Jul
14
Here we are in mid-July and the media just can’t shake off the tendency to make some sort of hysterical news out of the real estate market. First they insisted that there would soon be a crash and prices would plummet. Then they admitted that prices were stabilizing but that the future was “shaky”. Now, all of a sudden, it’s a “buyer’s market”.
The truth is that NONE of the above is true. There will be no real estate market crash, prices are still in flux and it certainly is NOT a buyer’s market. The facts simply don’t support any of these views.
What’s happened in recent months is that the long-running rapid rise in real estate market prices finally ran out of steam. It was due, and necessary for the health of the market. When the market began to slow, several things happened:
1. The market prices of existing homes and new homes coming onto the market stopped increasing at the rate they had been increasing.
2. Buyers, who previously had to snap up homes as fast as they came on the market if they wanted any chance of getting one, notices the slowdown and began to take more time to make their decisions.
3. Sellers were slower to accept the changing market place and kept their prices above the market in anticipation of continuing rapid price rises.
4. Consequently the inventory of existing and new homes with “old” prices began to increase significantly and the time to sell began to increase rapidly.
5. Next, some sellers adjusted their prices and experienced normal sale times while most new properties coming into the market were priced lower than they might have been in recognition that the prices had stopped increasing.
6. With “lower” prices (not actually lower, but either at the true market or reduced from previous highs to the true market), the media began to predict a crash (rather than an adjustment).
7. Prices stabilized in most areas, with some decrease in average prices due both to the proper adjustment of overstated prices to the true market and due to a natural slight sag in prices as a result of the correction. Whenever a market trend stops or reverses there is always a brief “backlash” that is in the opposite direction, then another correction to the true new trend.
8. With buyers taking more time and sellers trying to hold on to their older, higher prices the market pace definitely slowed and inventories have grown considerably. More adjustment of formerly high prices is needed to meet the current market trend.
9. Newly introduced properties that have been priced properly are selling in normal times and at normal markdowns. The overall trend of prices is slightly up, at an annual rise of from 3% to 5% for the forseeable future.
10. The bottom line - it’s a balanced market. There is now a good inventory to choose from with mostly fair market prices and willing sellers. Buyers are coming back to the table and making offers again, but don’t have to act as quickly as before. Unlike the previous market trend which was marked by selling frenzies and unhealthy rapid price growth, the current market is solid, growing and good for both sellers and buyers. Interest rates are still low by historical standards.
It’s a good time to sell and to buy, if that’s what you are ready to do. So, ignore the media hype, select a responsible and experienced real estate professional and go forward with confidence!
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COMMENTS (12)
Excellent 10 points assessment. I am so tired of hearing the media make this into a story, is there nothing else for them to talk about. July 25, 2007 at 2:41 pm
This is truly propaganda from a realtor. It is a great time to buy and a poor time to sell. period. Art's reply: It's understandable that this might seem like propaganda, as this is a blog by a Realtor. The main point of this item, though, is that each person's situation IS unique and it's important to look at the individual situation, the goals of the client, the current market conditions, financing alternatives, etc. as a part of the decision to sell. You are definitely correct that the current market is moving toward a buyers' market, although industry experts say that it won't go to the extremes that the recent sellers' market did. July 25, 2007 at 5:22 pm
Hi, What is your opinion on the loose lending standards that enabled anyone with a pulse to get a mortgage? How do you think tighter lending standards will effect the housing market? Art's Reply: Overly loose lending standards are, in general, not a good thing for the real estate industry or for buyers as a group. By allowing those who cannot qualify otherwise to enter into shaky financial commitments that often result in failure on the part of the buyer, lenders actually damage the lives and hopes of those who most need help. Better to put the facts on the table ... if you can't qualify for a responsibly structured loan, then it's not a good thing to take on the burden of a debt you may be unable to pay. it's not different from overloading yourself with too many credit cards that you spend to the max! Tighter (that is, properly stuctured) lending standards will encourage safe and sensible buying and help maintain a healthy housing marketplace. Some individuals won't be able to buy or will have to wait to buy, and that is just the plain facts of life. It's just not possible for everybody who wants to own a home to be able to do so. July 26, 2007 at 8:29 am
