San Carlos Real Estate Agent, San Carlos Realtor Three Myths About Buying a Home Today in San Carlos | The White Oaks Blog
San Carlos Real Estate December 3, 2008

Three Myths About Buying a Home Today in San Carlos

by Chuck Gillooley

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With all of the volatility that we’re suffering through right now with the state of our current economy, it’s no wonder that everyone has such a pessimistic view of the real estate market.  And why shouldn’t they?  It seems as if there’s an endless stream of bad news coming at us from every media source about real estate.   But if you have been trying to buy a home in San Carlos, isn’t this the perfect storm that you’ve been waiting for?   After all, home prices been dropping steadily — the average price of a home is 14% lower this year than the same time last year.  And homes are staying on the market longer.  It’s finally a buyer’s market in San Carlos…

So why aren’t more buyers actually buying?  What’s holding them back?  I believe there are three myths in today’s market that are keeping many qualified buyers on the fence:

Myth #1: Banks aren’t lending money to buy homes.

If you believe what you read in the papers, you’d think it’s impossible to get a home loan today.  But while lenders have more stringent qualification guidelines in place, they are ready and willing to loan money.  In fact, the requirements that are in place now are virtually identical to what was in place back in 1999-2000.  You’ll need to provide documented income, have a good credit score, and probably be able to put some money down.    But rates are pretty good right now, and when the risk is reduced in mortgage-backed securities, they’ll probably drop again.   But they won’t stay down forever, as many are predicting an inflation cycle in the next couple of years.

The fact:  Money is available, and banks are ready to lend.

Myth #2:  We haven’t hit the bottom of the market yet.

Here’s a little secret:  There is no “bottom” of the market.   There is no magical moment when the price of a home in San Carlos will bottom out and suddenly start to increase — it won’t be on February 12th at 10:31 in the morning.  In fact, we won’t know we’ve hit an inflection point until we’re well past it.    Unlike stock prices which can be tracked to the microsecond and and all sorts of declarations can be made about tops and bottoms of a market, homes are NOT commodities like stocks.  Every home and selling situation is unique.  But it’s critical to remember that the value of a home is determined by the group who has the power in a given market — and right now, that group is the buyers.    The sellers own the power in a hot market.

Here’s a good example of what I’m referring to:  Just this past week, the home at 1381 Chestnut St sold for $800,000.  If you follow White Oaks real estate, you’d probably guess just by the price that it’s one the many 2BR/1BA 1,000 square foot ranchers that dot the neighborhood, because that’s about what they normally sell for.  But 1381 Chestnut is a nice 3BR/2BA at 1,800 square feet in a great part of White Oaks.   Kudos to the buyer – they read the market correctly and consequently got a screaming deal.    They identified the “bottom” of this particular transaction.

The Fact:  There is no “bottom” to a real estate market.  Every transaction is unique.

Myth #3:  The quality of the inventory is poor in a down market. 

Right now, there are 64 single family homes for sale in San Carlos, which is near the highest level of the entire year, and they range from a 1BR/1BA at $486k to a 4BR/4BA at $3.8M… And more are on the way — there are two nice homes with “Coming Soon” signs in White Oaks right now.   For a whole variety of reasons, people sell real estate in good markets and bad markets.

The Fact:  Inventory is no different than it is in a healthy market.  There is something for everyone right now in San Carlos.

Let’s look at this from another perspective — would you rather buy a home in a soft market where you don’t have much competition from other buyers, and you have much more influence on the selling price…OR, would you rather be buying while prices are rising and you’re competing with many other buyers, thus giving you far less influence on the price?

Simply put, now is an incredible time to buy real estate in San Carlos.
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Comments 3
  • Chuck—that’s an excellent summary of what we as real estate agents see all the time. And as history will inevitably repeat itself, nervous and skeptical buyers will wait until the “all-clear” sign to enter the market. Unfortunately, as you pointed out, that all clear sign is generated by the media as they report bull market activity only months after it’s initiated. When your friend tells you to buy “Cisco” stock for example it’s usually already too late. By definition a trough in the housing market indicates the bottom—a market rebound begins at the trough, and by the time anyone notices (or the media) reports the trough has passed by definition you missed the bottom.
    The next boom, to whatever extent it will be, will be defined by people trying to time the market—those already in a home will benefit the most. Many buyers have realized that real estate is not and should not be considered an investment first and foremost, but rather a quality of life choice. I know this concept is foreign to the Bay Area (and perhaps even unique). There are many reasons to continue and rent, and quality of life is usually not one of them.
    I never try and convince anyone that they should buy a home. As an agent I prefer to work with people who are past that and I like to help motivated buyers get the the home they want. Those who are in for the long haul will do fine, as history as shown us. And as much as I like to disassociate the purchase of homes with stocks, for those who can’t seem to get past the analogy, consider the strategy Warren Buffet employs when buying companies or stocks–buy low sell high, and hold your investment for the long term.

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  • I agree with all your points.

    I certainly hope that those ostriches that still have arm loans and are in good standing with their banks take advantage of these low rates NOW. I am sure that a good number of borrowers in trouble because they cannot afford their reset payments took little or no action to refinance to fixed rates when they had the chance.

    Real estate in San Carlos (the peninsula in general) is a safe investment when you buy smart and buyers have that opportunity now. If they are afraid the market may go down further, they are kidding themselves. Practically, you should buy your home and live in it. Forget about what happens to the value day to day, but focus on the long term (5+ years). I cannot imagine (and history tells us the same) that 5 years from now, a home purchased today in San Carlos will not have appreciated in value (and you still get the tax benefits). If a buyer wants to roll the dice and buy to flip in 6 months to a year, that is a risk. If you want to buy and stay in the home long term, pick the house, negotiate carefully and you will build equity.

    Having bought 2 homes with less than 24 hours to make the decision has been stressful, but luckily turned out well. According to zillow (not 100% reliable, but a basis nonetheless), our current home has appreciated over $400,000 since we purchased it in May 2003. We bought smart (even in a tough market); we got our home (listed for only 2 weeks) for under asking price while competing against another offer.

    If buyers are smart, they will come out on top, and being on top in San Carlos is a good place to be.

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  • Michael & Drew,

    Thanks for your respective insights. Considering the relatively low interest rates, the decline is home prices, and the fact that the market is clearly in the control of the buyers, I don’t believe the bar will get much lower for buying a home in San Carlos. But only time will tell if this plays out.

    Chuck

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