A recent report on real estate sales and trends here in Palm Springs for December came out in The Desert Sun on last Thursday.
More important than the actual numbers or trends reported in the article, the author explains that what is being reported is a distortion; the cause is that when all types of houses, in all neighborhoods are averaged together, the median price figure from this mix of sold homes is strongly distorted by the large number of foreclosed properties being sold at distressed prices.
The article explains, “…the falling median (price) is as a much larger factor of the mix of properties selling in today’s market than is an indication of actual values” and “…because there are so many bank-influenced sales the market is seeing much more ‘radical erosion’ in the statistics than is occurring in the actual marketplace”.
In previous blogs, I have highlighted this same fact – that the trends, price, and sales figures reported in most news media when all averaged together, produce a distortion of what is actually happening in the housing market. Finally in last week’s article, there is a media awareness of the distortions.
Now, what does this all mean?
For many months now I have found that buyers arrive here with great expectations, looking for rock bottom prices and expecting to find repossessed, i.e., bank-owned houses in move-in condition, or close to it. No amount of talking persuades them otherwise, they have to see for themselves. So we go out and inspect a bunch of houses and after a few inspections, they go into an “Oh My God!” mode. As much as I explain to them about our glutted market , most buyers will need to see for themselves that a majority of the lowest priced, repossessed homes are trashed. It still holds that you get what you pay for. It’s my job to sift through the myriad of properties out there and find the good values for my clients. And I do find them, but it takes time.
Location remains the most important factor in valuation, and in many cases provides a measure of the bottom price of a particular property (let’s forget about lease land for a minute). After all, if you were to remove the house, you would still have the land. Where land is scarce, prices are high, where land is plentiful, prices are low. That’s why you can’t generalize on housing prices, its all about location.
Take Home Point
So if you are a potential buyer, make sure your expectations are realistic. Don’t be fooled by the many headlines trumpeting more falling prices and increasing foreclosures. That information is only one part of the total equation. The eventual price that you or someone else will pay is always dependent on location, condition of the property, and its market value (that market value being determined by the value of similar properties in a similar location, in similar condition, and based on a recent appraisal or competitive market analysis).
Once we’ve found a particularly well-valued home, and it meets my clients needs and wants, and they decide it’s really the one, it’s best for them to act and make an offer. If they wait for its price to fall further, thinking it’s not going anywhere, it’s quite likely that they’ll be disappointed when someone else comes in and buys it. I work hard to educate my clients on the importance of location, condition and value as explained above, and then we go out and find their perfect house. The clients who are happiest are those who, after we submit their offer (and perhaps counter offers), go ahead and buy that home. Knowledge of the local market and its particularities is a very important part of what I offer, and it’s what you’ll miss if you try plowing through the thousands of homes for sale on your own. For the entire Desert Sun article, click on Home Buyer Expectations.