How can it be a "balanced market" when home prices have increased 100% in the last 5 years? The problem isn't "media hype" it's that prices are too high due to loose lending practices, toxic mortgage products, and speculators. Now that the music has stopped, many will be left without a chair, as the market reverts back to 'normal' over the next several years. But currently, with home prices near 100-year highs, it's anything but a "balanced market." Art's reply: In real estate, there is no "market" that lasts for 5 years. In general, the "market" is the most recent 3-6 months of performance. It's this interval that's used to estimate the "market asking price" for a property coming up for sale and it's this interval that's used by appraisers and lenders to establish the proper lending level for a particular property. In this, shorter term, context the "market" has reached a more or less balanced state. Prices have stopped rising in general. In areas that were overinflated, prices have come down and many individual homes have seen pricing drops to conform with the current action of the market. Experts anticipate that there will be a slow upward trend of from 3% to 5% gain in housing prices annually over the next several years. Certainly there have been artificial stimulants that have fed the recent unusual rise in prices, and some of those influences have not been healthy. However, nationwide, real estate remains one of the best investments available. There is no evidence or indication that we will see a "real estate crash". July 26, 2007 at 11:13 am
So here is what i never understand. I am an average Joe. I got a new job. I need to relocate. This makes me both a buyer and seller at the same time. Aren't most people looking to buy (other than 1st time home buyers) in the same boat. And what difference does it make if it is a buyers market or a sellers market if everyone is going to be doing one or the other in a short period of time. Or is that I am the only person out there that doesn't own two or more homes? Art's reply: Many people who are looking to buy also have a home to sell ... in fact, it's often the case that they have to sell their current home in order to be able to buy another, so it's doubly difficult because of the timing of the sell-then-buy sequence. If you are looking to buy and sell in the same area, then whether it's a buyers' market or a sellers' market makes less difference, since you are going to benefit on one side and get punished on the other side of the transactions. But if you are moving from an area where it's a sellers' market to an area where it's a buyers' market then you have the opportunity to trade up for very little money. Conversely, if you are moving from a buyer's market area to a sellers' market area you may be forced to sell for less than you'd like and then have to pay more than you'd like to buy in the other area, losing ground in the process. It all depends on how the market is in the area, or areas where you have to buy or sell. July 26, 2007 at 4:17 pm
Why did my comments earlier today get censored? No profanity, just disagreement. And, I'm a Realtor. Is this thread just for those drinking the Kool-Aid? If so, please say so, and I'll go back to the bubble blogs. Art's Reply: There's been NO CENSORING. Yours may have been among the few that found there way to a different post, due to a fumble-fingered mistake on my part (I'm still leaning how the controls work). The most I'll ever do is to reply with a comment on your comment -- just part of the discussion. July 26, 2007 at 11:09 pm
I got money. Cash money. I need an extra 500 sq. ft. But I don't feel the vibe. Something isn't right. Like our local sheriff's sales sheets. What's up with 24 pages of the stuff when it always was, maybe, four (4)? And my buddy bought a nice little cape in a family neighborhood for $105k in 2000, and sold it for $200k in 2005. He giggled talking about it. Now, when a 6'4" guy who looks like Kris Kringle giggles, something is fishy. Please tell me I just need a prescription and it will all go away. July 26, 2007 at 11:18 pm
I know the media has got it wrong but so have many real estate pundits. The IRS claims that our gross income is among the top 5% in the country but when we go look for a house that fits our budget all we get to see is a POS with a 'lowered price'. Mind you this is middlesex and not some high flying NNJ town. Unless income like real estate prices double in the next year, i see prices going down for at least a year. How far will the downturn go, like most i don't know the answer but i would assume until median salary can buy a decent house at historical DTI. IMHO, Realtors should recognize this problem before the situation gets out of hand. July 27, 2007 at 6:46 am
How come Realtors were not sick and tired of the media when they were hyping housing price increases. Now that the market has turned, the Realtors are angry at the media, you people are something else. Art's Reply: Good Point! The truth is that if the media is distorting the truth then we should be taking issue with it in both good times and in bad times. July 27, 2007 at 9:08 am
Art, I agree with what you are saying. How can it be a buyer's market when inventory is down 4.4% and prices are up .03%? Also, please pay no attention to the poster who goes by the name "Clotpoll" He is an unethical reator who intimidates sellers into lowering their prices by threatening to withdraw their listing. He has admitted to doing this many times on the real estate bubble blogs. It's a mricale he still has his RE license! Keep up the good work! July 27, 2007 at 2:07 pm
The media is distorting the truth. Recently, it was reported that RealtyTrac, who counts foreclosures in the U.S. were counting the same homes 2 and 3 times so the number of foreclosures is greatly exaggerated. July 27, 2007 at 2:23 pm
I think that our market is better than ever for investers. The homes that were being bought by the infomercial people are now sitting longer and real investors are able to buy cheap. just remember the person who chould get the $200k loan can now only get the $150k loan and so on. Eveeryone has to live some where. Low ball the banks on these repos and go make some money. August 11, 2007 at 10:29 pm