John M. Lee: The state of real estate

I hear these questions everyday. How's the real estate market? I heard that it has slowed down. Is there a bubble? Should I buy now or wait? Is this a good time to sell? How have interest rates affected the market?

These are all great questions, but the motivation behind asking the questions is to determine the best course of action concerning real estate right now.

Everyone now acknowledges that the market is changing, that sales are slowing, and that the real estate boom of 2001-2005 is losing a bit of its edge.

The news media loves to say that the hot real estate market is coming to an end, that the "bubble" is bursting and that things are getting bad. Everything is painted black and white, as if slowing from a market where homes sold in a couple of days to a market where homes sell in a few weeks or months, means that we have entered a "slow" market.

This may sell magazines and newspapers, but it is inaccurate reporting. I have been guilty of telling others that we are moving into a "normal" market now, into a season in which it is possible to take your time looking at homes, studying loans, and entering into transactions in a more thorough and careful way. That's true, but calling it a "normal" market is misleading. What's really normal here is a constant process of cyclical change.

Our real estate market has always gone through cyclical changes and always will. And most of the conditions that prevail at any one spot offer their own special benefits and opportunities, as well as curtailing of some of the things that worked in the last phase of the cycle. We are less and less likely to receive multiple offers in the phase we are entering, but more likely to benefit and profit from buying opportunities.

Good markets and bad markets are hard to characterize. What is good for sellers is bad for the buyers and vice versa.

For example, what is so good about receiving multiple offers if it means skyrocketing prices that lenders are increasingly reluctant to write loans for? Or rushing deals past buyers and sellers so fast that neither party is sure it got what it wanted and needed? Or sales closing so quickly after a home goes on the market that the sellers are certain their listing agent does not deserve a commission? Or first-time buyers being increasingly priced out of the market?

The scenarios all have two sides to them - what is good for sellers is bad for buyers.

Seasoned professionals know the truth: people still need to buy and sell homes; people need to arrange their financing in the best possible way for their future; people still need assistance with investment portfolios, tax deferral strategies and the best ways to increase their wealth from real estate.

So what are the answers to the original questions that opened this article?

The real estate market in San Francisco is doing just fine. We still do not have enough inventory to satisfy the demand, and we probably never will because we have so little land available. According to the laws of supply and demand, our market will always do pretty well.

If you are thinking about buying or selling, I strongly advise you to consult with a knowledgeable professional regarding your personal situation.

There are opportunities regardless of the market, and with a good strategic plan and a long planning horizon, the cyclical nature of real estate will play out and you will be able to enjoy all the benefits that real estate ownership has to offer.

John M. Lee was recently honored in Las Vegas for being in the top 10 out of more than 22,000 agents in the GMAC national network of realtors. If you have any questions about real estate, call him at (415) 447-6231 or e-mail johnlee@isellsf.com