In this current declining housing market, homeowners who can wait for the market to rebound to sell their homes should. However, homeowners who need to sell now to move to another area can still do well. If you are selling in one declining market, you won’t get the price you could have in the hot market of 2004-2005, but you are also paying less in the market you are moving too. This is providing the new area you are moving to has an equal or better likelihood to rebound as the market you are moving from.The problem in today’s market is sellers can’t let go of what their home was worth a few years ago.
Many overpriced homes are sitting on the market, not moving, because buyers won’t pay the high prices and sellers refuse to lower them. If a seller is not motivated, the long listing period may not be of concern, and if the home doesn’t sell, they can take it off the market with nothing lost.
Other sellers get caught chasing a down-cycling market. Say you are selling your home in Sacramento and moving to Reno for a new job. You list your home for $500,000, which you pay $2000 a monthly mortgage payment. You find a new home in Reno for $500,000 that you purchase, and have a $2200 second mortgage payment at a higher rate. Now you need to sell your home. The problem is, you listed your home 5% higher than other comparable homes that were selling, the market has continued to decline, and you end up chasing the market and selling their home for $450,000 6 months later, 10% less than your original asking price. You just lost $25,000 in the sale of your home, plus 6 months mortgage payments at $2200, totaling $38,200.
This financial loss coupled with the stress of watching your funds dwindle for 6 months could have been avoided by picking a realistic selling price at the outlay. If a seller is willing to acknowledge a loss on their original investment, they can price their home to sell in this market, and move into a similar market at a low entry point, and stand to gain when the market turns around. This seems like a simple concept, until you are in the position of the seller and have to make this humbling decision and accept the loss on your investment. If you look at the bottom line and the life or your long-term real estate investment, you will gain in the long run.
What are markets that have potential for strong rebounds? Yesterday in Forbes article ”Most Resilient U.S. Real Estate Markets” by Matt Woolsey, growth projections for real estate markets in major US cities were discussed. Cities like Seattle have already hit bottom, and posted double digit gains since. Seattle bottomed 1st quarter 2006 since gained 12.3% . Tampa and Phoenix had a sharp downturn starting in 2005, as a high investors owned approximately 1/4 of all properties, leading to vacancy rates over 3%, when many pulled out. But because the job market is very good, both markets are expected to rebound nicely, with 10.6% annual gains in Tampa after the projected bottom in early 2008 and 7.7% projected gains in Phoenix after bottoming in late 2008.
Here is the rundown on several other cities reviewed by Forbes:
Tampa
Market trough: First quarter, 2008 Annual price growth following trough: 10.6%
Phoenix
Market trough: Fourth quarter, 2008 Annual price growth following trough: 7.7%
Las Vegas
Market trough: Second quarter, 2009 Annual price growth following trough: 7.2%
San Diego
Market trough: Second quarter, 2008 Annual price growth following trough: 5.3%
Los Angeles
Market trough: Second quarter, 2008 Annual price growth following trough: 3.6%
San Francisco
Market trough: Second quarter, 2008 Annual price growth following trough: 3.4%
Boston
Market trough: First quarter, 2008 Annual price growth following trough: 3.3%
Providence, R.I.
Market trough: First quarter, 2008 Annual price growth following trough: 3.3%
Washington, D.C.
Market trough: Fourth quarter, 2008 Annual price growth following trough: 2.6%
Orlando, FL
Market trough: Second quarter, 2008 Annual price growth following trough: 2.5%
Minneapolis
Market trough: Second quarter, 2008 Annual price growth following trough: 2.4%
Sacramento
Market trough: Second quarter, 2008 Annual price growth following trough: 2.4%
New York City
Market trough: First quarter, 2009 Annual price growth following trough: 2.4%
Denver
Market trough: Second quarter, 2008 Annual price growth following trough: 1.6%
Detroit
Market trough: Third quarter, 2007 Annual price growth following trough: 0.9%
Milwaukee
Market trough: Third quarter, 2008 Annual price growth following trough: 0.4%
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