said by Mark and Al - Century 21 Realtor Article :

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State of the Market
Cooling market and rising interest rates; is the window of opportunity closing for both buyers and sellers?

With recent economic factors having a significant impact on the real estate market both buyers and sellers want to know how they will be impacted. Each is hoping the market is tilting in their favor; but who will have the upper hand? First we’ll look at some of those factors and then we’ll discuss the way we see them impacting both sides. Amongst the factors we’ll discuss are inventory, foreclosure rates, availability (or lack of availability) of loans, interest rates, trends, local market statistics, as well as some of the perceptions we have experienced from both buyers and sellers. For the purposes of this publication we’ll attempt to be as concise as possible, (as hard as it is for us), so for those of you needing more detailed answers or having further questions, we absolutely invite your calls and emails!

Inventory: We track the local inventory carefully and with the exception of a slight decrease from late last year through February 2007 inventory has steadily increased for several years, and with the loss of the “sub-prime” loan programs, (as discussed in our previous issues), we noticed a spike in inventory during March which hasn’t let up. For example, as of early June 2007 the inventory of homes for sale in Covina, Glendora, and Claremont have increased 35-40% above the levels of late February.

Foreclosures: Reports indicate that during the first quarter of 2007 mortgage lenders in California sent out the highest number of default notices in a decade. With so many properties in default it appears that more property will soon be on the market.

Loans: Although there are many loans available for those with great credit and a sizeable down-payment, the availability of loans for those with low credit scores, difficult to document income, or little to zero down-payment are much harder to obtain.

Interest Rates: The buyers that can obtain a loan are beginning to see an increase in interest rates and in fact interest rates for the standard fixed-rate loan have increased approximately ½ percent since the beginning of April.

Trends: According to recent reports from the California Association of Realtor, home sales statewide decreased by 27.8% in April as compared with the same period a year ago. C.A.R.’s unsold inventory index for April was 10 months (almost double that of a year earlier). The National Association of Realtors trimmed its sales forecast for the forth straight month and said it now expected prices would drop more than previously forecast.

Local statistics: Our local Multiple Listing Service reported a) The highest number of homes for sale in 8 years, b) The monthly supply of homes doubling from the same period last year to 13.2 months, and c) An increase of over 46% in the average number of days on the market to 79 days.


Although a lot of the recent news and statistics may not be happy news, we are pleased to see that some of the big boys and the media are finally fessing up to the realities and trends of the market. (Trends and statistics that we have been reporting to our customers for the past 2-3 years!)

So, as promised, let’s take a look at the implications of the above on both buyers and sellers;

Sellers…
Many sellers are in denial and have yet to realize that it has become a buyer’s market. They seem to keep hoping there will be some miraculous reversal and return to a hot seller’s market. However, the market has been softening for at least two years, (locally anyway), and the fact is that a large percentage of the buyer pool simply evaporated after March because of the drastic changes to the home mortgage market. This coupled with the many other factors discussed above force sellers to price competitively or risk lingering on the market with little or no chance of selling. We don’t anticipate any price increases in the foreseeable future. Over-pricing now will simply add one more un-saleable listing to the existing over-supply of inventory. However, sellers willing to price competitively can sell, and even with the over-supply of inventory certain property types will garner a lot of interest and even multiple offers, just not like 3 to 5 years ago. A good agent with many years of experience, (we recommend at least 10 years selling a minimum of 20 homes per year), can best advise you where to price and if your property is of the type that will generate a lot of interest. Sellers that have equity and looking to buy another home should not hesitate as any loss they may actually incur or perceive will be made up by the seller on their replacement purchase. In general, our best advice to a seller that doesn’t have a strong desire or need to sell is simply not to list their home for sale at the present time.

Buyers…
Some buyers have been sitting and waiting for an opportunity to buy low and save money. That window is closing fast! Don’t expect interest rates to do a u-turn and improve real soon, and it could get worse before it gets better. With interest rates on the rise waiting may actually cost a buyer more! Prices may soften further but by waiting to purchase, the cost of owning a home with higher payments caused by increasing interest rates could cost a buyer thousands! Furthermore, although most buyers we talk to think prices will drop further, wanting that to happen doesn’t guarantee that they will! Buyers should consider that on an average priced home a buyer may need to see values drop another $50,000 just to break even, so delaying a purchase now probably doesn’t make financial sense. First-time buyers should be motivated even further by calculating how much money they are throwing away on rent and having no tax write off. There are many homes to choose from and it is a buyer’s market. That being said, buyers should not get too cocky or aggressive with their offers when they see a home they really like, because as mentioned in the seller’s commentary, there are certain property types that will continue to receive multiple offers. Again, this is where the advice of an experienced and trustworthy agent can be the difference between success and failure. In general, our best advice to a buyer is to buy now, play safe and secure a good fixed rate loan, and then plan to enjoy the property until the market gets back into another upward cycle; it’s simply a matter of time.

*Investors (large multi-unit apartments, commercial, retail, office space, etc)…
These markets move and react differently than the single family home market, have totally different financing options, and need to be evaluated by an expert. To discuss your options in these arenas contact Al Jafarkani, our resident expert with over 20 years of experience.

Today’s market is extremely complex! We are absolutely committed to providing the best advice and information to each individual customer given their situation and goals. We will continue to bring you valuable information and our market insights. We need your continued support and referrals and we earnestly invite your questions and feedback. Please keep them coming!

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said by wikipedia--> »en.wikipedia.org/wiki/Passive_management :

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Mutual fund investors

Dalbar Inc., a market research company, found that during the 20 years from 1984 to 2004, the average stock fund investor earned returns of only 3.7% per year, while the S&P 500 returned 13.2%. On an inflation adjusted return, the average equity fund investor earned $13,835 on a $100,000 investment made in 1985, while the inflation adjusted return of the S&P 500 would have been $591,337 or 43 times greater.

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