BUY OR WAIT: WHAT IS THE TRUE REAL ESTATE MARKET?

I was recently asked about current local market conditions and wanted to provide readers an update:

 We have strong data showing Vallejo and Benicia in the early real estate early.  The supply of houses is shrinking dramatically from the peak supply years.

 2005 was peak price years for these two cities.                                        

Inventory:  Vallejo: 400 homes, Benicia 50 Homes.

 2007/2008 was the worst inventory on the market and biggest price drops: 

Inventory:  Vallejo: 1,200 homes, Benicia 200 Homes.

 2009 – 2010 inventory was slightly improved and prices sagged or leveled off. 

Inventory:  Vallejo 700 Homes, Benicia 100 Homes.

 2011-now.  In the last 6 months inventory has severely tighten.  

Current levels are: Vallejo 250 Homes, Benicia 40 Homes.

 In addition to the supply, the demand was also changed dramatically. At peak inventory levels, we were only Selling 25 homes per month in Vallejo and 10 homes a month in Benicia. Last Month (December 2011) Vallejo sold 190 homes and Benicia sold 20.

 Generally speaking, real estate values are driven by Supply versus Demand.  Currently we have a tight supply of less than two month supply considering our current buying rate.  In comparison, we have a several year supply several years ago for both Benicia and Vallejo.

 Much of the demand is driven by low interest rates, prices low versus good rent resulting in positive cash flow for most investor purchases and perception of bottom prices.

 The tight inventory has resulted in price tightening and some increases.  Most desirable well priced home are now multiple offers for more than asking price.  Overpriced homes sit until prices are dropped.

 I’m willing to offer lower prices when it makes sense.   However, if a home is priced lower than market value, which Short Sales (homes whose mortgage is higher than the market value) and REO’s (Real Estate Owned by bank generally purchased by Bank at foreclosure sale) often are, then offering a lower price would be a waste of time.   If a home is priced higher or around market value and the home has been on the market for some time, then offering a lower price makes sense.

 Current home loan interest rates are 4% or less for owner occupied purchases and approximately 4.5% for non-owner occupied.  The low prices and low interest rates combined are resulting in attractive payments for homeowners and positive cash flow for investors!

Bottom line:  It is a great time to buy!

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