As I look at our local market and see inventories rising and sales dropping I wonder why.
- Does my market believe the media about the housing bubble?
- Are a lot of the people with their homes on the market thinking they have to sell now to hit the top of the market?
- Or are they worried that values have peaked and values are going to drop dramatically?
- Maybe they are all afraid of losing their jobs and are selling to get out before the ax falls?
- Do they think they can't get a mortgage?
See I don't know quite what the consumer is thinking. During the greatest boom in real estate our home values went up a whopping 25%. That's not in a year that is from 2002 through 2006. That's less than the historical average of a little more than 6%
While job creation isn't huge our local unemployment rate has hovered at 5.3% which is higher than the country, but not out of whack by any means and there is still positive job creation.
How about affordability? Our median house price is less than $160,000 and the most recent stat I saw showed it takes about 15% of the median income to afford the median house price. Not the most affordable market in the country, but for a top 40 sized market that is darn good.
What about area economic growth? In several areas of the city including downtown and many of the suburbs there are new businesses going in everywhere with more new commercial areas being developed in many places. Do business go into areas of decline?
Are we seeing the value drops as shown by the "Shiller Index"? Well according to the Office of Federal Housing Enterprise and Oversight who actually look at all 50 states (not just 29 like the Shiller Index) and they also look at loans under $417,000 (which is more than 90% of our market) and they said home values were actually up 3.4% from June 30, 2006 through June 1, 2007. That is UP 3.4% not down 3.4%.
Well maybe it's high interest rates? Oh, wait rates are more than 2% lower than the average rate since 1963 so that can't be it.
Maybe it is the credit crunch? Let's see, that is happening for people with bad credit (you know the ones that couldn't have qualified for a loan before 2002), people with no money, bad credit and can't prove income and for many folks looking for loans over $417,000. Yet our market is 90%+ loans UNDER $417,000 and the real estate market was pretty good before 2002 so that can't be it.
If it's the fear of dropping values then the mortgage business should be booming. If you fear your home value is going to drop then you need to go in and get all your equity out right now, because if you have equity and you don't separate that equity and values drop then who's money will you lose if values drop?
I am no economics professor or a member of the local or national media, but according to my estimation that is a pretty strong real estate market or at least it should be. Yet inventories are heading towards 15 or 20 year highs and the number of buyers is dropping quickly. So let me pose the question again: "Is my market suffering from guilt by association?" Is yours?
Just because the headlines say real estate is horrible and nobody can get a loan doesn't mean that is the case. So I want to propose an idea. Gather the actual information for YOUR area and share that information with everybody you know. Share it with the local media, share it with your fellow Realtors®, share it with your lenders, share it with your previous clients, sing it from the roof tops- just get the message out there.
Now before you do that, with your analysis you need to identify the opportunities to share with your clients and prospects. If you are telling them something different than what they have been hearing you need to be able show them what to do to take advantage of the situation.
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