I have made predictions to myself regarding the real estate business in Clark and Champaign Counties each of the last few years. As a licensed broker, I am interested not only in my personal production, but the production of the agents I work with in our company, and the agents I work with everyday that make up the Springfield Board of Realtors. I'm going to review where we have been the last few years, and what I think we will see in 2010.
In December 2007 I wrote a note to myself predicting the following for 2008:
"...continuation of a soft winter as evidenced by December 2007 trend. Expect some improvement into and through March. Spring and summer will improve to 2007 even based on my worst case scenarios. Business will soften again through election season followed by firming in the winter of 2009. Spring, summer and fall 2009 could see a 10 to 15% improvement over 2007 and 2008."
OK, maybe I'm not that great at the prediction business. The reality is the first quarter of 2008 was pretty good relative to the winter of 2007. However, even prior to the banking crisis of September and October 2008, business began to deteriorate. Once the banking crises hit, business slowed for the remainder of the year. 2009 saw another 15% drop in units sold in Clark and Champaign Counties and a 9% drop in average sale price in Clark and Champaign Counties*. (*As reported by our Multiple Listing Service, WRIST Inc.)
We have seen a steady reduction in units sold relative to the year before each and every year going back to 2006. Real estate production peaked in our area in mid to late 2005. What's behind the trend? The obvious of course, money is tighter and lending standards have risen. However, as in most of the Midwest, it is the lack of job growth that continues to bedevil our local economy.
While the real estate business may not be ‘boom and vroom' right now, it's not all gloom and doom either. Where are the bright spots in 2010? At this point it sounds cliché but I will say it again: "There has never been a better time in most of our lifetimes to buy real estate." For those qualified to buy, money is more affordable than ever, prices are low, and federal tax credits just add further icing on the cake.
Will prices go lower in 2010? My prediction is - I don't think so. I think we have finally hit bottom. CNNMoney.com recently reported that new home starts in the Midwest increased by 3% in November versus October, rebounding from a six month low. Existing home sales appear to be stabilizing and increasing in many parts of the country.
First time buyers and real estate investors with cash are going to continue to score big in this market. Investors may not make the big bucks again anytime soon by buying and flipping property quickly, but there is a case to be made that buying now to hold for seven to ten years is a very good bet. Both of these trends will prevent the market from falling further.
The main thing that will hold back sales in 2010, and in turn properties values, is many people do not have the equity in their homes to make a move right now. What is missing from the market is the ‘move-up' buyer. We are not seeing nearly as many home owners moving up to larger homes as their housing needs change. Sellers are staying put longer than they have in the past. I believe there is a lot of pent up demand here. When the economy does improve, these people will be back in the market in a big way.
If you are selling property in 2010, all is far from lost. In this market as in any market, well priced homes are selling - and well continue to sell. Work with your Realtor, understand what the sales trends are in your neighborhood, and price your home as the market dictates. Your Realtor will also tell you that staging a property to show in the best possible light matters as much as pricing it correctly. One requires the other, you have to have both.
One final thought for sellers who are also buyers moving up in the market: the opportunity to make up a ‘loss' on the sale of your property by making a once in a lifetime deal on the purchase of your new property is very real. I cannot stress enough however the importance your Realtor will be to your success. Quite simply, the complexities of this market require the services of a real estate professional. If you do not have a relationship with a Realtor, ask your friends and family who they know and trust and contact them.
In summary, here is what I see for 2010. Housing prices and number of units sold will end up flat to 2009. Based on where we have been, that is a huge improvement. From the Realtors' perspective, some months will be strong followed by months where it will feel like the bottom has fallen out again. But overall, the year will be flat to 2009, and ‘flat' is the new ‘up'.
Chris McAllister is a local Realtor® and the Business Development Director for Real Estate II.
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