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October 28, 2007

Real estate leaders analyze market's rise and fall

Don't blame real estate agents for the financial mess many homeowners are in. It's not their fault prices soared so high or crashed so fast. Housing is still a good long-term investment, and this is a great time to buy a house.

That's the consensus of the region's largest real estate companies -- Century 21 M&M and Associates, PMZ Real Estate and Prudential California Realty.

Their leaders made a well-argued case defending their 1,400 agents and explaining the crash during a round-table forum sponsored by The Bee.

Larry Matos of Century 21, Mike Zagaris of PMZ and Craig Lewis of Prudential were questioned about the housing market -- its rise and fall.

"Did the real estate agents do anything wrong? No. Did the builders do anything wrong? No," said Matos, whose company has 600 agents. "I don't think there was a lot of bad advice out there. I just think a lot of people got caught up in the market conditions."

The buying frenzy from 2000 through 2005 caused home prices to more than double. Since the market peak two years ago, home values have fallen about 30 percent, the three real estate leaders agreed.

"Real estate agents can't promise people their homes are going to go up and up in value. Neither can we predict they're going to go down in value," said Zagaris, who has 500 agents.

Unfortunately, buyers tend to move in and out of markets en masse, but Zagaris said savvy investors do the opposite.

"It's really hard to fight the mind of the crowd. In 2003, 2004 and 2005, the mind of the crowd was that real estate was an absolute slam-dunk-can't-lose proposition. Now the mind of the crowd is that real estate is a disaster," Zagaris said. "Generally, the mind of the crowd is wrong."

Mistakes also were made with the types of loans offered to buyers, Lewis said.

"You could say institutional investors or Wall Street created some of this problem because money was so accessible," said Lewis, who has 300 agents. During the boom years, Lewis said home buyers were given mortgages without having to verify their income or make down payments.

Lewis said many real estate pur- chases were motivated by the potential for short-term gains from appreciation.

"That is a mind-set we have to start adjusting," he warned, suggesting houses should be bought for shelter, not just as investments. "It is a home to raise your family in."

Homeowners shouldn't have refinanced or tapped their equity so often, the real estate leaders agreed.

"A lot of people got into these loans, then refinanced the property three or four times," Matos said.

With each refinance, equity was pulled out of the home. Matos said many real estate speculators tapped equity from one property to buy another, with the idea of "flipping" the sale for a quick profit.

That wasn't wise, Zagaris said. Buying a home traditionally was a conservative investment that wasn't dependent on big increases in appreciation.

"If you buy a home, get a loan, pay your payments and in 30 years you own it free and clear, then it doesn't matter what happens to prices of homes in the meantime," Zagaris said. He's convinced home values will rise substantially in the future because "over the long run, housing will become more and more scarce relative to the number of family units in our state."

But buyers should beware whom they get advice from, according to Lewis.

"We have people that are doing loans and they are selling real estate," Lewis said. "Quite frankly, there is a real conflict of interest. What are they really doing? Are they really trying to serve the client? Or are they really just trying to make money for themselves?"

Bee staff writer J.N. Sbranti can be reached at 578-2196 or

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