ salary.
The one item that I whole-heartedly agree on is the idea of “renovations are an expense and not an investment.” If you are planning to renovate, do it because you want to enjoy a new, modern kitchen. Also realize that placing your home on the market with an old kitchen will place you at the bottom of the listing barrel. Buyers that are serious have the ideal market conditions to be picky. They can and will expect home owners to have made the appropriate updates to a house they are paying nearly a million dollars for. Gone are the days (at least for awhile) where buyers are squeezing through the crowded front door screaming, “I’ll take it! I don’t care what is wrong with it!”
John and I also agree on the point that it may be better to sell sooner than later. Yes, if you sell in 2008 you will probably sell 10% lower than you would have in 2006. But it ain’t 2006 anymore and unless you can wait until about 2011 it may be better to take what you can get and get on with your life.
Finally, if you do have one of the ever-rising adjustable mortgages keep your ear very close to market news and stay in touch with your lender. If there is any truth to lender flexibility or governmental aide coming down the pipe, make sure-for-sure your payments are on time and that you are very pleasant when you make those phone calls requesting information. Keep in touch with your Realtor and Mortgage Broker to keep up with the changes. Educating yourself is the sixth way to surviving this changing housing market.