BOB’S FALL NEWLETTER (10/08)
The leaves are not the only things falling just now; home prices are also fluttering down. The recent economic changes make this newsletter hard to write – I could write a book. But if you can’t get a view of the Real Estate market from your Realtor, then who can you listen to? So, let’s give it a shot:
Let me start with a chart of national home prices. The graph below was just produced by the Office of Federal Housing Enterprise Oversight. They are the government folks that are in charge of the recovery, supervising Fannie, Freddie and all those new tax dollars. Here is their site, if you have an urge to keep track of the ones who are keeping track. Warning! Lots of bureaucratic double speak ahead. (Reading their news releases may be more entertaining than a Rams game, though!) By the way, this is not a new agency. They were supposed to be watching the stuff that Congress has now put them in charge of regulating. I never heard the alarm bell from them, did you? Oh well, maybe they’ll do better now. The chart: 
If you can’t read the small print, notice the constant appreciation of home prices from 1991 until this year. The note on the chart equates the index today with the same level as September 2005. Falling leaves!
Some Real Estate sources say today’s market is “normal”, but has just gone through an adjustment. NOT! The Real Estate market will not be “normal” until appreciation in our home values resumes. And it will. History will repeat. There are just to many forces in play for that not to be true in the future. The trend will reverse. OK, so then where or when is the bottom? Last week Alan Greenspan testified before Congress that he was “shocked” that national home prices have fallen. We are too, Allen. If “the man” is shocked and confused, far be it from me to predict the bottom.
Now in terms of local market activity, sales are also not “normal”, but are reduced from last year. You might be surprised, however, that there are still a whole lot of people buying and selling homes. Reduced activity is not zero activity – we’ve been pretty busy. So, who is buying and selling? Most recent clients seem to be taking the long view. Look at the curve above. Many owners have nice equity in their homes from past appreciation, and they realize the market is down for both ends, selling and buying. It is still somewhat of a buyer’s market, though, based on inventory and sales volume. It is usually an emotional experience for sellers to price their home at a true market value, and buyers have to realize that a low-ball offer is not always the most effective bargaining strategy. Sure, we all wish we had sold our home two years ago, lived in a tent for the past two years, and snapped up a purchase at today’s prices. Get over it, it didn’t happen, and a home is a place to live, not an investment certificate to be traded. People are getting together, usually with a lot of help from Realtors. In many ways, the present market is a real good time to buy or sell a home.
This market does present an unusual opportunity for first-time buyers. Rents have not gone down and home prices have. Think about it. Some potential buyers may not have heard about the new temporary $7,500 tax benefit for first-time buyers (a description is on my web page). Mortgage money is still available for new buyers with reasonable credit histories. While home ownership is not for everybody in every situation, this is a good time to consider purchasing a first home. I really enjoy working with first-time buyers, however their plans come out. Their questions are great!
Many investors, I find, are still sitting on the sidelines, waiting for the bottom, or waiting for that perfect steal. The home advertising world is full of ads for foreclosures and distressed properties. Go ahead, investor wanna-bees, give your name and telephone number to foreclosurestogoodtotrue.com, they will surely call only you about the deal nobody else has heard about! The truth is that this is the information age. There is no secrete list – everyone knows about them. The market will generally determine what a property is worth, and that’s what you will have to pay – distressed or not. My experience has been that buying a foreclosed, or other distressed property is a slow, complicated and frustrating process where you get what you pay for. Banks and mortgage companies are just not good at owning, managing and particularly selling property. The process may get better with practice.
This thought brings me to some advice. Many homeowners are facing some hard times. If you, or anybody you know, are having problems keeping up with home payments for any reason, there is a lot of help available, with more coming. The key is to take action early – early – early! Most bad situations I’ve seen or heard about could have been less serious if actions had begun sooner.
Wow! I really didn’t want this newsletter to be a downer, but I hate that false optimism that sometimes flows out of our industry, even if I am a positive, happy little Realtor. On that note, buy a new home for a Christmas present to you and your family. You will look back on it as the best decision you made this year.
Enjoy the pretty leaves!