Most realtors optimistic in housing market outlook, despite economic climate
Elizabeth Kim, a Berkeley teacher is house hunting with her husband. Like other home buyers, Kim, 29, is taking advantage of a market with interest rates at a 30-year low.
“I do find myself hoping the economy will get worse. It’s like I’m taking advantage of the craziness of the world,” said Kim.
The government is helping home buyers like Kim with interest rates as low as 6.25 percent on a 30-year loan. Buyers are also finding that the slowdown in the economy and the attacks on the East Coast which shook things up even further reduced the number of people able to put their money down on a home.
Still, a possible recession may not be enough to put a home in the East Bay into the hands of the average resident.
To buy a home, buyers will need to fork over an average $500,000, according to a June report from the California Realtor’s Association, a trade group.
Realtors today say almost half of all buyers coming to them are looking for homes costing between $350,000 and $500,000.
Kim said she is willing to buy a home that costs around $700,000. However, she said, she has looked at homes in neighborhoods like El Cerrito for a better deal. But even then, other prospective buyers overbid them by 15 to 20 percent.
Ira Serkes, a realtor and author of “How to Buy a Home in California,” said last year’s market was unhealthy. Homes were overpriced because sellers received as many as 15 to 20 bids.
Today, the market is still active, but he said he is now seeing an average of only three to five bids on a home.
“I’d call this year’s market healthy,” he said.
Serkes said prices are remaining stable so far and he’s not seeing a precipitous drop.
Simon Chen, owner and broker of Realty World Abacus in Fremont, said some sellers are keeping homes off the market in hopes of better economic times.
This lowers available inventory, Chen said, and may be making it harder for buyers to find affordable homes.
According to a broker’s report, which lists new homes, there were 180 homes that went up for sale last week. This year, only 164 were listed in the report.
Chen added that buyers shouldn’t expect a significant drop in the prices of homes; the mean price of a home is going up.
“That’s because in this area, and all over California, it’s still an attractive place for people to live,” Chen said.
Ann Tham, an Emeryville resident, was looking at an open house when the realtor told her the asking price was $730,000.
“It’s ridiculous,” Tham, 33, said. “The property tax is my whole income.”
Tham, who earns $70,000 a year wants to buy a home to receive a tax break, but knows she can’t afford it.
“I’m just hoping that the market will go down,” she said.
Nancy Wallace, a professor who lectures on real estate at UC Berkeley, said prices may fall in the housing market after a significant number of potential buyers are laid-off from their jobs.
“The best indicator for housing prices will be the unemployment index,” she said.
The commercial real estate market is also suffering. According to Wallace, there’s a 20-percent vacancy rate in the office space market in San Francisco.
“The Bay area’s labor market has been seriously hit by the economic downturn,” she said. “People are already losing their jobs and leaving the area.”
Other economists remain optimistic.
The increase in government expenditure and tax cuts will boost the economy, said Robert Kleinhen, a San Francisco economist.
He said we should begin to see a turn-around as soon as November.
For now though, Wallace said prices have fallen in the South Bay. The market in the East Bay is doing well because it’s less expensive and has amenities, such as public transportation.
If homes do become more affordable, it will eventually be good news for buyers who can stick out a recession, she said.
Chen said he is already seeing the benefits of a softening economy on the real estate market.
He said people who are in today’s market are those who want to sell their homes for a healthy profit, but aren’t looking to cash in.
“Right now, the people who have unrealistic expectations and want to sell to get rich are staying out of the market,” he said.