Your Exceptional Life

I am a bit of a student of the market.  A couple of weeks ago I had the pleasure of listening to Carol Rodoni of Bamboo Consulting speak about the market.  Good speakers make me think.  Really good speakers present well thought out arguments for their ideas and keep my thinking.  Ms Rodoni did just that.

The crux of her talk was that we were in the sweet spot of the market right now.  She outlined two market pull back scenarios.  One was an area would pull back to 2002 numbers.  The second was that if the area pulled back past 2002 numbers, it would pull back all the way to 1998.  Hello Brentwood.  Hello Antioch.  Hello Central Valley.  Conversely, areas like Walnut Creek, San Ramon, Danville, parts of Oakland and the LaMorinda area were done. I think she’s dead on.

Why am I talking about this?  Because I received an email yesterday pitching a loft in Oakland.

An absolute bargain and 100k less than they sold for two years ago.

Sounds like quite a deal right?  Except two years ago doesn’t matter.  Not one iota.  What matters is today’s market price, that’s what determines value.  A hundred thousand less than two years ago may or may not be a bargain depending on the area’s comparable sales.  Not the area’s comparable listings, but the area’s current comparable sales, say within the last 3-6 months.  Even a year ago doesn’t matter.  To know my history as a stock broker is to know this truth. I love charts.  I love juxtaposing them and making them in different colors and taking a slide rule to them and every thing in between.  And that’s great for us chart geeks.

Median Sale Price

This one doesn’t go back to 1998, but it doesn’t need to. San Ramon pulled back to 2002 numbers. There has been a lot talk about a second downturn in the market. Looking at this chart, I don’t see a reason for a second severe downturn. That’s the nice thing about charts, they tell stories. The run up is clear and if I were better at playing with ShockwaveFlash, I’d draw in little red lines to demonstrate my point, but imagine a line connecting the highs and another connecting the lows. I don’t see another pull back in that chart at all. The reason for the crash is as plain as the nose on my face, no second crash.

While we’re playing with charts, lets add another chart in.

Zillow Home Value Index

Now let’s compare the two. The first one is actual sales over the last 10 years. The second is Zillow’s Home Value Index which is a computer generated guesstimate of value based on six month trailing trends. This is the best argument I have ever made for not relying on Zillow for home values. Say you were a seller in late 2006. Or a buyer in late 2008. The Zillow numbers would not have been your friend. It’s fine for spotting trends, not so good for actual valuation of property.

The best bet for property valuation is a qualified real estate professional who understands the local markets, studies them and understands where they are going and why. I can be reached via phone, email, twitter or facebook. Ask for a Comprehensive Market Analysis. It’s from me to you.