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Posts Tagged ‘market bottom’

Will “Shadow Inventory” Drive Home Prices Further Down?

First to start with a disclaimer: Even if the opinions and predictions in this article are 100% accurate – it does NOT mean you can’t buy or sell a home.  It just means you have to work with a Realtor who is staying on top of the dynamics in the market place.    It’s always been my feeling, in all walks of life, that most bad outcomes are the results of  “flying blind”.

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We all keep waiting for the  market to hit bottom and then rebound.  That may not happen for a while – a long while according to an article from Amy Hoaks of Market Watch.

Most of the theory and forecasting in this article come from a presentation that Stan Humphries, Chief Economist from Zillow.com gave to the National Association of Realtor Estate Editors (an 80 year old organization of Real Estate Journalists) in Austin Texas earlier this month.

SUPPLY ‘N DEMAND

The gist of the forecast is, always, about inventory.  Remember the Real Estate Market runs on the very basics of Business 101 – Supply And Demand.   When inventory is down, prices go up and vice versa.

There is much data to support that inventory is going to continue to go up dramatically over the next 18 – 24 months.  Humphries proejcts than even light of the slight up-tick in the national median home sale price – there are two large sources of inventory that likely will hit the streets soon.

SHADOW INVENTORY

The first is “shadow inventory”. These are homes that banks are currently holding but have not yet put on the active market. In addition there are a lot of homeowners who have not yet been foreclosed upon but likely will be. They are way behind on payments, or they are trying to handle a loan modification, which is still difficult for them to make payments.  There doesn’t seem to be an accurate number for this but the consensus is that it’s a big one.

SIDELINED SELLERS

According to Humprhies the other large group – which he estimate to be as many as 5 million homes – are people who have been putting off selling their homes for the last couple of years as they have waited for the market.  Due the plethora of “signs” that the economy is improving slowly, many of these homeowners will put their houses on the market because they really need to move, for whatever reason.

No one really knows what’s going to happen but I think it’s important to stay as informed as possible so you can make contingency plans to handle whatever is coming.

Here is the link to Hoak’s article.

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

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When is a Seagull like buying a house?

1/31/10

Updating an old post from about a year ago.  This is actually more timely than ever due the April 30th deadline for finding a house under the Expanded Home Buyer Tax Credit.

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I heard an interesting parabolic riddle (I always wanted to say that) by an author on one of the morning television shows today. I was also on the phone, tripping over the dog’s water bowl and trying to make breakfast at the same time so I didn’t catch the name of the man who was talking. When my brain processed it a little later on it really struck me though.

If there are four seagulls sitting on piece of driftwood and one of them decides to fly away, how many are left on the driftwood?

The answer is four. DECIDING to fly away is not the same as actually making the flight.

It’s really the same with a lot of folks today who are looking at houses. We all know this is a buyer’s market and a lot of people are taking advantage of it to get some of the great bargains that are out there. There are lot of folks I talk to though, who have made the decision to buy but they are waiting: for prices to bottom out, mortgage rates to drop below the historic lows that we have right now, or they keep hoping that the next new listing that comes on the market will be the perfect home.

The fact is that it is only a buyer’s market for those folks who actually buy a house. At some point, prices will go flat and then rise, mortgage rates will go up, and there will be fewer houses on the market to choose from. Nobody knows when these things will happen.

The simple truth is that the stars are aligned pretty nicely – right now – for qualified home buyers. So if you’ve made a decision to partake in the buyer’s market, there’s no time like the present.

Home prices will stabilize in 2009 and then rise – or they won’t!

December 27, 2008 Leave a comment

Recently the number of times people ask me what the housing market is going to do in 2009 has increased.  It seems that is the number one thing to ask when speaking with a Realtor these days.

It’s no secret that if more people get mortgages they can afford and purchase houses, it could be the beginning of the fix for all things economic.

It’s also no secret that a lot of potential home buyers are waiting – for that single moment when prices have fallen to the lowest possible level so that they won’t buy a home only to have the value go down.

It’s also no secret that prices will stabilize when the home buyers start buying homes because inventory will go down, reversing the supply and demand direction.

So what’s going to happen?

From what I can see, the dam of people who need to buy homes has to start flowing soon.  After all, people who started shopping for homes did so for a reason.  At some point that reason becomes more urgent.  Maybe it’s a growing family – or a longer commute, or the waste of renting for those who qualify for mortgages.

At some point, folks who have been waiting – will make the decision that they’ve waited long enough and they will then make the decision to move ahead.  That will start the flow, and the cycle will be back in the direction we all love – up!

Prices are low, mortgage rates are low, selection is large, this is the time to buy.

Real Estate Standoff

November 21, 2008 Leave a comment

If you watch the national media, whether it’s the left-leaning, right-leaning or middle of the road (is there really a MOTR media?) one thing that most of the pundits agree on is that the housing market is at the crux of our current economic crisis. There’s a lot of arguing about who is to blame for it, but most agree that if houses would start selling, we’d be on the road to recovery across the board.

The actual reason for the depreciation in housing prices is as basic as Marketing 101 – Supply and Demand. The number of available homes in nearly every market is much higher than it was as recently as 18 months ago – and if you compare it to 24 – 36 months ago you could find as much as a 200 – 300% increase in the number of homes on the market. Naturally – this means that prices will be lower since the number of buyers has remained essentially the same. Makes sense – doesn’t it?

Let’s take my favorite town – Anytown.

In November, 2006 there were 10 people ready to buy homes there. There were 13 homes on the market.

In November, 2008 there are still 10 families looking to buy homes in Anytown but now there are 30 homes on the market.

Certainly you can see why prices are lower – there are more to choose from so the buyers take their time. They look, think; look, think; and then look and think some more. Meanwhile, there are more homes coming on the market simply because of normal housing factors PLUS an increased # of foreclosures due to the over extension of consumer credit in 2003, 04 and 05.

Potential buyers want to buy and potential sellers want to sell but they are both wary of making the wrong decision.

So we have a standoff.

I bought my home in the spring of 2007. It is now worth about 20,000 less than I paid. As Tommy Lee Jones said to Harrison Ford in “The Fugitive” when he swore he did not kill his wife:  I Don’t Care.

First of all, I’m not planning on moving anytime soon, so the value of my house being less than I paid doesn’t matter. It will cycle back up again – someday.

Secondly, if I did choose to move now, the home I would be buying would also be significantly less in price than than it was 2 years ago so what does it matter?

What we need is for someone to instill a little confidence in the country so that the buyers who want to buy and the sellers who want to sell are not afraid to take the first move. Remember – A Journey of a Thousand Miles, Begins with a Single Step.

This is the Moment for 1st Time Home Buyers

One of the challenges that faces people who are trying to do what we call a “sell/buy” is that selling your home in a buyer’s market (which is where we are right now) often means that the seller will often have to sell his home for less than it was worth a year or two ago. In some cases the seller will actually have to sell his home for less than he paid for it, depending on how long ago it was purchased.

While, in reality, the lower sale price will often be offset by the lower purchase price on the new home, there is great resistance on the part of many home owners to sell for less than they paid.

If you are buying a home for the first time – this market may the perfect time for you to get into a home. The house you want to buy is almost certainly going to sell for less than it would have if you bought it last year or the year before.

There’s no way of knowing if we’re at the bottom of the market yet, so you should be prepared for the possibility that if you buy today your home may actually go down further in value before it goes up.

Everyone’s individual situation is unique, so you should work out the specifics with your Realtor and Lender before making any decisions but if you’ve been holding off on buying your first home this could be the moment.