Don't Believe All You Read!

There, I've said it! Don't Believe All You Read!
Now you should at least think about what you read here because I try to give you the rationale behind my comments. But, in general, alot of what's printed about the real estate market is either an attempt to grab reader's attention, an editor or writer's opinions, or, at best, just old news.
I continually have clients, and visitors at open homes, remark that they think the real estate market is still in free-fall. Prices are plummeting if you believe these folks and the articles they read. But keep in mind that the news you read in the paper is usually based on reports and analysis that uses data which is a minimum of 6 to 8 weeks old. For example, we have just received the December numbers on single-family home sales. The "news" here is that pending sales were up in a traditionally slow month. Readers of this blog and those who receive my bi-monthly market updates knew this at least 4 weeks ago! In a market where everyone is awaiting the "bottom", reading that the bottom happened a month or two ago is of somewhat diminished value! Oops, sorry! You missed it!
Then there is the fact that every real estate market is local. What is happening in San Jose is NOT what may be happening in Palo Alto or Gilroy. Take the situation in Gilroy and Morgan Hill in the $400,000 and lower price ranges. We have seen a huge increase in the number of sales at this price point since November coinciding with the availability of 5% and sub-5% mortgages. Why hasn't this happened in parts of San Jose yet? Well, it's due simply to the fact that prices have to decline in any area to a point where a buyer can obtain a conforming (non-jumbo) mortgage and the low rates now offered on these loans. The true conforming limit of $417,000 (not the in-between conforming limit of $625,000 or soon $729,000 for high-cost areas) offers the lowest mortgage rates. Add a minimum of 3% down payment (preferably more!) and you see that to generate the highest incentive to buy (a combination of lowest rates, affordable prices on quality properties, and reasonable availability of same) prices need to be about $430,000 or less. Once prices on quality, livable homes fell to this range and mortgage rates went to 5%, homes started flying off the market in the South County. In general, prices have not reached this level in most of the more desirable areas of San Jose and certainly not in most of Silicon Valley. Even many Silicon Valley condos are above this price point. While the entry-level market in the South County is afire, the entry market in San Jose is vastly different. Guess which one gets the most press?? Don't believe all you read!!