Observations
One of the benefits of being in real estate is we get to see things happening. That is better than seeing what has happened usually. If we can see it while it is happening we get to participate and perhaps even mold a little of the results.
I want to share a few observations that I see happening.
Inventory (the number of houses available) is falling in most segments. Property priced under $250K is being sold and since we have almost no new construction going on there is little coming on the market to replace them. Inventory is down about 30% over all from this time last year. As the sellers of those houses close on their deals they will be moving up to the $250K to $350K market and that inventory will begin to fall.
List prices are holding up to the offers being made. I see multiple bids on well priced property and much of that is going for a price that is somewhat higher than was advertised. It seems that many sellers (banks and individuals) are listing property at a price that the market likes. I don’t think we will see to much of the overpriced home as we advance toward a recovery in the housing market. Some sellers are being jolted as their neighbors homes sell for a price much lower than they are willing or are able to accept so they take their property off the market further reducing inventory and helping to stabilize pricing. Some buyers are missing out on the perfect home because they are unwilling to commit to a list price or even over bid while other buyers are very willing. This trend will continue to stabilize the prices we see at closings.
Appraisals are continuing to come in low in some areas. This offers protection for the savvy buyer just in case they offer a bit too much. Most well crafted offers include an appraisal contingency that allows the deal to proceed if the appraisal comes in low. The seller is offered the chance to lower the price to the appraised value and the deal closes so don’t worry about paying too much.
Interest rates are stable or edging up slightly and that is affecting how much people can buy. It has been said that we do not live in our homes but that we live in our payments. On a $200K property a change in interest rate of just 1% has the same effect as a 10% price increase. With rates at historic lows that means we have little choice but to go up. Inflation fears will prevail for a while to come with the current economy and if inflation increases interest rates will follow.
Foreclosures are still happening but at a slower rate than before. Most of the sub-prime mortgage fiasco is now through the system and we are facing the Alt-A foreclosures. The number of those is much smaller than the Sub-prime version but the price point is higher. They tended to be buyers that needed creative financing to accommodate the purchase in the face of unverifiable income and self-employment history vs. W2 type employment.
The affordability index measures how able a family is to buy a house they can afford. It is at an all time high which means there has NEVER been a better time to buy.
The point of all these observations is to show you the trend that we are seeing and to encourage you to make your move if you are thinking about buying. Mortgage money is available if you have the means to pay it back. A job, a down payment of at least 3.5% and a decent (not perfect) credit history will get you a mortgage. In most cases it will be less then rent for a similar number of bedrooms and you are moved from the position of tenant to owner.
Share this with your friends that are thinking about buying and then call me with their names and work number and I’ll take great care of them. We want the folks that are ready to enter this market to win and I believe they will win big.
Thanks for listening,
Jerry Robertson
678-231-1578 Cell