The news media accurately reports that the housing sector of the national economy is continuing to suffer year-over-year declines in sales activity and that the danger of a recession led by the housing slump cannot be ruled out.   The housing market actually peaked in 2006 and the credit crisis in 2007 was the second whammy that has made matters worse.  National numbers are an average of good and bad local markets across the country and the overall numbers are not encouraging.  FNMA, the quasi-governmental agency that backs of 40% of the nation's mortgages recently designated metro Denver as a "declining market" and made loan requirements more stringent in our market as a result.  The National Association of Realtors reports that the national median price of homes that sold is falling and may continue to do so through 2008. 

In metro Denver, where economists expect earlier and stronger recovery because we sat out the frenzied sellers' market in the first half of this decade, year-to-date home sales as of October declined by 1% from the year before and the median price was down 0.5% from last year.  Not good news, but better than areas like Naples, FL where prices are falling by double-digits.  On the other hand, Colorado is forecast to add over 100,000 people and over 43,000 jobs next year, representing a 1.9% increase that would outpace the 1.1% increase forecast for the US as a whole.  New people with new jobs will need homes to live in.

In Evergreen/Conifer, home sales have decreased nearly 10% and the number of homes for sale has increased a little over 10% from last year.  In this environment, home sellers find the competition searing and potential buyers can't be faulted for their concern that the value of the homes they buy today might be less a year from now.   Indeed, today's slow market is the result of buyers postponing the purchase of their homes.

On the other hand, the oldest adage in investing is "buy low, sell high" and today's market represents an opportunity to do just that.  When it comes to buying a home, most people are driven primarily by their need to move (expanding family, job relocation, etc.) than by the investment nature of their purchase.   Today's home buyers will find, however, that they will enjoy bragging rights in years to come about how shrewd they were, because they bought at the bottom of the market. 

The question, though, is whether buyers should buy now or wait a while longer.  Just where IS the bottom of the market?  We'll know the market has bottomed out when we start to see prices go back up.  It will difficult to know exactly when that happens because the housing market moves gradually and it will be months after hitting bottom before we see data indicating prices are starting to rise.

As you reflect on the local real estate market, you can be certain prices are either at or close to as low as they are likely to fall.  And if you feel the market has a little further to fall, consider this:  home buyers are revered by home sellers and they will probably grant concessions like price reductions, repairs, upgrades, personal property inclusions and maybe even closing cost credits in order to get their homes sold.  If you wait until the market is on an upswing, you and all the other buyers who have been waiting for signs the market has already hit bottom may be bidding on the same house.  In other words, the real bottom in terms of negotiating strength is just ahead of the actual bottom in terms of price.

Chances are good that we will look back at the next couple of months as the best buying opportunity in Evergreen/Conifer for perhaps a decade to come.  A "perfect storm" created by the bottom of the economic cycle, combined with the seasonal slowdown we see every year at this time and interest rates that remain historically low, is brewing for those courageous souls who leave the others standing on the sides of the school dance floor and venture out to dance.

Every market downturn is followed by an upturn.  Consider the following quotes to put today's market into perspective.

"The prices of homes seem to have reached a plateau, and there is reasonable expectancy that prices will decline."
          ~Time Magazine, 1947

 "The goal of owning a home seems to be getting beyond the reach of more and more Americans.  The typical new house today costs about $28,000."            ~Business Week, 1969

"The median price of a home today is approaching $50,000.  Housing experts predict prices in the future won't be that great."
          ~Nations Business, 1977

"The era of easy profits in real estate may be drawing to a close."
          ~Money Magazine, 1981

"Most economists agree that a home will become little more than a roof and a tax deduction, certainly not the lucrative investment it was through much of the 1980s."         ~Money Magazine, 1986

"A home is where the bad investment is."
          ~San Francisco Examiner, 1996

Today's market conditions are temporary.  The market will improve soon, just as it has in the past.   If you have given any thought to buying, sooner than later are words of wisdom to heed.

By Tupper Briggs