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REALTORS®: Real Estate Still a Good Long-term Investment, Real Estate Expert Says


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Wednesday, January 14, 2009

Although the country is experiencing a deep recession and the housing market is experiencing a downturn, land will continue to be valuable, especially in Silicon Valley. And judging from the erratic performance of the stock market, where people have lost as much as 50 percent of their wealth or more, once prices stabilize, people will once again see real estate as an important, long-term asset. This is the message Carole Rodoni shared with Silicon Valley Realtors at their tour meetings in Palo Alto and Los Gatos.

A dynamic speaker and past president of Fox and Carskadon Real Estate, former COO of Cornish and Carey Real Estate, past president of Alain Pinel Realtors and now president of her own consulting firm, Bamboo Consulting, Rodoni laid out a dismal outlook for 2009 and stressed Realtors need to be educated about their market and their competition, and sellers need to be realistic about pricing their homes in order for the market to stabilize.

The country is currently in a deep recession which will last longer than most, Rodoni told members of the Silicon Valley Association of REALTORS®. She said the San Francisco Bay Area market, including Silicon Valley, which has been well protected the past year, will experience some stress this year.

Rodoni sees the stock market continuing to be erratic and unemployment rising to as much as 8 to10 percent by the end of 2009. For sure there will be a stimulus package, she said, because "the government is willing to do whatever it has to do and we have no choice."

On the real estate market side, Rodoni expects mortgage rates to loosen even more and money to be there for loans, but the strict underwriting standards will continue – buyers will need the down payments, stable income and excellent credit scores and credit history.

"There will be no more of the 'get in and get out and spin it' mantra of the past," she announced. In other words, it's back to basics when it comes to lending.

Since sales and prices imploded the past few years, prices need to correct and then stabilize. Values in some areas like the East Bay will need to come back to their 1998 levels; in higher-ends areas like Silicon Valley, the correction in prices may return to their 2000-2001 price levels. Once buyers see prices stabilize and hold for seven to eight  months, they will realize the market has bottomed and become more confident, Rodoni said.

This year, even San Francisco, Palo Alto, Cupertino and other areas which have held value due to the excellent school districts and where demand is greater than supply, will see some foreclosures and short sales, since job losses will now impact higher income earners, Rodoni warned.

Local and international investors are coming in, as they have in the East Bay. In places like Palo Alto, Rodoni said the $2.5 to 5 million level market will be stressed. The buyer pool will be reduced and negotiation will lead to price reductions. In the lower high-end markets of the $1.5 to 2.5 million, Realtors will see buyer's remorse after a purchase, walk-outs will occur and the buyers pool will also reduced.

"Be careful with sellers. They love to live in a rear view mirror," said Rodoni. "Sellers need to know it's not as bad as the media says and in a market experiencing a housing correction and credit crisis they are out of their minds to test it."

Rodoni said it's important to price a home right the first time. "It's their one shot with pricing; after that it will cost them 10 percent of the value of their property because overpricing means overvalue and they will end up in the discount business and then lose even more. They have one shot to stand out," she said.

Buyers are of a different kind these days. They will now be questioning the value and return on investment of a property, Rodoni said. "They will be prudent with numbers and look for opportunities with a deal that makes realistic sense to them to justify the money they are putting into this asset."

Despite the troubled outlook for 2009, Rodoni is confident the market will make a comeback because, especially in Silicon Valley, where land continues to be valuable.
In the meantime, she said Realtors need to be more educated and understand the market so that they can explain conditions to their clients; sellers need to adhere to the reality of today's marketplace and price their homes realistically; and buyers need to make sure they adhere to strict underwriting standards to be able to qualify for a loan.

Rodoni believes the economy will improve in 2010. "The U.S. is still the greatest country. … The best thing everyone can do is resolve to be happy," she said. "Always believe in these three words: Yes you can!"


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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