Tuesday, June 3, 2008

Positive News or Media Hype?

Quite a bit of attention has been focused on the national real estate market in the last few years by both the news media and consumers as we saw prices run up and then come back down. Somewhere along the way, many of us, including those in the real estate business, lost sight of the most important fact. That is, “All Real Estate is local!”
Sure, you have heard that before and the national market certainly has some effect on local real estate. Tuning in to the right information and tuning out the information that really does not apply is increasingly difficult in today’s society when we are bombarded by sooooo many messages. There have been some positive articles both locally and nationally on the Naples real estate market lately. By no means is the market back to the way it was at the peak of the market, nor would any of us want it to be! Sure we want the economy to be better, our homes and vacation properties to be worth more and gas prices to be less.

During the run-up in prices many buyers in this market refused to buy because they couldn’t find what they wanted(lack of inventory) at the “right” price which really meant they wanted to spend less and get more. We all want more for less, it’s just human nature and of course “consumer behavior”. Many of those buyers waited and waited to purchase and watched prices climb out of reach over the past 6 years. Now that we have seen an average decline in prices of 10%-30% sales are on the upswing again as noted in the news (and my previous blogs below). What many don’t realize is that many of the prices in today’s market are actually below the construction cost while still being nearly 30% above where they were in 2002.

Let’s apply a little e logic in our decision making and consider the following. Even if you could duplicate the building today it would cost more than the current prices. Inflation and the growth of emerging economies has strained resources around the world as we’ve all witnessed first-hand at the grocery store and gas pump.
Just as we certainly overshot the prices on the way up, we have now overshot on the way down. Many buyers today refuse to accept that this is possible and waiting on prices to decline with the hope they will continue to defy market economics because of what they are hearing about national housing market. On the other hand many have realized that the abundance of opportunities in the market given that we have significantly more inventory than we did a few years ago. It’s now much easier to find the right property with a great view and location at a reasonable price.

Now back to my original reason for writing this blog. The Naples & Bonita Springs market is primarily a 2nd home market. Those with the desire and means to purchase should be entering the market over the next several months. Those that want a vacation home and are still sitting on the sidelines are making a big gamble with very poor odds. With interest rates expected to rise 1% over the next year due to inflation any further price decline (that some are waiting for) is almost certain to be wiped out by an increase in interest rates. For example the payment on a $300,000 property at 6% interest(30yr) is $1,800. If you were waiting for another $30,000 decrease (10% decline) but the interest rate went up even .5% you only saved $90 per month. Is the risk/reward of losing a property that you really want and is currently available worth the cost of waiting? Only the buyer can answer that question but in these terms it defies the logic of those that remain on the sidelines trying to time when the market has really bottomed out. You can’t time any market, just like the top or bottom of the stock market. All you can do is decide if you have the means and ability to pay for it and if the price is “fair”.

Let me bring some of the logic and statistics above to your real estate transaction and allow me to filter out some of the media hype that is designed to trigger emotions in all of us!
All good real estate consultants analyze the current market based on the past trends (which are the best indicators), what is currently happening in terms of price on comparable properties and what best represents your desires. My loyalty is in providing you with the hard numbers and statistics as well as their interpretation to best inform you so you can make the best decision possible.

I look forward to hearing from you when you’re ready to seek the services of a professional. I welcome any comments and thoughts you have below in the mean time.

Garren Grup, REALTOR

Achieving your real estate desires through technology with Noteworthy Results!

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