The CNNMoney.com article "Home Prices: Don't Expect Quick Rebound", March 9, 2007 predicts what will happen to the value of homes in the next few years.  David Lereah, the chief economist for the National Association of Realtors, says that "we'll have to go into 2008, maybe even 2009 before we get even close to the peaks we saw in late 2005 or early 2006."  Celia Chen, the director of housing economics for Moody's Economy.com is less optimistic and believes that it will take until 2009 for prices to reach the peaks that were hit in 2005.

A couple things that contribute to this real estate slump are the glut of homes on the market, there are a record 2.1 million empty homes for sale, and the fact that home prices appreciated so greatly in the first half of the decade.  The law of supply and demand explains why home prices are dropping.  As the supply of houses increases, the demand declines because consumers have more choices.  Sellers therefore have to use incentives and lower prices to attract buyers to their property.  The problem with the appreciation over the last 10 years is that it was so great that it will even take longer for the market to balance itself and reach equilibrium.

These new predictions are not the greatest for anyone who is trying to sell their home.  They are however, an unbelievable opportunity for our generation, as we try to settle and purchase our own homes after gradation.  Home prices have fallen drastically and we should all have a better chance of buying a property and building equity.  As the market continues to level it can start to rebuild and our investments will appreciate.  We have the very unique chance of buying low and being able to sell high in the next 3 to 5 years. 

Another good sign for the market, according to David Stiff, the chief economist for Fisery Lending Solutions, is that all previous real estate slumps have been accompanied by a recession or downturn in the job market.  This decline hasn't been correlated with either of these issues, it solely due to overbuilding.

Buying is a great opportunity right now but one of the hardships for new buyers will be the difficulty in getting loans.  Because banks were so willing to loan money during the housing boom, many people over-borrowed and are defaulting on their mortgages.  Also, people who purchased houses using ARMs have started to suffer as the terms on those loans start to change, which lessens lenders willingness to loan money. 

Even though it may be a little more difficult for new buyers to get loans, this is the perfect time to find a way to buy.  If you can't afford to purchase on your own, consider investing with a family member or friend.  This opportunity to build equity so early in our lives is something that may never come again.  Start saving your money and thinking about your future before the market turns around and regains momentum.

There are several factors that affect the price of your home such as location, interest rates, and your local market. These factors must be carefully weighed when you are deciding to list your home for sale. Realtors are experts at evaluating these things and they can advise you on how to price your home so that it sells in an appropriate time period and for the best value.

Factors Affecting Price:
· Location
     Prices rise in markets where the population is growing and there is a lack of houses for sale, where job growth is increasing, where the best schools are, etc.

· Supply and Demand
     If there is a glut of houses on the market (More Supply) than the demand for homes is spread thinner among them, and each home will get less attention. Conversely, if there are only a few houses on the market (Low Supply) and many buyers (High Demand), they will be competing for a limited commodity which can lead to increased interest.

· Time Available Before the Move
     If the seller has to sell in a short amount of time, for a job transfer perhaps, they will not be able to price as high. They can not afford to wait for that higher offer and are much better off pricing it fairly or even 1-2% below market value to get attention right away. If the sellers don't need to sell immediately then they have the luxury of waiting for the ‘right buyer' to offer the price they want. Keep in mind that even if you can wait it doesn't mean that you should. The market changes everyday and waiting a month to lower your price could mean that you lose thousands of dollars.

· Interest Rates
     The lower the interest rates are, the more the buyers are able to afford to buy. This means that there will be even more qualified buyers for your home.

· Condition
     What is the general condition of the house? Have you kept up with repairs? Is it clean and sparkling or dark and dingy? Does your home have good curb appeal? Be sure that before you list your home you have cleaned it top to bottom so that it shines, picked up clutter, and landscaped the yard as best you can.

· Amenities
     Does your home have updated appliances, counter tops, bathrooms and low- maintenance landscaping? These things aren't something you should invest in if you want to sell soon, but if you already have them they will give your house an advantage once it's on the market.

Sale prices are NOT based on...
· Emotion
     Buyers aren't interested in how many great times you and your family have had in you house. They also don't care how long it took you to install those new cabinets or re-paint all the bedrooms. The buyers are only looking for the facts and the tangible things that give your home value.

· What the buyer ‘needs' to get in order to buy a new home
     Please be thankful for your homes appreciation. Despite the recent slow down in the market, almost all property owners still saw an average 8% in appreciation over the last decade. This is free money that you get just by living in your house and taking care of it. Don't get too greedy when it is time to sell and don't have a specific price in mind that you ‘must' get.

