Its primarily shelter

My sister called me one day and told me her friend's buddy was looking for a place in San Diego. We talked and set up a time to view properties. What we discussed was price, space, and proximity to school or school transportation to UC San Diego. Having attended there, I had a good idea of the areas that would be perfect to look at. After viewing more than a handful, we deduced the possibilities to two. He and I both spoke with his dad, who would be the one purchasing the condo for his two sons. W e discussed pros and cons, the prices, and then we finally thought about the financial benefit. When that seemed equally weighted, the father asked me which one I would rather live in, “as a student.” I said without hesitating which one I would prefer living in as a student.
The ultimate question was not which will maximize his return after three years and the boys are graduated. San Diego on average has experienced a 5% decrease in home prices over the last 1 ½ years and are still fluctuating in certain areas. That wasn't the concern though. The market doesn't determine most sellers reason for selling, their needs do. Most people live in their home for around six years and in that time realize an appreciation exceeding 40%, but they live there because they need a roof over their heads. He had a need to see his money go towards something other than a landlord's pocket for two of his boys over the years they would be attending the university. Now having an idea of the areas, I also knew that the prices if he bought where he did, that the resale on this particular complex was higher than what he bought it for, and now he has five figures of equity all before the school year starts. This is a great example of a buyer needing a place and not hesitating to go form with a purchase, despite the negativity of the media and others. Not only was there no hesitation, but there was a substantial payoff for doing so. This is the ideal consumer the market is looking for to correct the surplus inventory and buyer fears. Thank you for setting the example!

Fed is still cutting rates/ rent still increasing

Its great to see the Fed actively participating in this market to help keep it from soaring rates into the 14-21% like in the 80s and 90s market correction. With rates and options like now, it is a good market to jump into. The inventory is available, the sellers are motivated. The sellers that aren't are the ones that don't have much equity in their home or simply will only sell if they get what they want. Those will sit. Sellers, if you have equity in your home, congratulations. In this day in age, The United States has less than a 1% savings rate. I wish I could cite that source, but I've heard it from many financial planners and analysts that I can't give credit to just one of them. When compared to China with savings over 40%, we really live in the now and not the later. Its the sad truth, and the truth hurts. The Fed is trying to help, but it is ultimately up to the consumer and the decision to use what is given to help keep things moving and people happy. Meanwhile, rent is going up. That is a fun trend to watch. The more the market falters, the more the landlords smile with fat pockets. The Lusk Center for Real Estate stated an increase in rent 6- 7% in both LA and Orange counties, around 5% in the Inland Empire, and about 5.5% in San Diego County. While they are going up, rental occupancy is going up to, but people aren't complaining as much. That appreciation is even more OUT of the pocket, not in. So, rent rates are going up and mortgage rates are going down. Let's see the outcome.

Builders beware, you're over saturating the market

In July, new home construction declined over 6% compared to June and almost 21% from last July, according to the California Association of Realtors. Is this telling you anything? It's telling me a lot! To me, this trend is saying to the builders to stop building. They have over saturated the market, and now are slowly building less. That isn't enough though. There are too many homes and too few buyers. As buyers fear getting into a market that is controlled by them, every extra house is one more reason the sales have dropped significantly. On a positive note, building permits have dropped 23% since last July. Now I am not against new construction, on the contrary. I find new homes more appealing since they cater to the buyers so much more, but its the current market that is diluted enough already. Its like a batch of lemonade with too much water (inventory) and not enough sugar (buyers). It may be cold and good for you, but that first sour taste is enough to send many away. Lenders are trying to sweeten the batch themselves so they may assist others and their companies in order to correct the market, but that sour taste stops enough consumers from adding a little sugar and drinking it down with refreshment. Thanks to the media, our lemonade is advertised as a terrible batch... they must not know their history.
The hardest part is that people grow accustomed to a situation and have a hard time changing. The market is asking people to suck it up and act like these past few years never happened, that buyers have to actually put money down in most cases, that sellers have to negotiate more, and that lenders will loan money at low rates to someone who can prove he/she should get that loan. This is requiring people be honest, save their money, and shop wisely for the future, not just the now.

About foreclosures

Foreclosures, foreclosures, foreclosures! That is the most popular topic Realtors are constantly asked about. Let’s jump right in and talk about it. According to Realtor.org, the Center for Responsible Lending (CRL) estimates that 2.2 million households have or will lose their homes to increasing monthly payments in the next few years. A majority of this is due to subprime lending that we talked about last month as well as adjustable rate mortgages. Pat Combs, President of NAR (National Association of Realtors), said, “Foreclosures threaten the very communities that Realtors work to build. Realtors care as much about keeping families in their homes as we do about helping them find the home of their dreams, which is why NAR has partnered with CRL and Neighborworks America to give out Realtor members tools to help clients and customers at risk and educate homeowners about their options if they are facing foreclosure.” Measures are being taken with the government to sponsor programs to help homeowners stay in their homes. A bill was introduced in the senate on Monday, May 14th, that would provide nearly $300 million for ‘revolving’ loan funds, helping subsidize loans for families facing foreclosure. Inman News says that it is called the Homeownership Protection and Enhancement Act of 2007, or HOPE Act.
NAR has created a new brochure that illustrates examples of potentially dangerous mortgages, ‘predatory’ lending practices, identifies housing counseling organizations, and gives pointers on the steps homeowners should take as soon as they think they might not make a payment. Some options include: Forbearance, Reinstatement, Repayment plan, and Loan modification. If you or anyone you know needs or would like one of these brochures, please do not hesitate to ask!