In my last entry I spoke about how the availably of loans has dramatically impacted the housing market. The explosion of the "sub prime" market fueled the explosion of buyers, dramatically increasing the number of buyers. But now many of those loans are unavailable, decreasing the number of buyers and slowing our housing market. Supply vs. Demand.
Another contribution to the decrease in the number of buyers, are the homeowners who lived off the "equity" in their home and borrowed more than their home was worth. They can't move because they owe too much. I cannot count the number of times I have gone to someone's home lately for a CMA and they would show me the appraisal on their home from a refinance that showed their home worth $25,000+ more (in a $250,000- price range) than I could justify it being worth by the comps - EVER! They cannot move up to the bigger, more expensive home as they thought they could. But what if they absolutely need to move...
Enter the foreclosures.
People who stretched their limits or took out a loan that they really didn't qualify for are defaulting on their loans. I cannot recall ever seeing so many listings where the sellers owe more than they are asking. Short-Sale is now a key term in our business. Short sales existed before, but are now somewhat commonplace in our market (at least I am noticing them more).
So you have the homeowners who cannot afford their existing mortgage but cannot refinance and the sellers who sucked the equity out of their homes and cannot sell, but need to. More homes come on the market, many sellers who need to sell - NOW! They keep lowering their prices. Buyers see this and say, "I can wait. Let's see how desperate this seller gets. I'll take advantage of the lowest price possible. If I miss out, I will just wait for the next desperate seller." There are fewer buyers to compete with, so in many cases, they can wait and they can get a bargain.
Although there are many other factors that feed into making today's market - These are what I see as the key factors.
Fewer Loans = Fewer Buyers = Less Competition When Buying
Add to this:
Sellers Who Need to Sell + Fewer Buyers = Price Drops & Higher Market Times
Higher Market Times = Less Inventory Leaving the Market as new listings come on = More Inventory
Higher Supply + Lesser Demand...
Well, you do the math.
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