The real estate news has continually been highlighted and almost exclusively centered around the real estate bubble, continual boom, possible bust, and measuring interest rates.

Trade publications remain focused on this topic, business journals continue to address the speculation, and local papers cover the same within their communities and the industry trade organizations symposiums along with seminars geared toward the public continue to offer just more of this same information. So what else is new?

We keep hearing that the prices of single family homes may be dropping but there is just not a significant pattern of sales reflecting this to be true. The reality is, that with such scare inventory of homes on the market, there is no way to accurately measure a downturn. This accompanied with the constant measurement of a quarter of a point changes up and down in interest rates is comparable to watching your weight go up and down a pound; what difference does it really make?

The apartment market follows the single family market and apartment sale prices are still very high and climbing although not at the same rate and pace that we’ve been experiencing the last few years and this is an obvious correction. Measuring cap rates, gross rent multipliers, net operating income, cash on cash and yield after investment formulas don’t really mean anything when you’re looking at a proforma with today’s prices. The values are on the speculation of appreciation and supply and demand. The supply is still low and the demand is still high.

The continuous increasing costs of fuel is another constant topic. Our current gas prices of close to $3.00 per gallon are still only half of what the gas prices are in Europe and it’s no secret that the cost of fuel is only going to continue going up. Economic forecasts encompass the cost of fuel along with other consumer price increases and naturally weigh this into the overall housing projections. Re/Max, the nation’s second largest real estate brokerage will be listing all residential property listings in the United States on their website allowing easy access to consumers and some believe this will equate to more efficient pricing. So the question still remains: is more efficient pricing less or more?

So how does the Westside and the Santa Monica apartment market tie into these endless articles and discussions? In evaluating where the market is going, we can draw on our history and experience here in Santa Monica for 26 years. We have represented buyers and sellers of apartment buildings for 26 years and have even sold some of the same apartment buildings several times over the years, while the owners of building have changed some of the tenants still remain the same and we all know which tenants those are. We manage around 800 units and also operate our own portfolio. We have been residents of the city of Santa Monica and at one time were tenants. We have children in the Santa Monica Malibu Unified School District which is still considered to be one of the better districts however even with the increasing taxes and bonds to property owners for the schools, the district still does not have enough funds. We were here when rent control went into effect in 1979 and have been actively involved in striving for change and standing up for property owner’s rights. Looking back on these years and the real estate cycles we’ve lived through, consider the following calculation: Look at your current equity less the cash that you invested that will equal your gross profit then divide your gross profit by the number of years that you have owned your building which will equal your annual profit and then divide that again by the cash that you invested, that number will be your internal rate of return; wow that’s a very big number! You may even want to do that again! This is the real barometer if you want to know if your investment makes sense. Now keep in mind your own internal rate of return on your properties while you listen to the news, read the forecast articles and gauge the market along with everybody else and once again be aware of where your internal rate of return is in the cycle and what moves if any would best serve you.