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The last couple of weeks have brought financial furor. Several large sub-prime lenders went bankrupt, sending shock waves through the stock market and, even more so, through the housing market. Many home owners throughout the country will lose their houses because of higher interest rates kicking in at a time when their houses have gone down in value.
What does this mean to our real estate market? In the area where we work--Berkeley, Kensington, Albany, El Cerrito, Rockridge--there will undoubtedly be some people adversely affected by these recent events. We sympathize with them and would be happy to help them in any way we can.
In the meantime it's possible that sales will slow down because fewer people will be able to qualify for jumbo loans, over $417,000. The number of sales has decreased this year over 2006. Nonetheless, prices are up in our area in the first half of 2007 relative to 2006. Even though there may be fewer houses for sale, good houses, without major problems, in desirable neighborhoods, will probably sell for the same high prices they have been selling for. There may be a smaller number of offers on any given house, but our economy is still booming and houses in this area are in high demand.
Buyers should be sure to talk things over with their lenders to be confident they are still capable of the financing they require. Beyond that, the decision whether to jump or not is up to each individual. Some people may pay a point or two higher interest, but they may not have to offer as much over the asking price to buy their houses. It's always conceivable that waiting to buy will turn out to be the correct strategy. BUT, around here, that has not been the case for more than ten years, despite the constant braying of columnists and experts of various stripes.
As far as we know, none of the buyers we've worked with thinks they made a mistake and should have held out for prices to go down. On the other hand, many people we started working with, who decided things were just too expensive, and prices would inevitably fall, have wandered off and never been heard from again. Some of these people are undoubtedly living happily ever after in other areas or other states. But many are still handing rent checks over to someone each month and seeing that money just drift away.
We don't know just what will happen in the next few months. Some buyers will be lucky to grab properties that are languishing for one reason or another. But we doubt home prices in this area will fall dramatically, if at all.