From our most recent market data this is the most recent News-Press article posted:

Inventory, foreclosures force market down.

Whoever said that honesty is the best policy never had his wife ask him if her new dress made her look fat. Talk about a no-win situation.

First of all, guys, she already knows the answer, but doesn't like it. If you lie to her, just hope she doesn't see a photo of herself in that dress because, when she sees it, you're going to be in trouble for letting her go out looking like that. If you tell her the truth, then you will be going out alone and then spending the next night or two in the guest room.

Another no-win question is, "How's our market looking?" Most of the people who ask this question already know the answer, although they don't like that answer either. I would like to know how my fellow Realtors would answer that question. If you lie to yourselves and your clients by saying we look like we should be in the swimsuit issue of Sports Illustrated, that will only prolong the healing process our market must go through. If you tell the truth by saying we need to lose weight if we want the dress to fit better, you're going to be blamed for the market's retreat, and you will find yourself standing in a lonely place.

Regardless of what we want our market to look like, we have looked better. Our market is overweight. That is, we are very heavy with inventory. In fact, a recent article reported that inventory across the country is at its highest level since the 1992 housing slump.

And based on how much inventory has grown in the last two years, we won't be wearing Daisy Dukes and a tube top anytime soon.

A recent headline stated that the local housing market will face a two-year fall. The article quoted a PMI Mortgage Insurance report that predicted that there was a 63.4 percent chance that housing prices will decline over the next two years.

Is this just more negative press that is creating a self-fulfilling real estate plunge? Some think so. I don't agree with the report's findings because, based on the downward trend in sales and the lack of inventory depletion, I feel there is a 100 percent chance prices will fall from where they are today. They must. (Notice that I did not say prices will continue falling for the next two years.)

Other than the amount of existing inventory, there are two factors that will contribute to prices falling, providing the external environment remains constant.

The first is the heavy discounting of builder/developer inventory. National builders continue to cut prices in order to clear out standing inventory. People ask why these builders are still building and adding to the glut of homes for sale.

Builders are completing the pre-sold product that was purchased during the crazy days of '04 and '05. Many buyers are backing out, therefore the builder must do whatever he can do to get these homes off his books.

What will homeowners in this price range have to do if they want to compete with fire-sale prices? Wait or compete by lowering their prices. The good news is that this pipeline of business is only 12 to 18 months long. After that, normal market forces will take effect.

The second factor, one that will be with us for at least two years, is foreclosures and short sales. According to one banker, it is taking up to nine months to gain title to a property because our court system has been bombarded with thousands of foreclosure suits.

Banks don't enjoy owning homes, so they will price their inventory aggressively. What will this do to prices?

Let's be honest, unless you dig seeing Rosanne Barr in spandex, prices have to fall.
Agents don't have a coronary and don't fear the truth. We can survive this market. However, our job description has changed. Our responsibility is not to convince buyers that the market has bottomed, because many segments haven't.

Buyers will slowly discover it's turning into a good time to buy, even though it's almost impossible to create urgency in a market with more than 15,000 homes for sale.

Our job is to educate sellers that if they want to sell in today's market, a market that is becoming increasingly competitive, they will have to sell at today's market value.

If you have a listing in a segment of the market that is oversupplied, then unless you could sell gas for 10 cents more a gallon than the competitors on the opposite three corners, you'll have to be price competitive. If your property is in a segment with little competition, then it can be priced at what the market will bear.

How's our market looking? Overall, a little chubby, so prices will fall in most market segments before they rise again. There, I said it. What's next ... the usual. It's time for me to go to the guest room.

- Denny Grimes is a real estate broker with Denny Grimes & Company. Readers may contact him via e-mail at denny@dennygrimes.com or by calling 689-7600. Michael Polly, Vice Presdient

Originally posted on July 02, 2007 in the News-Press