The Three Most Important Words in Real Estate

One of my first lessons in real estate came courtesy the man who would become my mentor in the business. “You know those three little words that mean more about real estate than any others, don’t you?” Eager to show my vast wealth of knowledge, I replied, “Of course I do…location, location, location.” “No”, he said, “Follow the jobs”. After all, real estate is a prime example of supply and demand. If people aren’t working, they can’t afford to buy homes so prices will have to drop.

That overly simplistic view still has merit today. Back then, we didn’t have the myriad of financing possibilities that we have now. Fixed rate with 10 and 20 percent down, adjustable rate and balloon notes. That was about it. If you couldn’t qualify for those, that was it. Today, we have all kinds of different loan programs available. It isn’t just jobs that we have to watch. Anything that would reduce the number of buyers and upset the supply and demand balance will have an effect on the real estate market.

Right now, we have lost a whole segment of the market that was created just a few years back. The subprime market came about because we had exhausted the refinance market and there were thousands of loan officers and other positions with nothing to do. So, new programs were created to bring buyers in and make it attractive enough for the people who were already homeowners to move up. With interest rates low, it made sense for buyers to make that jump. Unfortunately two things happened, or didn’t happen. Many of those buyers didn’t prepare for the adjustments that were going to happen to their loan down the road and values didn’t increase enough to give enough equity for them to be able to sell to get out from under the payment. The result? You see it out there….foreclosures, short sales, distressed sales and the like.

How is Coles Crossing doing in this market? Well, happily, pretty well. Sales are down are down a little across Houston, just as they are all over the country. We haven’t had the depreciation many places in the country have. So, all in all, being in one of the strongest parts of the city in the city that is the strongest in the nation isn’t a bad place to be. In our next installment, we’ll take a look and see how 2007 stacked up for Coles Crossing compared to our record-breaking 2006.