Timing the Bottom

Good Day All-
We are getting so many inquiries as to what the market is doing; we hope this may shed some light…

From a client’s recent email:
“I’m extremely intrigued at the possibility of buying something but feel like waiting another 8-12 months might be the smartest play given the market conditions. That’s where I’d seriously depend on you to be extremely honest with me.”

Our response:
“Simply, if you can afford the payment, like the house, and plan to stay, it’s a good time to buy. What you’re talking about is “timing the bottom” of the market. Pretty hard to do- Bottom line, we know the top of the market in LA was around Summer 2005, so you’ve already done well by not buying in 04’, 05’, and part of 06’. Having said that, the people that bought during that time got to borrow money at 5.5% for 10-years fixed! An incredible rate that translates to seriously monthly savings for years.

If you are planning on having a mortgage you MUST be aware of rates and how they effect your decision… As an example, a home that cost 800k today with 20% down, borrowing 640k @ 6.5%.... your mortgage is $3,466 per month.

Let’s pretend that prices decrease by 10% in a year, so that same property cost $720k. IF that happens, a big reason would be rising interest rates… So you still put 20% down and borrow only $576k. But instead of borrowing $640k @ 6.5% and paying $3,466 per month, you borrow $576k @ 8% which costs you $3,840 per month. Yes, you paid less, but the Cost Of Money rises, so your monthly outlay is increased.”

--It’s difficult for any buyer to know when the time is right. Especially when all you hear from the media is that doomsday is upon us. Most of the articles I’ve read lately make comparisons to places such as Akron, Ohio (USA Today), New Jersey (MSNBC), Seattle, Philadelphia, etc… All of which are also mainstream cities, but have little bearing on our very unique Los Angeles market. Even in SoCal, most foreclosures and heavier drops are in surrounding counties.

Lawrence Yun, NAR senior economist, says he can’t predict when the housing market will hit bottom. Still, he says, the market has gotten a boost from the interest rate cuts a couple weeks back by the Federal Reserve and from legislation in Congress to reform the Federal Housing Administration. The FHA provides mortgage insurance for low-income and first time buyers. With sales falling for two years now, Yun says, “It’s my firm view there is significant pent-up demand.”

So we can see the problem with trying to time the market. Again, you’ve already done well by not buying at the peak. Interest rates are still relatively low. And there are other things to consider, which we can discuss at a later time…

Hope this finds you well, and we hope to speak with all of you soon.

Groundbreaking Sales / Groundbreaking Service

How are our sales “groundbreaking”? Because we have been able to command some of the highest prices for homes over the past year in a transitioning market. Our manager, Alan Long, asked “HOW is Boni & Joe accomplishing this?”

Part of it is our “groundbreaking” service, which includes impeccable marketing starting with incredible photos. We use some of the best architectural photographers in L.A. so a buyer’s first impression is a great one. And we are literally “on-call” to our clients day and night so the information flow and exchange of ideas never stops.

Well thought out marketing placement maximizing exposure through advertising, open houses and networking. Our west side connections (it’s where we work) and our east side knowledge (it’s where we live) combine to create top to bottom coverage for your home. Our reach is priceless and extraordinary.

Sotheby’s International Realty –There is no more prestigious name in Los Angeles real estate. Your home is held in the highest regard by buyers and other agents and responded to in kind. It is our experience that buyer’s have an easier time paying top-dollar for a home listed by Sotheby’s.