Saturday, October 25, 2008

What's Really Happening with Real Estate Market
I'll be the first one to tell you that I'm no expert on the national real estate market. All I am concerned about is what is happening in the local market and how it will affect my clients, my agents, and business. Keep in mind that real estate is local. What is happening in California, Florida or Texas has no bearing on what is happening in the real estate market on the north shore of Massachusetts.
During the first 2 quarters of this year (2008), things were looking dismal, with a continued downward slide in prices, number of units sold, and traffic (number of inquiries received, open house attendees, web site visits, etc.). But something happened in the third quarter beginning in July. Buyers started making offers...and suddenly our business is up 85% year to date over 2007, and over 200% for the quarter. The fourth quarter has started off with the same gusto.
What has caused this complete change? I believe it is the result of several ideal buying factors all occurring at once:
  • Home prices have come down to a point where they haven't been in years. Add in the bank owned and short sale properties that are on the market and there are literally hundreds of bargains out there. The price that homes are selling at are equal to 2002.
  • The inventory of homes on the market is still high. Though the number has come down compared to last year, it is still considered historically high, giving the home buyer plenty to choose from.
  • Home sellers (including banks) have come to realize that if they want to sell their property, not only will they need to price it aggressively, they need to give some concessions to the buyer. You can get pretty much ANY seller to pay your closing costs, and even prepay your mortgage insurance to reduce your monthly payment!
  • Banks and Mortgage companies have money to loan...still at historically low interest rates. (under 6% just a couple of weeks ago) And you do not have to have perfect credit! You do have to come up with 3% down, but this can come from a gift (from a relative, etc.) or your retirement account (401K, etc). There are several government programs that will also match your down payment, so you only have to come up with 1.5% down.

The local real estate stats show that the number of units sold during the last 3 months is about equal to last year, with the average price down from last year (single family) but up from the previous 3 month period this year.

The smart home buyers are going out and looking at potential properties, and jumping on the ones that meet their needs and budget. You could wait another year to see if prices will drop any further, but in the meantime you continue to pay rent and will not be reaping the tax benefits of home ownership.

Jim Armstrong

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