When will the market come back?

I suspect that most Realtors are being asked this question daily – probably multiple times.

Every day and night – we are being bombarded with headlines like “Housing prices tumble”, “Housing market continues to decline”, “No end in sight for drop in home sales” “Foreclosures up”.

The net effect of this kind of sensational journalism is that people who need to make a move are waiting. The question is, what are they waiting for and when will it happen.

If you ask most of these folks, exactly what they are waiting for – the answer is often that they are waiting for housing prices to begin to climb as they did in the early part of this decade.

Well – guess what? That’s not likely going to happen any time in the foreseeable future. Here’s what is going to happen.

Right now, we are in a depreciating market. This basically means that while the number of buyers looking to buy homes is roughly the same as it was last year and the year before, the number of houses for sale is much higher than it was. This puts the buyers in a good position. They can pick and choose which houses to buy. This also means that they set the price. The homes that do sell are selling for less than would have sold for 18, 24 and 36 months ago.

At some point, the glut of inventory (the number of homes for sale) will start to drop a bit. This will happen because some folks will pull their homes off the market or they simply won’t put them on. Buyers will start to act a little more quickly as they see homes they were considering start to sell out from under them. This will in turn decrease the inventory a bit more. This cycle will keep going until eventually the market will “bottom out” which simply means that the prices will stop declining.

Home prices, at that point will probably remain stable for a while and they start to rise a bit. The thing is that even when they do start to rise, the odds that they will rise as they did a few years ago are extremely low. Housing prices will rise, but at a normal pace – most likely keeping in stride with the economy in general.

You must realize that the level of increase from a few years ago was artificial. Prices went up because everyone was buying/selling/buying. People were purchasing homes with the intent of staying in them only a year or so and then “flipping” to another house where they would do it again. I know people that moved 5 or 6 times in 3 or 4 years. A feeding frenzy was rampant. Houses were selling in a matter of days or even hours after being put on the market. Bidding wars ensued.

None of this has any precedent. It was a self-perpetuating house of cards that had to tumble at some point. It did.

Now, at some point, the market will hit bottom, and begin to start a new cycle.

As to when it happens, some people think it’s very near. Anecdotal evidence suggests that houses that are priced properly are selling in a few weeks instead of a few months. Hard data isn’t available yet to say what 2008 is actually going to be like.

Some think it’s going to be a while.

So – when will the market come back? It will probably never come back to where it was 24 months ago, but it will come back to a normal cycle – soon (we hope).

If you have a need to move, talk to your Realtor and look at the market conditions in your own town. In spite of the gloom and doom from the national media, every market is different. If you have a need to move, you should move.