Real Estate Reality and the National Press

All real estae is bought and sold in neighborhoods or price ranges I call “micro markets.” It is difficult to interpolate median and average prices from a single MLS’s  report to these “micro markets.” At Tahoe, I have a cleint who is looking for an entry level condominium. The market has presented them with opportunities that were not in their price range as recently as 2 months ago. Great news! However, they asked if the “Countrywide Report” would predict prices falling further and should they wait. Here are some things to keep in mind about any national report:

1. If I can’t track relative market statistics within “micro markets” in my MLS without extra analysis, how can a national report be of specific use in predicting the movement in a “micro market?”

2. The national press, espcially the business editors, are sensitive to publicly traded securities like Countrywide or large builders like Lenar, KB and others. As any of these companies releases news (as required by the SEC) it is extremely germaine to the shareholders and possilbe buyers of the security that represents shares of that stock. They also reprint, practically verbatum the relases fron the National Association of Realtors without much analysis beyond the local MLS President’s most generalized quote.

3. How germaine is any national report to a buyer or seller of a home in a specific “micro market?” Not! For example, the Countrywide report  states that some “prime” (good credit risk) borrowers have increased their indebtedness to 100% of their home equity using Home Equity Lines of Credit (HELOC’s). If they, in turn,  have difficulty making their payments because of loss of a job, reduced earnings or illness, they become vulnerable to default. Because, in a declining price real estate market,  borrowers cannot refinance or sell homes that may be worth less than they owe. They are upside down!

4. We can point to some primary home owners in Tahoe and Reno who are facing a similar problem. I got a call from on just last week. However at Tahoe, where 70-80% of the homes are vacation homes, HELOC’s are a less attractive debt vehicle, and going to 100% is less likely. Secondly, vacation or 2nd home owners are generally more financially secure. Most live in diverse economies like Sacramento, the Bay Area or Southern California. So the market impact of a national report is far lower on entry level condos at Lake Tahoe than on entry level homes in, perhaps, Natomas, CA, Fernley or Dayton, NV.

5. I expect declining prices in most markets in Reno and Tahoe, and yes even the entry level condo “micro market” for the rest of 2007. How far will they fall? I dont know and neither does anyone else. But I do know that if you pick a price that represents your predicted low, and put it in the form of an offer, you will buy real estate in your “micro market” for less today than you ever thought you could yesterday.

Call your agent, find some homes, fall in love with one, in “like” with 2 others and make your own market of one! If you think the market is bloated, squeeze the bloat out on YOUR deal, and in the case of a Tahoe condo, start enjoying the beach before Labor Day.