Should You Price High To Start?
Many sellers are under the impression that it is okay to start their home at a price higher than the market can handle because they can always adjust it later. This is a huge mistake that can lead to frustration and the loss of thousands of dollars. If the list price is too high to start you will immediately push away prospective buyers who would otherwise be prime candidates to purchase your home. Also, the majority of buyers work with a buying agent and these agents will know that your home is overpriced and advise their clients of that before they even get to see it.

Pricing too high is also a waste of marketing. When your home is first listed a good Realtor will advertise it in many ways, possibly including the Multiple Listing Service, company websites, personal websites, homes magazines and newspapers. When interested buyers see the ads and contact their Realtors for more information they will find out that you have overpriced and will be discouraged from looking at it. At this point you and your Realtor have wasted time and effort. Also, agents and buyers pay the most attention to the newest listings on the market. Agents specifically get ‘hot sheets' everyday that shows all the new houses. If your initial price is over fair market value, you are missing the best opportunity to get exposure on the market.

Let's say that you knowingly over price to start because you knew that a price adjustment was an option later on. The risk is that overpricing wastes time and something unexpected could change your circumstances. You may have found your dream home and need to move soon, or you may want to start your retirement as soon as possible. Situations like this could make you desperate to sell and you might be forced to lower the sale price, possibly below market value. You may also be forced to accept a lower offer just so that you can move out in time.

The Figure below shows how long it will typically take to sell a house depending on its price. The CMA, or Comparative Market Analysis, is the evaluation prepared by your Realtor that explains your local market and the range for which your house fits in.

The real estate market in Southern Rhode Island is heating back up which should make for a great 3^rd and 4^th quarter and an even better 2008.  Contrary to popular belief, the market here is performing excellently.  Many towns are staying stable and some are even seeing increased sales of almost 20% from 2005.  The ‘bubble' certainly hasn't burst here, the public just needs to recognize the differences in the market and be realistic with their expectations.

Certain towns such as Narragansett and North Kingstown have seen some pretty big losses.  However, the falling prices are due to the local economies, not the national panic about the real estate market. 

North Kingstown is in the middle of a rebirth.  It saw a 13% decline in sales price and homes sold for January to May from 2005 to 2007.  This was largely due to the military complex being closed in the 70's which left the once booming area desolate.  Today NK is in the midst of plans for shopping centers, parks and a new boardwalk area that will revitalize the town.  The journey to restore North Kingstown's residential and commercial areas to their glory will take a few years but it will certainly be to the benefit of the community and anyone owning real estate in the area. 

Narragansett, another underperforming town, suffered a huge decline in sales prices of 25% since 2005.  This was greatly because of its major market being vacation homes.  Since the economy has slowed recently people are not investing in second properties as much as in the past.  That falling sector skews the change in home sale data despite that fact that residential properties are still selling well.

Remarkably, East Greenwich and West Greenwich are among the towns to see great growth.  With a 9% and 19% sales price increase respectively, they have been some of the most profitable areas.  East Greenwich is always attractive because of its rich history and culture and for having that small town feel.  The waterfront, shops, and diversity make this area unique and guarantee that it will continue to flourish in the future.  West Greenwich is very attractive because it has more housing opportunities at lower costs.  It is a great way for first time homebuyers to get into the market and own a home while still enjoying a stable town, nearby amenities, and good schools.

South Kingstown is holding steady with a 20% increase in the number of homes sold and only 4% depreciation in price since 2005.  Clearly this area is still in high demand and because of that, they have not fallen victim to the ‘real estate scare' of the last two years.  Great schools and the proximity to the beach guarantee that affordable homes are swept off the market quickly and at offers very close, if not a little over asking price. 

East Greenwich and Exeter had over 50% increases in home sales from January to May, 2005 to 2007.  West Greenwich saw 40% improvement since that time.  This clearly shows that Southern Rhode Island is a very desirable place to live.  The increased buying will also help alleviate the glut of homes on the market, making the market even more stable and creating more demand for the houses that are available.

This state has everything that anyone could need and there is so much diversity that we were never affected by the real estate ‘bubble'.  The area is still flourishing despite the national economic setbacks but sellers and buyers must realize that things have changed.  Homes are staying on the market longer and sellers need to be more realistic with their asking price because they are still seeing huge appreciation in their homes even without the bidding wars of the past.  Buyers alike need to understand these principals since homes here haven't lost much, if any, of their value and they need to offer fair market value for a home that they want as their own.  Even if you are not planning to buy or sell soon, understand that the real estate market is a delicate thing and that each individual market is affected by many factors.  While some markets are suffering, Southern Rhode Island is stable and its real estate will see even more improvements in the near future. Visit www.McPhersonGroupRI.com for more market information and for advice on buying or selling.