Luxury Insider: What’s Next After Labor Day?
Summertime came & went already… Did you go on vacation, got a good rest and got a nice tan to prove it? Hope so for you. It’s good for the mind to go into neutral every so often. Summer 2014, however, has not been exactly quiet and relaxing for everybody and in all businesses. Try real estate for example. No time to smell the roses for the true pros; July & August have been hot in every way.
Some people might argue with the above statement. After all, sales units are actually down year-to-date, in many markets this year, particularly (and paradoxically) in the most buoyant of them. The Silicon Valley is a good illustration of this peculiarity. However, this apparent slow-down is more a mirage than the reality of the marketplace. Let me make my case…
First, the number of sales units does not always tell the story. For one thing, we can only sell what is available to be sold. As you know, we are suffering from the most acute (and often incomprehensible) shortage of inventory that I can remember. Give me more listings and I’ll give you more sales. A lot more.
But, no matter how relevant the number of transactions may be to describe the velocity of the real estate market, it is not, in my view, the N.1 indicator of a hot market. Prices are. And price appreciation during the last two months, in many sought after areas such as the Silicon Valley, has certainly continued at a good tempo, seemingly unaltered by the “slow” season.
I know what you are going to say: that too is all about that supply & demand dichotomy I was referring to earlier. Well, OK, up to a point. Prices don’t go up simply because of listings scarcity. There is a lot more to integrate that the eyes don’t see. The significant fact is that most people believe again in real estate; they believe in the value of purchasing a home, whether to live in or to leverage as an investment. The recession years are now well behind us and, if nothing else, the appetite for real estate has grown after a long diet.
There is more. US real estate is wanted. This is particularly true in the San Francisco Peninsula & the South Bay. Even when the domestic demand shrinks, for all the good reasons we can understand during tough economic times, the international demand makes up for some of the loss and keeps on driving prices higher and higher yet.
For most foreign buyers coming to town, prices are no object. They don’t perceive our real estate prices as being too high. In fact, many of them find local homes to be very affordable compared to what “similar” properties would go for in the countries they come from. Not to mention that in some Asian countries, for example, you stand to lose the property that you paid dearly for upon the expiration of a multi-years lease. Title remains with the State.
Hence a growing migration of international buyers to the US. Hence the upward pressure on prices. Cash deals, multiple offers and wild over-the-asking price offers are the new normal. It is what it is. As a Realtor, I am not complaining, I am just observing.
The thing to always keep in mind in the real estate business is that buyers “make” the market. Not the sellers; not the real estate agents. We have to look at the buyers’ behavior to measure the pulse of the market and understand where it is going. Today, the trends are good. Prices, more than units, are the expression of this optimistic view.
Labor Day is now behind us. We are about to start a “new year” of sort when the fall season pushes summer away. A big wave of buyers is approaching. It would be nice to see more listings hitting the streets. Chances are it will happen. Cross your fingers and stay tuned.