Real Estate market is cyclical.
While it would be great for our property values to gain ground and then stay on top, most of us are aware that the prices and home values fluctuate with the market cycles. Starting in July 2018, the current market had leveled off and had entered the downswing phase. Since then I have been consistently asked several questions that I want to address here.
Are We Headed Toward Another Real Estate Crash?
Not likely. During the last real estate market crash, a huge portion of home owners borrowed more than they could afford, and as a result ended up with an upside-down mortgage (I heard some local lenders quote a 58% statistic on that one). Having survived the recession with a few (or several) financial scars, the new home owners are not rushing off to bury themselves in debt and are much wiser with borrowing, so the average equity is currently at 20-30% nationwide. Even with shrinking home values, the number of home owners in default is not likely to be large enough to affect the entire market, and those whose home equity is above 20% are expected to look for ways to sell their homes and downsize rather than drop it and walk away if financially hard times hit them.
The Market is Adjusting Down, So Is This a Bad Time to Sell?
It all depends. If you had thoughts of selling within the next few months to two years, NOW would be a better time to sell.
Here is why.
We are still high enough on the Price/Value curve to allow you to reclaim the built-up home equity through the sale of your home. While the home prices and property values are not falling, they are certainly adjusting down. Wait a few months, and you are guaranteed to sell for less.
An example: Properties in the city of Pomona area with 91768 zip code, have lost 0.74% of their value last month, and the average sale price went down by 7.72% (Source: CRMLS, Realtors Property Resource, December, 2018). The median sale price for homes in that area is currently at $412,000. IF the price and value shrinkage trend continue at the same speed, wait to sell just six months, and your property value could slide to $393,709, and, depending on the demand at the time of this future sale, your home could go for even less.
If, however, you are not in any hurry to sell, and the time frame you had in mind was closer to 3-4 years, you are probably better off to wait. Most market experts agree that the current downswing phase is expected to last about 5 years, after which the prices and home values are expected to rise again. If you are not happy with the recent “ding” the market put in your home value and the possibility of selling it at a higher price, hang tight until the next up-cycle when the market will return to a higher point.
If The Market is Pushing Sellers to Sell, This Means Buyers Win, Right?
Depends on the area and the specific property. As we have seen during the last recession, premium areas, such as some beach communities and Pasadena city, did not lose much in value, and were not pressured to sell at lower prices. Other areas, such as Riverside and San Bernardino Counties took a heavy hit. If you are looking to purchase a home at a great value, a fixer-upper that needs some TLC (we’re not talking about whole new roof or repairing the foundation) can be a great deal and built equity after repair in any market.
Most real estate transactions involve negotiations, and your best bet for a successful purchase if to team up with a real estate professional who can represent your interests and get you the results that you are happy with. WHO you work with matters! I would love an opportunity to show you the range of services our Century 21 CARE team can perform for you to help you buy or sell your home within the timeframe you want and at a price you are comfortable with.
Marina Alkasas | Realtor® |Cal DRE License # 02070557 | Century 21 CARE
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