Who's Painting the Real Estate Picture?

The new buzz word of today is Media. Media says this or the media says that about our Southern California real estate market. As if their generalizations and spins on the topic are the only source and gospel for your specific region of the country. Who is really painting this picture? It's an election year and do you think someone might want to have a rosier picture painted?

Is the market going up? what's going on in the market? I get asked these questions almost everyday. The best part of this story is...the question is always asked with hope in the voice and in the eyes of the person asking the question (we all want things to get better).

The answer is not as simple as one might think. As I have mentioned in previous writings, "there are 10 major markets under $1,000,000 in Southern California."

The hottest market right now, and most likely will be through August of 2013, is any property in fair to good shape, a standard sale or REO sale (bank owned) and/or priced under $435,000! First-time buyers and investors are having bidding wars over these homes.

One of the biggest contributions to the high demand in this price range is the lackluster interest in the short sale market and the tremendous shortage of good inventory.

Many of the buyers in this price range have had enough unsuccessful experiences with the "Short Sale" process. They now understand that the short sale process is not for the faint of heart.

An extremely high short sale fall-out rate is due to many unforeseen factors including, but not limited to, the overwhelmed bank processing centers, no clearly established guideline/underwriting polices to follow, inexperienced listing agents and non-licensed third party negotiators hired by listing agents. Another factor is that many sellers who have assets and good jobs don't want to continue to pay for their homes when they are so far under water.

There are six real estate markets above this $435,000 price range. There is a different story regarding how hot the market is and whether prices are going up, stabilizing or sliding.

All good sailors know there's a smoother ride with the wind at their back. In this metaphor, the six higher-end markets may still have the wind in their face and some rough waters ahead before they see calm waters.

The move-up buyer is more wary than ever before, as they should be during these uncertain times. Unemployment, cut backs, and layoffs are the news of the day for a lot of professionals. Most move-up buyers will purchase upward in price 1 1/2 times from what they've sold their home for.

Here's an example: Buyer A sells their home at a sales price of $500,000 (1.5 x $500k), they will purchase around $750,000 or less. Buyer B sells their home at a sales price of $600,000, they will purchase around $900,000 or less. And so on...

Comments I'm hearing from the higher-end buyers are: they aren't seeing that dramatic of a change of neighborhood, school, or square footage to entice making an offer. Additionally, these buyers have a new found perception of value that is far more ostentatious than in years past. These buyers want and are getting more bang for their buck! in these higher end markets, larger down payments, good credit and high incomes are the norm. These buyers are the ones who are scarce in the market.

What is the market doing in these higher priced markets? A: Sliding slower, but still sliding.

The tough problem is, like that of the below $435K market, there is so little "quality inventory" to compare to. The middle of the road high-end properties are what's helping to drive the high-end markets downward in price.

Now a top condition properties with modernized upgrades and good location is selling fairly quick and at a good price. Some things never change. A quality home will always draw that A+ buyer, who will see its true value over mediocrity.

The same goes with Real Estate Brokers. When I'm giving real estate advice, I try to paint the truest picture of the market that I can. With good advise and information comes good decisions.