I have been selling and managing real estate since 1988. I have experienced two very good markets and now two very bad markets. Real estate is cyclical and the cycles usually last about 5 years whether up or down. The very bad market 1990-1995 was both a normal cyclical downturn compounded by economic problems. This market started off as a cyclical downturn but became much worse when loans started adjusting and people began to default on their loans. The whole banking scandal is old news now but the effects will linger. A normal real estate cycle, is like the stock market. Everyone can't wait to get in on a good thing and prices go up and when it starts rising too high too quickly the media starts talking about bubbles. The buying public begins to worry about buying at the height of the market and fear begins to permeate the market. The slow down causes more media attention and before you know it, no one is buying homes. Sellers and their real estate agents get frustrated and scared, and people begin to drop their prices in order to sell. Early prognosticators talk about a soft landing, however soft landings are rare. Usually prices after a large rise will take a good size fall. Our current fall has been more dramatic and will be longer lasting due to the economic conditions in the nation and the lending issues that greatly contributed to this fall. The good news is that real estate, historically, especially in Southern California, has been the best investment anyone can make. Prices that seemed incredibly high in 1990 are now twice as high. What we once believed as impossible prices to achieve are now commonplace even though wages have not kept up with the rise in prices. That is why I advise people to hold on if they can. My rule of thumb is, if the house is making you lose sleep and is creating financial difficulty then you probably want to consider doing a short sale or letting the house go. If you have equity and need to move then hold on and rent your home out. Even if you run a large negative on your monthly payment you should hold onto the house. Say you have a $700 a month negative. That is a loss of $8400 a year. Over 10 years that is a loss of $84,000. If you look at housing prices over a 10 year period you would have to assume that $84,000 loss would pale in comparison to the gain in appreciation and equity. You also need to factor in the true negative cost after tax deductions for everything related to the house. In turning the house into a rental you are entitled to deduct all costs including property management.

For those thinking of renting out their home, you should know that the Temecula, Murrieta, Lake Elsinore, Wildomar, Canyon Lake, Perris, San Jacinto, Hemet, Menifee, Winchester, and Romoland rental markets has been excellent for years. We have recently noticed a slow down in San Jacinto, Hemet and Perris. My concern is the slow down in building and the loss of construction related jobs which has made up a large portion of the local economy might begin to effect other areas. You should also be aware that an enormous amount of homes in this area were bought by investors with the sole intent of renting them out. That has created a great deal of competition and lower prices for rent. With that said I still believe renting the home out is a much better option right now than selling. I hope this analysis helps you with your decision.

If you have questions, or comments, or are interested in finding out about our property management services or selling your home please call me or email me:


Jeff Schlansky

Office (951) 506-9683
Email: cabest1@verizon.net