The San Diego Union Tribune is gleefully reporting a rise in real estate prices, and points out that this rise in prices has continued for a number of months. That’s good. What apparently is lost on the statisticians, though, is the incredible difficulty of closing transactions. One of my colleagues, who has been selling real estate for nearly 30 years, indicated that this was the “toughest 1st half he’s ever experienced.” The same is true of me, and of many others in my business. But there are several “ground-level trends” that give me a lot of reason for hope:
- People are still buying homes, if they are reasonably priced.
- Commercial property is seeing a slight increase in activity.
- Even though real estate financing is still difficult, we are seeing new programs every day, and interest rates are low–and may be for some time.
- There are some private money mortgage transactions being done. This is a harbinger of better things to come, since private money loans depend on equity for their security, rather than credit.
- The bankers are slowly beginning to understand the value of short sales. This is a real benefit, since a short sale buyer is usually much better off with his property than someone who buys a foreclosure–short sale properties are nearly always in much better condition than foreclosed properties, and provide a better value for both the investor and homebuyer.
- There are more and more “traditional” sales being done. In the past couple of years, the MOST prominent source of properties was the banker or short seller.
- Jobs seem to be returning to the San Diego area. This is the single most important event in the past few years. Better jobs and higher wages always lead the real estate market–someone with a poor job cannot buy property, and someone with no job can’t afford rent. This is changing, which is wonderful news.
One burning question that will be difficult to answer until later in the year is: “will there be a double-dip recession?” And the answer is, yes, there could be, but we won’t know for a while yet. If a double-dip recession occurs, then property values will drop again–however, an inexpensive property in San Diego is still much cheaper to buy than build, even at today’s building & land costs, and San Diego is, well, San Diego. There’s no other area like it in the world. With those things in mind, a really harsh double dip is still possible, but the likelihood is that people will buy property to be a storehouse for their cash and a hedge against inflation, if nothing else, so a true double-dip is not as likely here as other places.
Even if there is a new recession, real estate is one of the best investments you can buy. Why? because it produces income. Many investments do not. They produce appreciation, if the stock value rises, or if the value of the commodity rises, and this can be very good. however, the king of investments is one that produces both income and at the same time rises in value. Real estate normally does this, and although the real estate market has suffered a great deal (along with its investors) in the last few years, it’s due for a comeback. If you buy real estate now, you will be positioned perfectly to acquire some excellent gains. Besides. What other investment can you buy that a tenant will pay for?
