Wow! Existing home sales are up 5.5%! That is the most since a 5.6% increase in July 2003, during the housing boom. While largely overlooked by the plunging markets, this is great news. This means that despite all of the doom and gloom in the media and the economy, buyers came out. Why would buyers come out? Because they are starting to feel that they cannot wait any longer. They are afraid that if they wait, then they will miss their opportunity. They feel that this is the bottom, or as near to the bottom as they can safely achieve.
Many of these buyers are investors. I can’t tell you the last time I saw so many cash transactions in real estate. Yet, what does that matter? In fact, that might be even better news. If investors are not willing to wait on the sidelines any longer, doesn’t that mean that they will force a bottom or that they see this as the bottom? I think so.
So while the markets stumble, buyers are telling us that the bottom is close at hand or already here. This is the kind of encouragement that we were waiting for. Don’t miss it yourself and don’t let the media dictate your reality. If it is time to buy, sell or rent, contact Tiered Real Estate and see how we can help you!
God bless us every one!
Another article about the bottom of the market. This one says that it is coming in 2009 and then the market will wallow through 2010. I have found a couple of very interesting details about the market discussions. First, no one is kidding us any longer. Throughout 2007 we kept hearing about how it really wasn’t that bad… and it really wasn’t that bad… and no, really it wasn’t that bad. Unfortunately, we were headed down, but no one wanted to talk about it or consider what was going on. Those days are gone. Everyone talks about how we are down and how we came crashing down.
Second, a lot of the analysts are talking about how the market will do some wallowing, maybe for a season, maybe for a year and some say, maybe for two years. What this implies is that we have either come to the bottom or we are very near to it. It takes time for the entire market to shift gears and it will struggle with the changes that have already taken place and those that will emerge over the winter.
“Business as usual” doesn’t appear to be anywhere on the horizon (and that is a good thing) but business as it was before the lending madness is still here. While there is talk of wallowing and struggling and financing difficulties and crashes, there are still people (and hundreds of thousands of them) out there, in the market, buying and selling homes. When the stock market bubble burst in 1999 there were a lot of hurt portfolios and feelings but the market never turned off the lights and went home. It came down and kept going, and real estate is doing the same thing.
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.
Jim Cramer, during his “Mad Money” TV show, predicted the bottom of the market. The interesting thing about Cramer’s prediction is that it is focused on stocks (particularly the stocks of builders) and not specifically on housing. Obviously, an investment person like Cramer would focus on that side.
There have been a great many predictions about the market. So far, they have all been pretty bad. When the market was turning down, there were a great many people telling you to look up. When the market started its freefall, the doomsdayers talked about 1929 and the Great Depression. If you believe many of the big real estate organizations (you know who I am talking about), then you would have believed, for about two years, that it is turning around ‘next month’/'next quarter’/'next minute’/etc. Any length of time at all so that you wouldn’t feel there is a panic. Obviously, they have a stake in the market (i.e. our jobs) so they don’t want anyone to feel bad about it.
The amazing thing is that this is just a correction like free markets make. They happen on a regular basis. They always happen. The market always bounces back. The other interesting thing is that the market never goes to ‘zero’. We never have a month where no one buys or sells a home. Even in the 1980′s, when interest rates went to 18% and beyond!, people still bought and sold homes. There are still millions of people who are moving their families from place to place. In fact this sales market has turned into a boom in the rental market. People have to have a place to live. You may have been foreclosed upon or gone through bankruptcy and lost your home, but you can’t move your family into a cardboard box and most families cannot handle the burden of taking in another family. So what happens? They rent. And the market and the cycle continue.
In 3-5 years, when these bad credit renters have cleaned up their credit reports, increased their credit scores to a decent level, shown that they are good risks for banks and they have grown very tired of renting, they will start talking about buying again. And then guess what? The market will boom right back up because all of these people (who have no home to sell) will come back in the market and start buying up available homes. And the cycle goes on…