The 2 Factors that should make today’s buyers absolutely giddy are:

1. Strong Buyers Market and
2. Historically Low Interest Rates.

Today’s blog will tackle the 1st, Strong Buyers Market; next week, we’ll tackle the 2nd.  But do realize, for today’s Central Coast Home Buyer, they are both intensely and pleasantly linked.

As we discussed in previous blogs, people buy homes for various reason.  Throughout the 20th Century,  a home buyer made that plunge mainly because they intended to live in the home through the years.  And they did.  Course.. that’s back when people remained at their jobs for 30 years, and a pension was something you could rely on.  But even through two world wars, The Great Depression, many recessions, periods of high inflation, the relative recent spike in home prices, followed by a well needed market correction, people continued to by homes for various reason!

And regardless of the tough circumstances and difficult times, they did it because it was the right decision for them at that moment.  It did not matter to the individual home buyer if the economy was weak, as their pocket book supported the purchase.  It did not matter if the purchasing power (inflation) of the dollar was down, home purchases continued.  When home prices went up, Americans as a whole, supported those higher prices by…continuing to buy.  The value of home ownership has been, and continues to be, an American mainstay.

Even when ‘supply and demand’ doesn’t necessarily support it.

According to the National Association of Realtors, in 2005, the months supply of homes (this number tells you how many months it would take for all the current homes for sale on the market to sell, given a monthly sales volume) ranged from the high 3′s to 5.  So we did not have that many homes available.

But at that same point in time, American set records in homes purchases:  over 7,000,000 existing homes were sold in 2005!

So you have relatively low inventory of homes and a huge influx of buyers.  Supply and demand teaches us that when we have more demand than supply, prices go up.  And they did…in a big way.

So oddly, even against the laws of supply and demand, people (7,000,000+) still bought homes!  And they paid through the nose.  And this was defined as a ‘Sellers Market’: low inventory, high demand, prices go up.  Seller wins!!

And while we’ll keep the reasoning for this huge influx for another post, what’s pertinent here is that TODAY’S BUYER ENJOY THE OPPOSITE SCENARIO.  TODAY WE ENJOY A STRONG BUYERS MARKET!!  Buyers win!!

Today, we have larger inventories of homes and fewer buyers.  Again, supply and demand…if we have a ton of sellers trying to dump their property to a relatively small pool of buyers, prices go down!  And they have…in a big way.

Love ‘em or hate ‘em, the influx of homes to our local Central Coast market due to foreclosure is a boon for area buyers.  Even if you are not pursuing ‘foreclosures’, per sey, the involvement, sale and influence of foreclosed homes has a positive effect on local real estate prices.  For example, to break homes into the classification of Traditional, REO and Short Sale listings, both the Traditional seller, as well as the REO asset manger must keep their pricing in line with the Short Sale market if they expect to compete for the same buyer.  In short,  a Traditional listing will be priced lower due to the influx of Short Sale listing that will continue to flood the market.

This shift will be addressed in a later post, but suffice to say, foreclosure listings, pre-forclosure listing as well as ‘shadow inventory’ (millions of homes yet to be foreclosed and released into our market) are here to stay for awhile and by that fact, inventory will remain high, thereby pricing kept low.

But how low?

Love it or hate it, Zillow tracks market data for our Central Coast.  So while I’m NOT plugging Zillow, the following stats stem from Zillow.com as of today.  To follow are certain Central Coast cities and towns, followed by the yearly change in market position as well as the average home value for each area.

Clearly, home prices are down over 2010.  Moreover, in a few areas on the Central Coast, some homes are down by 40% and 50% from the market peak in 2006; I see it often.

A question now for today’s potential buyers (and potential sellers should pay attention too), is ‘where is the bottom?’  I get that question a lot.  And I always go back to ‘why’ people buy?  What is their ‘why’?  If their ‘why’ was important enough to choose to buy in the 1970′s when inflation was rampant, or in the 80′s when the interest rates ran up to 16%, or when any number of obstacles to ownership presented itself, AND THEY STILL MADE A POSITIVE DECISION TO BUY, then what I start out by saying is that “today is strong buyers market.”

Folks, it’s a simple statement, but to a hopeful homeowner, that statement should mean I can: 1) dictate price, 2) dictate terms, and 3) if I don’t get what I want, another great home will present itself next week.

Buyers…that’ a powerful position to be in.  The fact that the seller (banks?) needs your money more than you need their house!  That’s another definition of a “Strong Buyer Market”.

A strong buyer buyers market is pivotal for your success.  And it’s today.  So putting aside all that cheesy, salesy lingo we all hate, if you are genuinely interested in a home purchase, the question presents itself, do you choose to buy in a ‘sellers market’ or a ‘buyers market’?

Naturally you buy when the market is in your favor, a ‘buyers market’.  Again, that’s today

And ohh…don’t think for a minute I am ducking the question about ‘where is the bottom?’ because the answer to that is found in my next post, The 2 Factors That Should Make Today’s Buyers Absolutely Giddy: Historically Low Interest Rates.  HINT: do you want to buy the house for less money, or do you want to pay less for the house?