Real estate downturn won’t last forever as business is cyclical.
Subprime crisis is teaching lenders and borrowers valuable
lessons
We’ve gotten spoiled. We’ve come to expect that housing prices would continue to skyrocket; that houses would sell as quickly as they are listed and often for higher than the asking price.
The boom in real estate lasted so long. The downturn came as a big surprise. The decline in home sales and its financial repercussions for real estate agents hit South County coincidentally on the onerous date of Sept. 11 when more than 90 agents with Century 21 Premier in Gilroy and Morgan Hill learned they would lose their jobs as the offices announced their closures.
Morgan Hill Times staff writers Serdar Tumgoren and Emily Alpert reported there are more than 1,000 homes for sale from Morgan Hill to Hollister compared to conditions in 2005 when agents sold a home in less than 30 days on average. Median home prices in Morgan Hill dropped to $858,000 in July compared to $1 million for the same month last year. In Gilroy, home prices dropped to $675,000 in July compared to $725,000 for the same month last year.
Other business publications report most real estate brokers have been operating in the red since at least the beginning of 2007, which has made them consolidate many offices across the state or eliminate agents. They’ve also adopted new business models requiring agents to sell immediately as opposed to letting them build businesses before demanding sales.
However, real estate has always been cyclical, with times of increasing values and times of stagnation. Regardless, owning a home in California remains a tremendous investment. That is, if you have an adequate down payment, manageable payments and look at your home as a place to live and not as a piggy bank.
 Fueled by low interest rates and let’s say a number of “creative” mortgage plans, in hindsight it is clear that some folks who didn’t have the resources were able to become homeowners. It is the American Dream. But sometimes dreams become nightmares.
 Those facing foreclosure are the most visible victims of the housing bubble now burst and the so-called subprime mortgage crisis. The entire state, and cities such as Stockton, face the dubious distinction of having the highest foreclosure rate in the country. Many of those families, regrettably immigrant and low-income families, took out interest-only or adjustable rate mortgages because there was no other option.
There are others with companies or jobs in real estate related businesses that are also being washed out as the tide of tightening credit sweeps over the housing industry. And, it is natural for people who may be considering selling their homes to be a little concerned. We’re sympathetic, but let’s not lose focus.
Take a deep breath. The sky isn’t falling and federal and state legislation is on the way to prevent this nightmare from happening and particularly hurting high-risk borrowers who were victims of predatory tactics.
It may take a few months or a year, but the situation will improve. It always has. And, we remain confident that property values here in Morgan Hill and Gilroy will remain strong, even if they don’t grow at annual double digit rates.
