What's Your Point?

In today's Chron, various parties weigh in on what will happen to mortgage rates in the coming months. Of course, to borrow from William Goldman, "Nobody knows anything." Nevertheless, speculation that rates could jump as much as a full point should give some pause to anyone with a stake in real estate. Higher rates usually mean falling values. With apologies to Mr. Goldman, one thing we do know is it's going to be a very interesting year in real estate.

Posted by Jess Pearson

Rising Tide?

If a rising tide lifts all ships, then what do rising interest rates do? Unless, like us, you assiduously avoid television news and talk radio, you've already heard about Fed Chairman Bernanke's comments regarding eventual and inevitable increases in interest rates. Here's the article about it in the Times. When rates go up, lots of things will happen; some bad and some good and all depending one your point of view. But they won't all happen at once and they won't all happen right away. One thing we think we can say with relative confidence...if you're thinking about buying and you plan to hold on to your investment for a good long while, this might be the time to act. Conforming loan rates are under 5%. Even if prices fall, higher rates will mean higher cost of ownership over the long haul. Unless you're a cash buyer, you may look back on Q1 of 2010 as that rare moment when prices and interest rates were both low.

Fall Into The Gap

Take a look at this recent article by University of Chicago economics professor, Austan Goolsbee. It originally ran in the New York Times. Mr. Goolsbee highlights an obvious but often ignored fact of residential real estate sales: a house is only worth what someone will pay you for it. Home values are governed by supply and demand just like any other product or commodity. But unlike wheat, widgets, and washing machines, homes are repositories of personal memory and emotion, neither of which have much if anything to do with market value. When farmers grow too much wheat, they lower their prices to stay competitive. Yet somehow, when there are too many homes for sale, sellers often prefer to price their homes for what they wish they were worth, not what the market will bear. This creates a glut of inventory in the marketplace, as buyers and sellers stare at one another across an ever-widening gap, each unwilling to accept the other's assessment of value. It is this gap that accounts for the gloomy sales statistics you've been reading in the newspapers lately. When buyers and sellers are so far apart, there's no room for negotiation and the market becomes stagnant.
So what's the lesson? If you're not ready to accept your home's true market value, then you're not really ready to sell. And that's okay, assuming you don't really need to. But if selling your house is a priority, take a tip from the farmers. Be realistic about what the market will bear and price accordingly.

Outstanding Online Resource

Next Generation Real Estate offers CleanOffer to all clients and friend. This site tracks the North Bay MLS (including Marin, Sonoma, Napa, and Mendocino) and allows users to create custom searches, track listings, and review property details. We feel it's the most useful local site for buyers, sellers, and those who just like to keep up on the market in their area.

CleanOffer is a pay site. Fortunately, Next Generation Real Estate has purchased an unlimited subscription that allows all our clients and friends to use the site for free. Simply register as our client and you'll get unlimited access. Registration instructions are below:

• Click on the link above. (There is also a permanent link in the "Links" section of our blog.)



• Click on “Buyers & Sellers Register Here.”



• Click “I Agree” on the Membership Agreement page (assuming you do agree).



• Fill in the registration form. Type “Jess Pearson” when they ask for agent’s name.



• Click “Jess Pearson.”



• Click “Submit.”



• Click “I accept.”



• Click “Submit.”

You’re done. Happy searching!