Richard D. Cosner
President
Prudential California Realty
22800 Savi Ranch Parkway, Suite 110A
Yorba Linda, CA 92887
Direct 714.279.3802
Fax 714.637.1288
RichCosner@mac.com |
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To: Homebuyers working with Prudential California Realty
Date: February 3, 2001
Subject: Extreme Market Conditions |
Dear Prudential California Realty Client:
It is at my request that our sales executives share this letter with you. I feel there are some exceptionally unusual market conditions about to take place that we want you to be aware of. If you are aware of them, you can better make your home purchase decisions.
What I am going to share with you is my opinion, which is based on almost 30 years of real estate experience. I don’t pretend to be an economist nor does my opinion mean I am absolutely right. Nevertheless, I feel strongly enough about the current and near term market conditions that I wanted you to know my thoughts. I feel so strongly that this is only the third time in those 30 years that I have prepared such a letter.
In the past 30 days, Federal Reserve Chairman, Alan Greenspan, lowed interest rates dramatically. While your loan officer will give you the latest interest rate, suffice it to say that it is at a historic low. To the inexperienced, this is great news. The fact is that it might be and it might not be. To be sure, a low interest rate is an awesome thing…if you can get the house. Therein lies the problem you may experience.
The real estate market is about to explode with new buyers coming into the market. The drop in interest rates will create desire on the parts of thousands more home buyers in Southern California. The problem is this: There are not enough houses on the market to satisfy these throngs of buyers. There won’t be enough houses coming on the market in coming months to satisfy this demand. In this situation, home prices are going to rise dramatically. They will rise because this extremely high demand can’t be filled.
Coming into the market as a homebuyer now has a number of consequences:
- You will find more houses on the market now than you will in the months ahead. If you are serious about purchasing a home you should act as soon as possible. Every week there will be more buyers to compete against and fewer homes to buy. This will be driving prices up thousands of dollars per week. Buying a home in February or March will likely cost a lot less than buying it in April or May. So while the lower interest rates are a great benefit, it will bring out intense competition for every desirable property. I would encourage you to find the home you want and buy it the day you find it.
- Listen to the counsel your agent gives you. When they encourage you to pay full price or even more than the listed price, they are not trying to get a higher commission. They are trying to get you the house.
- Work with your agent closely in the offer process. If they request you to wait in your car at the home of the seller while the offer is being presented, do so.
- Have your mortgage loan approved before you find or buy the home. This makes you an attractive “cash” buyer to a homeowner. The owner isn’t left wondering if the people buying his or her home can really get a loan. Your sales executive will introduce you to our affiliate, First Capital Mortgage, and they can provide this service for you.
- It is likely you will experience “multiple offers.” In other words, the homeowner will be considering your offer as well as others. This will become even more intense in March and April. Let your agent guide you through this. We work with as many of our associates as possible to see that they are trained and skilled in this area. You need to be available and you need to be decisive when your agent requests it of you. He or she will not be “pushing you to buy.” They will be trying to get you the house.
- In this market, it is wise to remember the following: It’s not how great a price you can get the house for…it’s whether you can get it at all.
- If you are a home seller as well as a homebuyer take heed. You will be able to sell your home for top dollar. Remember however, that higher priced homes will many times tend to go up even more in value during this hot market period. Waiting to get an extra few thousand dollars on this home might cost you ten thousand dollars on the next home.
- The point is this: If you are serious about buying a home, buy it as soon as possible. Take counsel from your agent. Every month you wait is going to cost you thousands of dollars in higher home prices. If you pay $10,000 more for a home in May than you could have bought it for in February, you will have a higher mortgage and therefore, the lower interest rate is nice, but you still have a higher monthly payment.
The skeptical homebuyer may well read this and think it is pretty self serving on our part to suggest you act now and at the top price. Please know this is not the case. We are not effectively serving you if we don’t give you the information you need to effectively make decisions in this market. In a fast paced market you need strategies to help you achieve your goals. That is our purpose in sharing our ideas with you.
Let me personally thank you for working with our firm. Please know that we are sincerely honored that you have chosen our firm to work with, and we will do all we can to meet your objectives. Thanks for considering my thoughts!
Sincerely,
Rich Cosner
President
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