I am sure many of you have or will be getting questions from your clients on how the current financial crisis will affect the real estate market in the short and long run. Since the details of the program are still in debate, the best that can be said is that a very sweeping program certainly will be passed and its effect will help stabilize the financial markets, allowing an increase in availability of mortgage credit and foreclosure relief to many, all very good things. This is a big ship to turn so there will be some immediate market euphoria (some of which has already happened) but the actual benefits will take some time to trickle down. In the short run, it will be interesting to see if lenders pull back on short sale negotiations since they may view those loans as the ones they will sell to government, thus avoiding a write off.
I don’t think our world will be affected much by all of this except for maybe some short term hesitation to jump from some buyers. So far, from John Adams perspective, we have not seen any mortgage access issues since 85% of our market is eligible for FHA for FHA/MSHDA and there is not a shortage of those loans. It is the less than 20% down conventional mortgages that have seen the biggest squeeze. If you come across some buyer hesitancy, remember the Financial Package is designed to stabilize and improve the housing market, and it will eventually bring with it increased interest rates as a consequence of the enormous size of the additional government debt. Both of those results will reduce the bargaining power a buyer has today, so the importance to buy now is even stronger. For Sellers, no change in strategy, if they need to sell now, cut the price hard to stand out in the crowd, or pull the home off the market and wait.
Monday, September 29, 2008
Friday, September 12, 2008
August Market Update
August followed the same trend as July and for the most part the past six months, a rising rate of sales (in terms of number of homes sold), a declining inventory of available homes and a decline in home values. No new news there, except the news that the trend continues, which is a very good sign (except for the home value part, but that will right itself when inventories fall to 6-8 months). Add to that a more stable mortgage market with the bail out of Freddie and Fannie (and even a rate decline!) and you have all the ingredients for an acceleration in our recovery. Not anything earth shattering for us in Michigan, since job growth overshadows any other housing influencers, but still good news for all.
What does this good news mean for Buyers and Sellers? For Sellers, price is still king and will be until our inventories fall from 12-18 months to 6-8 months. As we begin to move off bottom and see more good news trends, one of our bigger challenges will be keeping Sellers expectations reasonable. It will be very easy for a Seller prematurely feel the good signs mean their home will sell for more. There is still a lot of market absorption left before that can happen. Although the number of homes sold should continue to rise for the balance of this year and next as well, home values will continue to fall so don’t wait to sell, be aggressive and price ahead of the market, or take your home off the market and wait until 2010 or beyond when prices begin to rebound to better fit your target value needs. For Buyers, the advice does not change as well; the next three to four months will be a perfect storm of even lower interest rates and low prices. Rates should go up next year, negating any gain by waiting for lower values. If a buyer hesitates, waiting for a better price next year, ask them to make what they think will be next year’s offer today, you would be amazed at what can be created in this market. Finally, it can never be said enough, when you are selling and buying in the same market, you can’t loose, your gain on the buy will always beat or at least equal the gain (or loss) on the Sale.
What does this good news mean for Buyers and Sellers? For Sellers, price is still king and will be until our inventories fall from 12-18 months to 6-8 months. As we begin to move off bottom and see more good news trends, one of our bigger challenges will be keeping Sellers expectations reasonable. It will be very easy for a Seller prematurely feel the good signs mean their home will sell for more. There is still a lot of market absorption left before that can happen. Although the number of homes sold should continue to rise for the balance of this year and next as well, home values will continue to fall so don’t wait to sell, be aggressive and price ahead of the market, or take your home off the market and wait until 2010 or beyond when prices begin to rebound to better fit your target value needs. For Buyers, the advice does not change as well; the next three to four months will be a perfect storm of even lower interest rates and low prices. Rates should go up next year, negating any gain by waiting for lower values. If a buyer hesitates, waiting for a better price next year, ask them to make what they think will be next year’s offer today, you would be amazed at what can be created in this market. Finally, it can never be said enough, when you are selling and buying in the same market, you can’t loose, your gain on the buy will always beat or at least equal the gain (or loss) on the Sale.
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