Polishing the Rear View

It’s  January already? You mean, magically, mysteriously, somehow, some way we’ve managed to make it through another year in real estate together? Congratulations! Let’s give ourselves a big thumbs up and get it ready and poised to press the reset button for 2014 in the next few weeks.

I guess time flies when you’re having…having….well… er…. whatever it is that real estate has been having this past year?

Not exactly fun.  That’s not the word that immediately comes to mind for 2013.  Some excitement? Yes. Intensity at times? Yes.  A quickening of the pulse? A rising sense of promise? Isolated incidents of some serious shake and bake? Yes. Yes. And more yes.

Here’s a quick snapshot.  Last January, we started with a median price of $485,000 in Santa Cruz County.  The Average Price was $548k.  Interest rates were 3.6%.  And there was a noticeably low inventory of homes available for buyers to choose from – just 460 single family listings including those already in contract but not closed.

By  November,  the median price had ballooned to  $659,000.  The average sales price was $716,000.  Interest rates were at  4.37%. And the inventory of homes was at its lowest level starting any November in the last 16 years.

A 30-35% increase in the median and the average.  On par with any of our previous bull/boom markets.  A huge change. But did it qualify as unmitigated fun?  Nah.

Sometime in late February the market took an unanticipated shift into radical high-gear.  For a brief shining moment, lasting a few months (until around May) it  almost felt like it was 2005 all over again.  (sans all the subprime loans)

A familiar sense of déjà vu washed over the market. Pervading the air. Rousing some of those irrational exuberance centers nestled dormant in our brains that had fallen into a deep trance back in 2008.

The adrenalin was suddenly pumping.  Multiple offers were jumping.  Prices started leapfrogging up as buyers jockeyed for acceptance from sellers who were suddenly strutting their stuff  – happy to feel powerful and in charge again

In a sure sign  Agents were getting more confident and cock-ier,  the majority of new listings coming on to the MLS prefaced their remarks with the standard phrasing:  “No showings until Brokers Open on Thursday. All offers to be reviewed next Tuesday at 5pm.”

Which roughly translates as:  “This listing is coming on today.  You can’t see it until brokers open on Thursday.  Don’t bug us until then. We’ll have Open Houses on Saturday and Sunday.  If you are interested you’ll have one additional day to get your act together.  Then we’re going to review and respond to all offers we’ve received on the next day.  That’s the cut-off . Don’t be a day late or a dollar short.”

After I received 19 offers on a Westside listing in early March,  I wrote an 8 week series on Multiple Offers. How to position yourself. How to write them. And how to negotiate the process effectively after you submit them. Because multiple offers were all anyone wanted to talk about.

Remember the young couple that the Santa Cruz Sentinel wrote about that had written more than 20 offers on 20 different places and didn’t get a single acceptance on anything?  As  I recall,  they gave up and headed south towards San Luis Obispo hoping they’d find a coastal housing market that was less intense than this one.

Things began to settle down and settle out by mid to late June and although the rest of the summer wasn’t quite a swoon, it wasnoticeably less frenzied.

Next week we’ll pick it up and continue to retrace our steps through the rest of the year that was.

Synapse Crackle Pop

Synapse! Crackle! Pop!   Rice Krispies!!   Or Rice “Bubbles” as they are known in Australia.  The cereal, serial and surreal breakfast of champions.  There’s been no lack of neurons firing this week here at real estate of mind central – with the election and all.  Tough to decide what to pick out of my own brain.  I’ll just give you a few quick cliffs notes rather than the full fiscal cliff version.

Does this sound familiar? From CNN Money: “Buyers were snapping up homes faster than developers could build them. Investors grabbing two, three, four each, hoping to cash in on skyrocketing prices.”

“But then the music ended. Prices started to slide. Developers were stuck with empty buildings. Homeowners saw their wealth begin to slip away.“

Buying frenzy?  A dangerous game of musical chairs?  United States – 2007?

Dystopian ghost-tracts littering the landscapes of Florida,  Las Vegas and the Central Valley?

Nope. Been there. Done that.

Now, I’m not going to beat the drum too loudly here folks, being the cautious real estate soul that I am,  but it finally does seems like housing markets around the U.S. are rounding the corner.  Passed the bottom. Beginning to head slowly-but-not-so-surely back up that I recommend wishful Sellers start looking for 2006 Median Price Points anytime soon. (Think 5 years down the line – maybe – the pendulum has a long way to swing. )

But how about China – circa 2012?  What goes around comes around? Karma?  Deja Vu all over again as Yogi Berra would say?

Perhaps this could qualify as a weird remake of The China Syndrome.  Jack Lemmon, Jane Fonda and Michael Douglas hook-up with Tim Geithner, Hank Paulsen, the gang at Lehman Brothers and the 25 member ruling politburo of the Chinese Central Committee?

Goes something like this:  The world’s run-away economy overheats. The global financial meltdown reaches critical mass.  It all begins to burn a hole through the middle class  – inexorably heading down, deeper and deeper towards China – where all those cheap exports to the US are starting to dry up.

Faced with a rapidly cooling economy the Chinese government does what so many others have done before – they drink the Kool-aid.

Lending restrictions are loosened.  Billions are encouraged to borrow trillions. Real estate and housing are pushed to the forefront.  Creating jobs. Increasing demand for steel, coal and construction equipment.  Keeping the economy moving ahead at an overheated, unsustainable pace.

A massive house of cards built on ballooning debt, financial speculation, officially sanctioned greed and the prevailing belief that “real estate never goes down.”   Sow the wind and reap the whirlwind.    It always comes full circle.

The solution?  Tighten credit. Crack down on speculators. Enact more regulation to limit the opportunities for the middle class to jump on the gravy train.  Cut off the flow of free money, in the form of debt, that’s being handed out like Halloween Candy. Then charge the Catch 22 off – back to the people.

Now that things are getting better here – perhaps the U.S. can start exporting boatloads of short sale negotiators, foreclosure experts, customer service reps, collection agencies and loan modification processors to China.  We won’t be needing them much longer.  We can do our part to help China bailout out of its own underwater real estate market while we help equalize the trade balance at the same time.