Jim Valentine: Real Estate’s confused sea

Jim Valentine on Real Estate

Jim Valentine on Real Estate

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Real estate markets are very much like an ocean in that they are comprised of an infinite amount of variables creating many different “moods.” We’ve had a very strong “current” real estate market most of this year. That situation is easily recognizable and many participated in it to keep it flowing. While there is still a strong “flow” in the market, other factors are starting to stir it up a bit.
On the ocean there is a situation called a “confused sea” which is defined as a highly disturbed water surface without a single, well-defined direction of wave travel. In such situations the waves go in all directions creating confusion. There are times in real estate when we have such confused sea circumstances and it would appear as if we are close to entering such a time. What could cause such confusion in such a strong market one might ask?
The change in inventory is interesting to consider. We are seeing a surge in listings in several market segments. One can only wonder why they waited, but it is very likely that these new sellers are seeing the market softening and want to get in on the action before its too late. While the market isn’t what it was, it is still very strong. Buyers may be able to find a home now, but there are other factors causing the swirling waves.
Interest rates are increasing which affects the buying power of buyers that are limited in their ability to borrow. They are still very, very low, but as they increase they can have an affect on the market. There was a time when interest rates were at 18% and 9 points (1 percent of the loan) and we agents said if it ever got back to 12% we could make a living. Purchase money going from 2.5% to 3.5% is more psychological than financial, but it can have an impact. Other factors in play may cause it to go up a bit more, but it is still much lower than the dynamic 2005 market when we had 5 and 6% money.
Inflation has worked its way into our vocabulary again and may cause the most disturbance. Cost of living expenses have soared, i.e., gasoline, heating oil/gas, groceries, electronics, automobiles, appliances, etc. The real affect on daily lives is just starting to be recognized by the masses with many public statements reflecting the possibility for this to be long term and to get worse. Higher living expenses have an impact on borrowing power.
It is still a good time to buy so you can own your home and not be subject to rent increases, or having to vacate the property because the owner wants to capitalize on this still great market. You can lock in a very good interest rate and have stability in your payment. Sellers are being more cooperative thus allowing for more conventional approaches to your purchase than the frenzy we had earlier this year that caused many to compromise their emotional and financial comfort in an effort to buy in a competitive market. There is still competition, but not as maniacal. The Northern Nevada economy remains strong, a good thing.
Confused seas have a greater impact on smaller vessels. As a tenant you will feel the real estate market confusion more than you would as an owner. Don’t overbuy thus overburdening yourself, but make a wise investment and enjoy the American Dream while everything else sorts out. We know from our 40-plus years of selling real estate in Northern Nevada, the market will cycle. It always does. Batten the hatches, secure the loose items and ride it out. It makes the ultimate smooth sailing you will experience that much sweeter. Get with your agent and line out a plan to sell or buy your home and work your plan.
If you are clear in your wants and needs you will be able to achieve them in this market. Your clarity will help clear the confusion that is around you. Work your plan and enjoy the results. These are the good ole days!
When it comes to choosing professionals to assist you with your Real Estate needs… Experience is Priceless!  Jim Valentine, RE/MAX Realty Affiliates, 775-781-3704. dpwtigers@hotmail.com 

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