The big continuing question is: Are the last four months a real bottom and bounce up or just an illusion? The answer is a little of both. There is no question we are at a bottom, the bigger issue is how long will we stay here and is there a chance of a second "dip" down (i.e., a "W" vs. a "V" recovery). The second dip will be largely dependent on to what degree the government extends or adds to the current housing stimulus efforts. A reduction of the stimulus will cause a downward dip.
If there ever was an example of government dollars and intervention at work, the current housing market is it. There are four key government support elements at play and a fourth private sector effort that contribute to the improving housing numbers we are seeing both in Michigan and across the country.
1) The
First Time Home Buyer Tax Credit, creating over 400,000 sales out of a national total of 1.4 million (both NAR and Moody's stats)
2) The government's financial support of Fannie Mae, Freddie Mac and the
FHA - Contrary to what the average person may think, these are the chief buyers and creators of mortgage products, not banks. FHA mortgages constitute nearly 70% of all
John Adams mortgages.
3) Low interest rates, created by a near zero % federal funds rate and the government's purchase of most of the mortgages being made (since other financial institutions don't want to buy them, without the government purchase, rates would have to rise to entice others to buy).
4) The banks current direction, with both a stick and carrot from the government, of a slower release of foreclosed inventories into the market, helping to stabilize home values.
Keep in mind these improving numbers have not yet moved up enough into the middle to upper range home values. That will not really take hold until employment stabilizes, giving two income families (one of the core engines to move up buyer growth) the confidence to sell and buy and the mass of former owners, now renters, the ability to become home owners again.
In Michigan, the overall market in the next 12 months is most likely to be either the same (extended stimulus) or down (not extended), so regardless of the outcome of the stimulus programs, Sellers still need to price aggressively, focusing as much on current competition as comparable sales. Buyers should be aware that an extended stimulus will benefit them but it will, combined with the banks holding back their inventories, also help dry of the current supply, making the best buys more scarce.
As a
company, beginning in June, each month has been successively better for us, extremely hectic, but better. The sales are unprecedented in their complexity and in many cases, anxiety. Collectively, each of us, our clients,
mortgage,
title and staff feel like we are walking up a sand dune, three steps forward and two back. But we are making great progress and in that effort helping people that have never in the past 70 years needed us more.
Here are our numbers for the month, as usual, better than anyone else. Also two very important bragging points, our
Traverse City offices were named the Hottest Real Estate Company buy the TC Record Eagle and
John Adams is now the number one FHA lender in purchase mortgages in Southeast Michigan!
