Thank you for all the good wishes, and hugs, as we at SJREI celebrated our 10th anniversary! Most especially, thank you for your support – it has been a wonderful journey, and we are grateful to be still in the game!
Recently I shared two charts at SJREI to decipher the pulse of the real estate market:
- The affordability chart for CA: In 2006 12% of Californians could afford to buy a home. In 2012 nearly 60% can afford to buy.
- The second is interest rates – and they are at an all time low. Unfortunately, because of the pain that has been experienced by real estate investors this cycle, there is difficulty with getting past the pain and fear, highlighting once again how emotions drive markets, not logic.
We hosted one of our favorite market timing experts at the meeting last week Bruce Norris, and his insights were just as compelling as ever. Here are a few takeaways from his “All in or Fold” event which I attended last Saturday:
- CA has trends – if you get in the way of them you could be wiped out. The “when to, is superior to the how to.”
- Bruce believes that 2013 will bring changes politically that will not be easy. Essentially, real estate will be a target because of all the tax benefits that it enjoys.
- Capital gains will probably increase so be aware of that and maybe liquidate in the near future if you want to avoid that fallout.
- We are very far away from the next peak, but are you prepared to make a better decision, a less emotional decision, more logical? These booms are intoxicating to everyone. You begin to believe that you are a genius. Mood shifts - the predominant emotion of euphoria leads the market when real estate is a wanted commodity.
- Buyers at the peak never saw themselves as speculators. The majority were making the same decision – you became a speculator inadvertently – not realizing that you don’t know what you don’t know. When you believe you will make money on the sale, cash-flow is not important! All mistakes are forgiven in a boom. In 2005, if a house took four months longer to get to market, seller was rewarded with a higher sale price. Fast forward to 2012, and that is absolutely not the case.
- When things are on the rise you begin to believe that it will never end. Same with a decline by the way.
- Lenders were lending 10x income (now it is back to 5). Bankers were drinking the same kool-aid, that we investors and the average person were.
- Affordability charts indicate this path/journey nearly – today 60% of Californians can afford to buy, in 2007 it was 12%. This is an all time high for affordability!
That was a small slice of what was shared, what can I say you miss an event – you miss a lot!