So, What About the Housing Market?

For a few months now the conventional wisdom is that the housing market is in a tailspin. The problem is that recent data is refuting such thoughts. So what is going on? Well, the housing market has slowed, as any realtor or new homebuilder will gladly tell you. But mortgage interest rates are still quite low and were even dropping again until recently. This continues to make the housing sector desirable, especially as prices are declining in a softening market.

If you own an existing home and you want to sell now, you probably won't fetch as much money as you would have a year ago. In fact you will probably have a hard time getting people to even come and view your house as inventories rise and the market is tilting heavily toward buyers for the first time in about five years.

All in all, U.S. home sales are down about 8 percent over the past year. But it's important to remember that the decline follows a red-hot housing market that was destined to cool off eventually. And even then, the numbers continue to contradict themselves. For example, the Commerce Department reported this week that spending on private residential construction projects fell for the ninth consecutive month in December, pushing total construction outlays down by 0.4 percent. But for all of 2006, construction outlays were still up 4.8 percent.

And the number of mortgage loan applications rose in January, even though the figure is down from a year ago. So what's the message? Well, certainly those who watch the housing industry like to think that they have hit bottom. And the Federal Reserve Bank even hinted at this in its message about the economy yesterday. But that may be a lot to expect. Housing surged so much over the past few years that a little correction may not be enough. Nevertheless, as long as interest rates remain low (and kudos to the Federal Reserve Bank on that note), the cost of financing a new home will still be affordable for most Americans.

If pricing remains soft, as it has been in much of the country, people will continue to buy homes. They may not buy as many new half a million dollar homes, but they will buy homes. If you are a home seller, the thing to remember is that the easy days may be over for a while. No longer can you list your home and hope for competing bids. So if you need to sell, consult with your realtor about how to make your house more attractive on the market. The short list: paint. It's the cheapest and best thing a seller can do. And look at any deferred maintenance that might come up in an inspection report. A new water heater, clean carpets, even a thorough scrubbing of the kitchen and bathrooms can make you money. And that money becomes your profit.

Your home is a big investment. And if you need to sell right now, the environment has changed.  Do your homework and be willing to make your property stand out from the rest. The good news is that when you look to buy you will find the most favorable environment in years. Every thousand dollars or so you make on that transaction is money you can put toward retirement.