I was asked:

Dear Steven,
I have a home in Cupertino for sale. So far in the past month I've hosted 3 open houses and have attracted qualified buyers. However, each time, the stock market has dropped the following Monday 500 pts or more. Am I bad luck for the market, or is the market bad luck for me? Should I quit having open houses, as it doesn't seem to be lucky for me or the market?

Should I continue to drop my listing price to chase this crazy real estate market, or hold tight and wait for this horrendous storm to blow over?

Since you've been in the Cupertino RE market for many decades, I'd like to get your analysis of where you think things are headed and how we should best handle our listing.

So how do you sell in a difficult market? The key is making the home attractive to the buyer, and with a fluctuating economy it comes down to price. As much as I hate to be the bearer of bad news, if you need to sell, price the home under the market. The popular attitude is one of cost savings in this housing recession. Those buyers who wanted to buy two to three years ago but couldn't due to peak prices, now are in a better position with cash down, low interest rates, and more affordable prices. They're out there looking for a "good deal."

If you don't need to sell, staying in your current home for a few more years may be your best option if you need to hold out for more equity. I encourage clients to look at the big picture: If you sell in a down market, you can buy in a down market. A $700K house two years ago may be worth 25% less on the market today. But that is generally true across the board, so the community you want to buy in is also less expensive. Value on paper is one consideration, but your overall cash flow and needs should be weighed.

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Visit this unique 6 bedroom, 4 bath home on Sunday, Oct. 19 from 2 to 5 pm!

Stop by and tour this home at 749 Live Oak Way, San Jose in the Moreland School District!

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749 Live Oak Way
San Jose 95129

Almost 3200 square feet, this 6 Bedroom, 4 Bath home has a new, oversized kitchen with spacious eating area next to a step-down den with fireplace. With two master suites, there's plenty of room for an in-law setup, especially with the kitchenette upstairs off the game room.

See the virtual tour at: http://www.tourfactory.com/455355

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Sellers are motivated! We've just reduced this beautiful 3/2 Cupertino home to an unbelievable $819,830, almost $200K under original list price.

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Despite the gloom and doom of the financial market, buying a home that you plan to live in for 5 to 10 years is not a bad idea if you meet the financial requirements.

Let's run some rough numbers: First-time buyers purchase a home for $400,000 with 20 percent down ($80,000). The loan amount is $320,000 (let's assume the buyer paid all the fees, costs, etc.). At a 6% interest rate your interest payment is around $1920 per month for a 30-year loan. Incorporating the cost of property tax ($400) and insurance ($70) your mortgage payment is $2390. If you are also paying principal on the loan, let's guestimate another $300. So your monthly mortgage is between $2390 and $2690.

While that's some serious change, and I'm not recommending anyone purchase a home they can't afford, let's look at the comparison. Say you rent the same home for $1700/month. Using the interest-only figure for the comparison ($2390), after 5 years:

Renting: $102,000 spent over 5 years
Owning: $143,400 spent over 5 years

So how likely is it that in those five years your home will go up in value $41,400? Yep, it's quite possible. Even probable. If you're handy around the house, you certainly can do a number of improvements yourself and gain sweat equity that benefits you even in a difficult market.

Yes, you put down $80,000. I'm not forgetting that. But it's unlikely you stuck that saved $41K in the bank while you were renting and "saving all that money." If you paid principal in addition to the interest, then you gain equity by paying against the balance of the loan. So at $300/month you've paid off $18,000 of your $320,000 loan.

Sure, you may own a home and drive an older car. But economically, borrowing to buy a house is money far better spent than borrowing to buy a new car. Fat chance that car will go up in value in five years.

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