Tiered Real Estate Blog – Reality in Realty

My attention was recently drawn to an article (click here to read the article) that while it is several months old, it is still one of the most popular online.   The article discusses signs the housing market is starting to recover.  This is a very good sign for the economy overall since housing is a ‘leading indicator‘ or the economy (i.e. it is one of the first to move up or down to indicate which way the economy may be moving).

In particular, I noticed several things that lead me to believe that housing has reached its bottom and is finally turning around.

First, last winter there was an enormous number of cash transactions.  What does this mean?  After sitting on the sidelines for a long time, investors (basically anyone who had cash to invest) decided that they couldn’t wait any longer.  Simply, it was too great of a risk to wait because they saw that the market was extremely low and the best deals may start to disappear.  Since that time, there has been a steady flow of cash transaction as more and more investors return to (or start in) the housing market.

Second, on occasion, I provide market information to banks.  For the first time in several years, I had to report areas of increasing values, increasing number of sales and a reduction in inventory.  Inventory is simply the name used for the number of homes on the market.  As little as two years ago, some areas had four times as many homes for sale as sold in the previous 6 months.  This means that if no homes came on the market for 2 years (4 times the amount x 6 months) then we would finally exhaust the inventory.  That is an awful ratio in housing.  Two year market time is not something that any homeowner wants to face when selling their home (this is part of the cycle that leads to dropping prices… high supply +  low demand = drop in price to sell your home before another).

Finally, the simplest (while the most subjective) reason is simply the activity that we have experienced.  As the market was free-falling, the number of inquiries and phone calls also went into a free-fall.  Not only have those levels stabilized, they have increased.  Again, buyers are competing for homes that are great deals.  No longer can we casually make an offer and expect to have it taken.  While we certainly do make offers of all shapes and sizes, nothing is a ‘sure-thing’ any longer.

What does this mean for you?  If you are a home owner who wants to sell or refinance their home, then good news!  Everything is starting to come back and buyers are looking.  Values are slowly (and not in all areas) starting to increase.  If you are potential home buyer, it means that you shouldn’t wait on the sidelines and hope that you can squeeze out another 5%-10% decrease in price.  Go out and look at homes and if you find something you like, negotiate.  Use your buying power to get a decrease in price, don’t hope for a price drop that doesn’t look likely to happen.

If you are interested in buying or selling a home, contact one of the great agents at Tiered Real Estate where we will be glad to help you with all of your home buying and selling needs!

I came across an article about housing prices and the possibility that the decline could be worse than the great depression. There are two things that strike me about this brief article.

First, it hints that we may be near the bottom as far as the decline in home prices is concerned. While it does say that we could drift down some more, it gives us an indication that the crash, and the most difficult decline, is over. It does dispel the myth that prices will jump right back up. The rate of increase in housing prices in a normal market is slow and steady. As we proceed through the cycles we have adjustments (most not as severe as this one) but historically, real estate is a slow and steady march upward. When we hit the bottom, it will take several years for prices to start going up and they will not recover all of their losses for many years.

Second, even though prices may have plunged on a level equivalent to the great depression and our debt ratio is so extremely high (which is a concern for the overall economy), we still haven’t had a repeat of the changes in the landscape of the American public like we did in the 20′s & 30′s. We don’t see the Joad family. We don’t see millions of people crossing the country looking like the Beverly Hillbillies searching for that elusive job. Yes, we see millions losing or giving up their homes, but the impact has been different. These people have shifted from owning to renting. They have shifted from spending lavishly to being forced (largely by not having access to enormous amounts of credit) to spend conservatively. They have shifted from one income to two and not raised their nose at that minimum wage job that the business owner had trouble filling a couple of years ago.

Yes, the housing correction has been extremely painful, but more and more indicators are that the worst is over and while the glory days will not return in the near future, we do know that they will return. They always do.