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Is That a Light at the end of this tunnel?

By
Real Estate Agent with 1st Action Real Estate

I  just got back from our National Association of Realtors conference in Las Vegas. Over 30,000 Realtors from around the world gathered to discuss legislative issues, mortgage fraud, marketing, the election and the economy. There's enough going on in each of those categories to write a whole column but since I promised you an update on the state of our market, that's what we'll focus on.

By far one of the highlights of our annual conference for me is the opportunity to talk with our Chief Economist. This year our new CE, Dr. Lawrence Yun, was joined by John Tucillo, our CE from 1987 to 1997. While they differed on several elements of the housing market, one area of agreement continues to be the certainty of a recovery and the fact that at least a part of the current problem is the result of media sensationalism.

Dr. Yun pointed out that every economic cycle, be it housing or stocks or trade, include several identifiable milestones. These include a period of market normalcy, such as we experienced in our local housing market from 1996 - 2001. This is frequently followed by a period of greed, like 2001 to 2006, followed by a cycle of fear - which we're experiencing now, to a period of recovery and back to normal.

Dr. Yun believes the recovery period will begin sometime next year, probably late 3rd quarter, as pent-up demand fuels a reduction in inventory and a return to price stability. Tucillo is less optimistic, delaying his forecast recovery until sometime later in 2009 when the number of new listings fall, Days on Market for existing listings fall and the list to sale price ratio increases. This will not happen until the glut of bank owned properties is digested and that's the wild card.

While we've seen the deleterious impact foreclosures have had on our local market, we've only seen the tip of the iceberg. Between January and June of 2008, $250 Billion worth of sub-prime and adjustable rate mortgages will re-set to their upper limits. While those aren't all in Temecula or Murrieta, we'll get more than our share, as will the Central Valley and Sacramento area, our states previous high flyers.

But as the economists pointed out, a time of crises for some equals a time of opportunity for others. We saw some evidence of this at last months housing auction at Temecula Creek Inn as both single family purchasers and investors took advantage of the most affordable housing prices we've seen in a decade. Yun also pointed to the region from the Rocky Mountains to the Appalachians as being underpriced right now and enjoying a healthy housing market (never read about that in the paper did you?). Wichita Kansas is the hottest housing market in the country today with great values, steady job growth and strong demand.

Coastal areas in particular remain overpriced and some other areas, like ours, Denver & Las Vegas, grew ‘over-exuberantly' based on affordability, demand and lifestyle. Those areas are correcting even as we speak. Other areas, like San Francisco and New York have transcended the typical cyclical market and have become ‘superstar global cities' joining cities like London, Paris, etc. in defying local market trends and frailties.

Tucillo also points to the changing structure of the market. Baby Boomers, who have driven the market for years, are now approaching the stage where we're not looking for our next house but "auditioning our last home". (Damn, that's a depressing thought, isn't it?) He points to a ‘tsunami' of Gen X and Y  Buyers poised to hit the market as early as 2010 looking for their first homes. These buyers will be less emotionally tied to a house and are even now just waiting until the market stabilizes and the purchase of a home is a sound business decision. This base of buyers is larger, more technologically oriented and likely will be more affluent than we were at the same age and he assures us that ‘demand for housing will not be a problem'.

So there you have it, from the mouths of experts through the prism of your local yokel. We ain't seen the worst of it yet, but if we can hang in there, the best is yet to come. Between you and me, if you don't have to sell your house right now - don't. You're competing with the banks and new home builders and they have much more incentive and much deeper pockets than you do. This next year will be a great time to buy another home or two either as a move up for you while you rent your current place, or to just buy a couple rentals. With some homes selling for a little as half of what they sold for two years ago, if you don't take advantage of it, don't blame me. The opportunity is there, it just depends on what you make of it. You can lead a horse to water but you can't make him fish.

Gene Wunderlich is a Realtor with Coldwell Banker and a 2007 Delegate to the National Association of Realtors. Share your opinion or questions with GeneWunderlich@earthlink.net.

 

Comments (5)

JL Boney, III
Coldwell Banker - Columbia, SC
Columbia, SC Real Estate
I sure hope that light isn't a train.
Jan 03, 2008 07:52 AM
Matthew Rosov
Amerisave Mortgage Corporation - Laurel, MD
Certified Mortgage Planning Specialist

I understand the light at the end of the tunnel was turned off to save on electricity!

Thanks for sharing this analysis

Jan 03, 2008 08:07 AM
Pat Laracy Baker
Realty Executives Boston West - Holliston, MA
Pat Baker Dream Home Maker
Hi Coldwell Banker guy. me too. I love the positive outlook. Thank you for the blog.
Jan 03, 2008 08:15 AM
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison
I don't think it's a train but it's still a ways off. We've got a long trek through rough going before we reach the light - but you know the light is always there in real estate. Sometimes it's just a little dimmer, sometimes hidden under a bushel, but always there. They might even turn it off to save electricity but there's always some schmuck who'll stand up and light a candle. Thank God.
Jan 03, 2008 09:39 AM
Mike Frazier
Carousel Realty of Dyer County - Dyersburg, TN
Northwest Tennessee Realtor

Gene,

I appreciate you sending me here to your post. Thank-you for sharing the thoughts of the economist at Realtor.com. I am one that has a lot of confidence in what is projected by the Realtor.com economist!

One of these days I will make it to the NAR convention or conference! 

Apr 03, 2008 09:55 AM