Mike’s Real Estate Show

Friends,

Our opening session of our annual “Family Reunion” or Keller Williams Realty convention, featured our two leaders of the company, Dave Jenks and Founder Gary Keller. They gave an interesting, ramlbing synopsis of last years real estate market and where we might be headed for the upcoming year. Here are some notes:

Homes sales last year accounted for an unbelieveable $1.739 Trillion!! (just give me a couple of points of that!). If that doesn’t knock your socks off the previous year it exceeded $1.886 Trillion!  Last year, according to the National Association of Realtors (NAR), was the second best year on record for sales.

  Gary and Dave pointed out NAR, which makes many predictions for the coming year, have been off some 6.4 to 14.2% over the past years when it came ot price appreciation and market fluctuations. The point being, national numbers are very hard to predict. However, looking back gives us an easier route! Here are some numbers to chew on: The medium priced home in 1996 was $141,900. In 2006 it had increaded to $268,300! A big jump but still, on a national level, affordable by many people. The problem we run into, and the reason our market has slammed on the brakes recently is this stat: Same time span but now let’s look at Anahiem, California. 1996 medium priced home: $213,000, 2006 medium priced home $705,000!!!! Now that’s not sustainable! The affordability number crash and burn at that number. Many,many are forced into adjustable rate mortgages, sub-prime loans and more and more debt.

  What needs to happen and what IS happening. The obvious is the market has stopped and slid back in home price appreciation. Our market, Sonoma County, California, dropped between 10-11% last year as our medium of $565,000 was unsustainable. Marin County–UP 10%!! Why? Demographics!

  Employment and wages need to catch up with the cost of housing, In Marin, with its much higher medium wage/salaries, this is not an issue. But Sonoma County, a bedroom community to Marin and a large service economy, wages have not been able to pay for these big real estate prices. Local numbers are your chief concern when determining the viability of a real estate market.

  National numbers to track are Inflation and Interest rates. These two numbers determine how much you’ll be paying for goods and how much home you can afford. Metro-this is your city and its sphere of influence. Numbers to track are Employment and Household income levels. Both of these will determine an economies viability. Look at Detroit. A monolithic industry controls the overall economy of Detroit-The automobile. The “Big Three” are laying off folks left and right. This ripples throughout their metro area and even the state. It’s not only the workers but where they shop and how they consume and all businesses dependent upon those auto dollars.

  Our area, Sonoma County, is pretty diverse when you look at the economy. We have a large service sector but also agriculture, high tech, bio-tech, financial services, contruction,etc. We also have those who commutte from and TO our county seeking work. Our employment is not tied to one industry. Remember,during the Dot.com bust we lost in the bay area some 330,000 high tech jobs but still experienced the greatest bull real estate market ever! 

  So on the local “Micro” level you can look at neighborhood dynamics and home prices. Marin county is a mere 45 minutes away but has a real estate market from another planet! Our local neighborhood dynamics must take into consideration urban growth limits (now on every city in Sonoma County) and the prescense of the Caliornia tiger Salamander, vernal pools, wildflowers and other issues. Also, the overbuilding of houses will take a while to absorb.

  Remember, national numbers should be ignored when it comes to housing with only two indicators worth tracking; interest rates and inflation. Don’t listen to the national real estate numbers. A well known national financial advisor was citing a 1.5% national decline in housing prices and stated what’s all the hang wringing about?? Obviously, he doesn’t track the LOCAL market. I suggest you do! And listening to the “Real Estate Hour”, Sundays, 9 to 10am on KSRO, 1350 AM is the best way!