Well, to say the real estate market the last 6 months has been like Mr. Toad’s wild ride would be a gross understatement. Never have we been hit with numerous bad economic reports, such wild swings in commodity prices and incredible instability within our mortgage banking system. One would think that my own real estate business and that of my colleagues would be non-existent, and they probably should be correct.
Time out! It’s not happening. Yes, many realtors have left the business. Many of those got into the business during the run-up during 2004-2005. Unfortunately, they didn’t have the staying power to make it though a dismal 2007. Warren Buffet has said, “When the tide goes out, that’s when you see who has been swimming naked. “ Well, the real estate equity tide retreated making 2007 a year to forget.
However, over the last few months the number of real estate transactions has started to increase. Now, remember, most of my business is in downtown San Diego, the 92101 zip code. In this area business is booming for me and other agents. Why? It’s simple. When you can buy a well constructed condo that sold for $650,000 three years ago for $375,000 today, the condo’s original selling price 6 years ago, it’s time to buy.
There are many first time home buyers who now can afford a home today that couldn’t three years ago. Yes, there is a credit crisis: for no money down, stated income, stated asset buyers. But if you have 10% down and good credit, you can buy anything you want. That’s the type of buyer that is coming into the market. And if it’s not a first time homebuyer, then it’s an investor with the common sense to understand that they will hold the property for five to seven years.
But the best aspect of the new real estate market is the new type of buyer. Last week I put into escrow a young couple buying their first home. Michael and Laura came to me and said, “We want a detached home so we have to buy in the suburbs, but we both work in the city so we need to live near a trolley strop. I immediately dubbed them my first “TOB.” This stands for transit-oriented buyers. With the price of gas going sky high, I expect a lot more buyers like Michael and Laura.
It’s sad to say but I think we are going to have to emulate the rest of the world when it comes to some choices. I think the price of gas will dictate to us that we need bullet trains, like Europe and the rest of the world have had for years. We will have to build more “TOD”, or transit-oriented developments, increasing residential density near public transportation centers. People that live in the suburbs will move to the urban areas in order to save in fuel costs that will more than offset any rent or mortgage payment increase. Not to mention the quality of life improvement by having more time to enjoy themselves both in the morning and evening.
I hate to be the first to say this, but folks, “The party is over.” Our lives will be dictated by choices based on energy costs from here on out and that will create the new real estate market for buyers, agents and developers.
And it’s a good thing, because it will make us more efficient.