Tiered Real Estate Blog – Reality in Realty

If you are a watcher of the stock market you will notice that many times the market will undergo a “correction.”  This usually happens when stock prices race up to a high level.  Then investors will sell stocks to pull out profit and the prices fall.  Hence, a “correction” in the market.

Real estate appears to be going through a “correction” as well.  Prices raced up to a high level and then many sold off and took out profit from their homes.  Like most corrections they tend to drop considerably lower and then start climbing back up and there are swerves along the way.  Think about driving your car.  If you are sliding and you turn into the skid (like you are supposed to), your car will turn and you may have to make another small correction or two to be back to going straight again.  We have been experiencing a drop and there have been some ‘swerves’ where prices have increased and market times have dropped, while there have also been areas where prices have again decreased and market times risen.

Unfortunately, housing is not like the stock market in terms of expedience.  You can’t call a broker and sell your house today like you could sell a stock.  Sales in real estate take time and even if you had a buyer today for your home, it would take a minimum of a few days (for a cash transaction) to several months (for a short sale).

So what happens when the prices start to drop and everyone else decides they want to get out?  You end up with the current market and creative, new ways of getting rid of homes.  We have short sales (where owners sell for less than they owe) and foreclosures (where the bank takes the home back from the owners).   These are both part of the current market correction.  Anyone in the stock market will tell you that it cannot go straight up forever.  There will be ups and downs along the way.  To accommodate this correction, the banks had to either find ways to let people pay significantly less on homes they owed, or they had to find ways to get people out of their homes and let market forces (supply & demand) take over.

So while many people fret over the number of short sales and foreclosures and many worry about the stigma of short sales and foreclosures (either on them or their neighborhood), everyone should realize that this is part of the market correction and largely is going to be universal throughout the market.  That means that every neighborhood should experience the same issues.   In fact, we should realize that many homeowners are taking advantage of the current situation and leaving their homes intentionally so they can set themselves up for a better future.  Homeowners who are constantly struggling to tread water are realizing that they don’t want to live like this for the next 2, 5 or 10 years and are better off leaving now and realigning their finances and saving for the future.

Once we get through this correction (which will take longer than a stock market correction because of the time it takes to buy and sell real estate), hopefully everyone will have taken prudent steps to firm up their finances and prepare for a better tomorrow.