Barry Noble's Blog

The Desert Sun’s article of 12/05/07 with the huge headline "Home sales jump 16.4% in October" is so frighteningly misleading in its message to local home owners in the Coachella Valley.

We are just starting what might have been a normal Market down cycle had it not been for the sub-prime debacle - and most agents have been begging their home seller clients to drop their asking prices as the market values decline. Now, headlines like this will be waved around by the people wanting to sell their homes - asking to raise or keep their asking prices above what is the current market for their particular properties. The median price is oh so false a benchmark for market values, when the market is in a general decline and the one market that has been least effected by the sub-prime market is the very high-end, million to multi-million dollar home sales. You mentioned that in passing, but if median home prices are to be used, it would be far more revealing if there were, say four levels - very high end, moderately high, median value and low value properties. This would best compare comparable properties sold in a given month with the same quality, value and location - say a year before.

I am a Realtor, (Independent Broker) and primarily, a Residential Appraiser - and I understand the need for Realtors to promote sales, but to not advise Sellers on how to handle a notably declining Market and tout this as looking like maybe a market turn around, is so wrong. Yes we are seasonal, yes September in any given year is slower than October, but our season looks to be dramatically slower than any in the past 5 years, for 2008, 2009 and maybe 2010. We are in a market decline mirroring 1990 through 1995, only possibly worse due to the number of foreclosures across the State and Nation.

Many of our Coachella Valley wide second home owners are noticing problems with their primary home markets as market values dramatically decline in major metro and other cities. Many investors more recently buying homes to fix up and re-sell are in trouble having bought at the high point of a normal market cycle. Second or retirement home buyers will be few are far between as their primary home equities dry up. Major developments across the valley (just look at Escena in Palm Springs, for example) are closing down or postponing indefinitely or canceling additional phases, and infrastructures and amenity facilities are seemingly being abandoned or postponed, again, indefinitely, just as builders did in 1990-1992, and some are having "escape" sales of their remaining built-out models - selling off the last of the current phase homes at notably lower prices than people paid for the same models, just 6 to 8 months ago - leaving those home buyers up the creek with homes worth far less than they paid for them and already negative equity. There may be a rise in "Baby Boomer" buying, but possibly not enough to greatly temper the rate of value decline. This is normal in a declining market, and the secret there is to grit your teeth and hold on to the homes - pay the mortgages (if not on a teaser rate about to convert to adjustable) until the next rise - where homes typically rise 20 to 45% more than their last high points. Unfortunately, that type of market might not be on the horizon for four to five years or so. (As in 1990 to 1996, there followed a stabilization and then market value rise). For those who have teaser rates that might adjust to a much higher adjustable rate within the next 1 to 2 years - I recommend they contact their lenders NOW. Don't wait until market values have declined over 12 to 24 months and selling would mean sales +- 20-30% under what may be the then current mortgage owed.

No, this is not all doom and gloom. It is a plea to the home sellers and buyers to get with it, understand what is happening, be willing to work with the current situation and not be foolish and stick their heads in the sand, with sellers thinking to “hold on the higher asking prices, for a fast rise in values within months”. In my opinion It just isn’t going to happen – and I have been predicting this sub-prime debacle for going on 24 months now – to mostly deaf ears.

This is also a call for real estate professionals to remember that statement of ethics – and help the home sellers and buyers by being up front on Market Cycles, made worse in this case by predatory loans, and foolish people who bought homes they really new they couldn’t afford – and jumped on the bad wagon of fly-by-night mortgage promises. There are some good buys out there – those who understand the market – really need to sell and are willing to put their homes on the market at what its CURRENT MARKET VALUE is.

For help and/or further discussion

Barry Noble, RE Appraiser and Broker

760-992-9523

barry@PalmSpringsCA.net

www.FastAppraisalValue.com