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Photograph by Paul Myers
Due to the tragic events that occurred Sept. 11 on the East Coast, many forms of patriotic expression have found their way to local homes, such as this one in Los Gatos.
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The American Dream lives despite the recent nightmare
By Jean Newton
In the aftermath of the tragic events that rocked the nation, the sound of unity is ringing throughout the land as Americans gather together in support of the ideals that make the United States so strong. As part of the basic belief in freedom for all, the dream of home ownership ranks at the top of the list of all things American, along with baseball, Mom and apple pie. With flags waving, Americans grieve, but continue to move forward with determination--even when faced with uncertain times.
For many, it's a time of deep reflection, and for others there is a push to return to business as usual. The real estate industry is no exception as it grapples with how to handle the ramifications of a cowardly act of terrorism that turned the economy and day-to-day living upside down. While the first response from Realtors was to establish a fund to support families of the victims of the tragedy (see Real Deal column for details), the second was to continue to help clients understand the nature of the real estate market as it unfolds.
"No one has the insight to know what will happen tomorrow. Realtors will be making every effort to become informed about housing market conditions to give their clients the most up-to-date information available," said Jeff Barnett, president of the Silicon Valley Association of Realtors and vice president of Alain Pinel Realtors in Los Gatos.
Even before the terrorist attack, the housing market was slowing down after setting record sales in the first half of this year, according to the National Association of Realtors. Dr. David Lereah, chief economist for the association, said, "Clearly, the housing market has peaked, and sales are now slowing." His forecast called for sales to increase in 2002. Now, it's anybody's guess as to what will happen during the remaining months of this year, let alone next year. Although, as a result of the Federal Reserve's Open Market Committee's action this week to support the nation's economy, major banks began lowering their prime rate to 6 percent.
This marks the eighth reduction by the Federal Reserve this year in an effort to shore up the economy and boost sales. Lereah said low interest rates tend to keep the door to home ownership open for many first-time buyers who ultimately preserve the trade-up market as sellers find a fairly ready market for their property.
According to the Freddie Mac Primary Mortgage Market Survey for the week ending Sept. 14, the 30-year fixed-rate mortgage averaged 6.86 percent, down from 6.89 percent the week before. One year ago, the 30-year fixed-rate mortgage was 7.88 percent.
"The August unemployment picture was weaker than expected, confirming suspicions that the much anticipated economic rebound has not yet occurred," said Robert Van Order, Freddie Mac chief economist. Van Order said he expected a dip in mortgage rates in the weeks after the East Coast tragedy. "But the uncertainty brought about by the horrific events may cause some retrenchment of consumer spending, stalling the economic recovery even further and offsetting the impact of lower mortgage rates."
Perhaps a better picture of where the market stands comes from the observations of Realtors in the valley as they interact with people who are considering buying or selling. Comments from several Realtors from Coldwell Banker ranged from "it's too soon to tell" to "now is the time to buy."
Realtor Leannah Hunt of Coldwell Banker in downtown Palo Alto held an open house in south Palo Alto on the weekend that followed the Sept. 11 attack. More than 30 groups attended. "People were subdued; however, we have so many who wish to live in this community that the terrible events don't seem to deter buyers." Although she said buyers were tentative because they don't know what else may occur, the drop in interest rates was positive. "I do believe that if people need a home, now is the time to buy," Hunt said.
Without a crystal ball, Realtor Dante Drummond of Coldwell Banker in Palo Alto thinks it is impossible to know at this time. "It could be that as a seller this would be the best time to sell because the market could be worse next year in light of all the ramifications of the recent events. As a buyer, interest rates are on the way down, home prices are lower than they have been in years, and people still have a need to find their home and settle in. Our office was reporting open house traffic as usual during the past weekend. People are still out there looking. We also reported several sales last week, despite the events of the week," Drummond said.
According to Cristina Page with Coldwell Banker Palo Alto Midtown, reacting to fear isn't a good way to respond. In her opinion, going about normal routines is key. "If every American continues to do their best, we all will come out ahead, better and stronger. If you were looking for a home last week, that need is not gone. You are still in need of looking for a home. The interest rates are very low; inventory is large, so it is a good time to buy that home now. If you were planning to sell your home last week, that need is not gone. You still need to sell your home. It will take a little bit longer to sell, but it will sell because buyers are looking for homes."
In the short term, Page believes people will be a little cautious and prefer to wait a bit. "But buying a home may be a better choice now than placing your money in another form of investment," she said.
In the long term, housing has traditionally been a good investment. As the nation adjusts to life after Sept. 11, 2001, Americans may find that the old saying "there's no place like home," will become more appropriate than ever before. And as business slowly returns to normal, the dream of home ownership will continue to thrive.
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Los Gatos, California Since 1881
