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The Tribune recently reported the median prices for SLO County homes rose last month. While this may be true, it may also be caused by the continued sales of properties over 1 million dollars. If high end home continue to sell when everything else slows down it will increase the median and tend to skew our interpretation of real events. One need only look at the quantity of price reductions of homes currently for sale to realize that prices for most homes continue to decline. Data for the following chart comes from the MLS.

I believe the we could plot a similar curve for the 5 cities area. I still believe this decline in prices will bottom out in the 4th quarter 2006.

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The weekly Cayucos column by Dick Weiss has been moved from page 3 to page 7. While this may seem like bad news it is actually great news because Page 7 is in color.

They have also given Dick more space for photos of Cayucos Events.

So write, email, or phone the Sun Bulletin and thank them.

149 Market Ave

Morro Bay, CA 93442

phone: 805 772-7346

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As many of you know I have been President of the Cayucos Chamber of Commerce for the past year and a half. While my term ends in December many have expressed their desire for me to continue for another two years so I have decided to place my name on the ballot for another term.

There are still a number of things I would like to accomplish. First and foremost is to get the Chamber on a sound financial basis. To this end we are launching a membership drive. If you are a business or do business in Cayucos I encourage you to join as a full member. Dues are the lowest in the county at only $100 per year. You get a plaque for your business, a listing on our website with a direct link to your website and you are listed in our roster which is sent out to the numerous people contacting us for information. We also have an associate membership of $50 for those who just wish to help out and be a part of our community.

At www.CayucosChamber.Com you will find a calendar of events, a roster of members, and a membership form which you can download. There is also an extensive photo library of past events. Check it out. I’m sure you will find many photos of people you know and possibly one of you as well. All photos are digital and if you find some you like, drop by the office and I will give you a CD. Also, if your event is not listed, let me know about it so I can get it on the calendar.

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July is looking like a record month for price reductions. With only a week left, we could surpass 80 reductions by the end of the month.

A few price reductions are common, as sellers and REALTORS® overestimate the current value of a property and need to make adjustments. A trend, such as we are currently seeing, indicates that property values have already declined and adjustments are being made accordingly. Further analysis is required to establish if values are continuing to decline, level off, or rise.

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WHERE ARE WE NOW? – JULY 2006

It started last summer. The interest rate bottomed out, and there was massive new construction. The media began talking about a housing bubble, and even Greenspan commented there was “Froth” in the real estate market. The US economy involves how we feel collectively, rather than inventories of consumer goods, stock market averages, unemployment, or inflation.

But last summer talk ensued about the housing bubble. It was on every broadcast being debated by every talk show host. By October it had affected everyone and sales plummeted.

From October 2005 to December 2006 prices in Morro Bay fell by 6%. Since there is no massive construction of new homes in Los Osos, Morro Bay, or Cayucos the elements of a housing bubble did apply but it was like being unemployed during a season of low unemployment: the collective feeling of the nation was in control. Interest rates were still great. Baby boomers were still retiring, but now buyers could wait and see if prices were going to continue downward in which case it paid to wait.

*note* July has 11 more days to equal or exceed Junes statistics.

As buyers left the market and demand fell, sellers were forced to lower the price of their homes; therefore, home values in the area continued to decline from January 2006 to the present (July 2006). I surmise along the lines of another 6%. In the chart above it is obvious that REALTORS® and sellers were late in reacting to the downward trend, partly because it was felt to be a temporary anomaly (bad press, holidays, and an extended rainy season).

While it was obvious to me in October, I gave it 6 months and expected it to bottom out in April 2006. My real estate predictions have been incredibly accurate for the past 6 years but I missed this one.

Based on current indicators this may last a year and bottom out in September or October. This means that the best time to buy a home on the central coast is anytime in the next three months. When things do turn around, I fully expect annual appreciation to return to the 15%-20% range. How can I say that you might ask? It is simply this: we are small communities and will remain small. This quaint lifestyle is very attractive to anyone who has been stuck in traffic. The air is clear and the climate is fantastic. But most importantly: We are still the most reasonably priced area between San Diego and San Francisco.

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DECLINING MARKET - BUYER’S MARKET

The rub comes in when you are in a Declining Market. If you err on the high side, the home never sells because it is always overpriced. Even if you price it correctly, if it doesn’t sell immediately then your home becomes over priced and doesn’t sell.

Let’s take the same example. A similar home closed this week for $790,000 and had a 30 day escrow. The current market value of your home is $780,000 because it has declined $10,000 during the month. So if you price your home at $780,000 and it doesn’t sell right away then you are over priced and need to reduce your price $10,000 every month until it sells. Obviously if your home sits on the market for 5 months you may be lucky to get $740,000 for it. Other factors which come in to play in a Declining Market are fewer buyers and more homes for sale – supply is high and demand is low. So it becomes even more important to price you home properly.

It may be best to offer your home at $20,000 under market value to attract potential buyers and get a quick sale. There is a price where everyone says to themselves, “That’s a no brainer! We’ll buy it.” Everyone wins. The seller minimizes their potential loss and the buyer gets a good buy. REALTORS® will steer their clients to the best buys available. So if you under price your home by $30,000 then you have a good chance of selling it within 3 months. At the end of 3 months, you will need to reduce the price yet again.

Naturally, we want to predict when this declining market will end, level off, and start back up. If we feel it is going to be of short duration then we may want to hold off on reducing our price. If it looks like it is going to persist then we may want to get aggressive in our pricing. Recent events have made it very difficult for REALTORS® and Sellers in determining the proper course of action.

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RISING MARKET – SELLER’S MARKET

Sellers and REALTORS® have had it easy pricing property over the last 6 years. Look up comparable properties that have recently sold and add $10,000-$20,000.

In the example below let’s suppose the comparable property for your home just closed escrow at $790,000. It was a 30 day escrow so today’s current market value of your home should be $800,000 because prices have been rising at $10,000 per month.

So if you price your home at $840,000 then it should sell within 5-6 months. On the 5^th month it should be at current market value and on the 6^th month under current market value. The beauty of this market is that you can err a bit on the high side and everyone is happy.

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