A Bell Will NOT Ring When the Market Hits Bottom

The last article I referenced, from Time magazine, "Ignore the Headlines", elicited some thoughts from a reader recently, about how that article is 2 months old and how he was skeptical of the points brought out by the author.

Who, then, is really, really qualified to tell you when this market, or any market, has hit bottom? Gosh darnit, if Dennis Richmond tells me we haven't hit the bottom of the market, then it MUST be true. Right?

And when someone says the market hasn't hit bottom, do they mean the average US market, the average California market, Northern CA, San Carlos, or White Oaks?  Every single market is different -- that's like saying there's a "National Weather Average".  If you live in Palm Springs, and the weather forecaster says "the national average weather today is 55 degrees and cloudy", is that really a good statistic for you? Why would real estate be that much different?

Yes, the article’s two months old — firstly, I can’t believe I missed it when it first came out. Probably because the only real estate stories the media seems to salivate over and regurgitate are the negative ones, and most of those have conclusions that I disagree with as well. A recent news report I saw on KTVU, in typical doom and gloom fashion, said the Bay Area market was in such a tumble, and as evidence of their award-winning reporting they pointed to 15 foreclosed homes in one neighborhood in Discovery Bay. Hmm, in my 44 years of living in this area, I can’t recall the last time Discovery Bay was such a bellweather of Bay Area real estate. Ah well, just another unbiased day in journalism, I guess. So who to believe these days? Talking heads? National averages? Economists holed up in universities who don’t ever talk to real buyers and sellers? My own tendency is believe people in the trenches. Five people will tell you we’re in a recession, five will tell you we’re not. Again, who to believe?

I don’t discount that the market’s cooling in many areas, nor that our country is not as economically strong as it was. I do get that. If you can wait to buy, then by all means, wait. Sure, you can wait for more blood in the street, but no bell is going to ring when we’ve hit bottom and there’s no more blood. Nobody can predict where & when a bottom is, nobody. Have we hit bottom in Palo Alto, where 9 out of the last 10 homes sold in the last 2 months were all 5-6 figures over asking price? Hmm, doubt it, and doubt we ever will see a bottom there. Have we hit a bottom in the Shoreview area in San Mateo? Probably not. A home in Twin Peaks listed at $4M sold for $5.6M, closed in 10 days, all cash. Has that market hit bottom? My old boss's house in Atherton, listed for $4.2M, sold in 4 days for $4.4M. A declining market? I think not.....If a buyer’s looking for tremendous appreciation in one year, then, no, this is not the time to buy. Every buyer’s situation is unique, and every neighborhood/block has different dynamics and supply/demand issues; but if a buyer is buying for the long term, then my opinion is, yes, it is a good time to buy. You take any 5 year window between 1968 and 2007, and the average (yeesh, I detest using averages sometimes) median price has always, ALWAYS increased. In 2002 the median was $316,130, in 2007 it was $588,970