Real Estate Article: A Market with Equal Opportunity
02/02/2006

            There has been much speculation about what might happen to the Southern California real estate market in 2006. Some perspectives are optimistic some are not. It is true that the real estate market will be slowing down in comparison to previous years but this does not have to stop anyone from taking part in transactions. In my opinion, the market in 2006 will be an environment very suitable for both buyers and sellers to conduct business, in other words, a market with equal opportunity for both buyers and sellers.

          After coming off a five year boom, the real estate market is merely experiencing a “soft landing.” Although prices will not appreciate in double digits like it has in the past five years, this is not necessarily a bad thing, the market is just normalizing. The hectic market of the past few years is becoming a calmer, less stressful business environment. The market no longer favors only the buyers or the sellers. Let me tell you why.    

          For sellers, it is a good time to sell because prices just peaked the previous year. In addition, the lack of land has lead to a decrease in the number of new houses being built. That along with modest job growth creates an environment where there is still a plenty of demand for homes. With appreciation slowing down, there need not be any fear of selling your property too early and have the prices sore a few months later. With favorable market value and substantial demand it is a great time to sell.              

          As for the buyers, it is a great time to purchase your new start-up home or upgrade to a bigger home. The cooling of the market does not mean prices will fall, it just means appreciation will just be slowing down. Even if appreciation slows down, the current interest rates are still considered very favorable when compared to historical interest rates that exceeded double digits in the early 90’s. Interest rates are still steady at 6%, however, it is very possible that they will gradually increase throughout this year and next. It would be wise to purchase a home while interest rates are still favorable. In addition, the market’s unsold inventory index has increased in comparison to previous years. This is because buyers have been hesitant due to speculation of what will happen this year. With favorable interest rates, a large inventory to choose from, and willing sellers, the current market is definitely a great opportunity for buyers to obtain their dream home.              

          The market does not appear to be substantially beneficial to buyers or sellers, but that is what makes the current market such a good one. It is impossible for a market to completely favor both the buyer and the seller. In a seller’s market where demand is very high, and there are few properties on the market, the sellers have all the power leading to a number of unhappy buyers. In a buyer’s market where there is too much inventory and no demand for homes, many sellers will have to either wait or lower their prices. In both scenarios one of the parties is likely to be unsatisfied with the transaction. In the current market, both buyers and sellers can moderately benefit with each transaction. This means that buyers and sellers are more likely to find a price that they can both agree on leading to less stressful negotiations. Who wouldn’t want to take part in an easygoing market where we all can benefit?

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