WHAT DRIVES THE HOUSING MARKET TODAY?...It's NOT The Stock Market, Nor The "Need" As I See It.

By
Real Estate Agent with Douglas Elliman Real Estate 30HA0800896

WHAT DRIVES THE HOUSING MARKET TODAY?...It's NOT The Stock Market, Nor The "Need" For A House, As I See It.

What could it be?  Just what IS bringing the public into the housing market today? Could this be a sea change in the world of real estate? Is this phenomenon happening elsewhere, or only in the pockets of second homes?

Buyers aren't running blindly into a purchase; buyers today are looking for something that is very different from my vantage point! Decisions are not made THE EMPTY HOUSEquickly either---it could take months before a deal comes into being.

Of the last 6 sales I have completed, 5 of the houses I sold are not occupied--they are sitting silently, some in a messy, unkempt state. Some, the brand new ones especially, are looking mighty empty--they look sad and vacant, as if the smile has been wiped off it's "face"!

One house that traded 6 months ago for a price that no one in this market could believe, is sitting with trees down from last years hurricane and barely a branch has been picked up from the property--no lawn mowing, just a trim here and there. This is so uncommon in this bucolic world of manicured lawns and precisely clipped hedges!

I think there is the desire to invest in something that is tangible and that will eventually go up in value that is driving almost all sales at the moment. Maybe I am wrong and maybe, because this is a mostly second home market, I am way off base and the real estate market is just becoming another kind of business, another way to make a profit!..Or maybe there is a wave of new problems arising--maybe these "New investors" are seeing the reality of buying when they thought the bottom had been reached. The bottom is no where in sight!

LET ME EXPLAIN WHY I THINK WE ARE SEEING A MAJOR SHIFT IN BUYERS MOTIVATION:

My last 2 sales were under construction--6000 SF houses on small 1/3 acre lots---near the village center and the ocean so they are in prime locations..but they are sitting there, SEARCHING FOR THE RIGHT INVESTMENT?as though the new owner is re-thinking ownership....as if the houses do not "fit" in the buyers life and they have decided to let them sit and wait until they do!

In my opinion, there is so much money on the "side-lines" in the world of the wealthy financier that there is a void in what that money should be spent on....nothing to buy; nowhere to put your money!

So, what is a wealthy person to do if they fear losing money in the stock market? Where can they put the money that used to go into 401Ks, or the money market fund, the one place where you could be sure to get your principle back should things go South! 

All of the typical places for money to go when a person decided to invest for the future are pretty much unsafe right now. Stock market? NO! Stocks have just taken a beating that they haven't seen in years! Equity funds or bonds? NO, NO, NO!

So where does this money go? The Uber-wealthy are buying ocean front homes--they are putting $20Mil into a house that they never plan on living in because they can rent them out to the person who does not want to own any more homes.

The next level of buyer, just under the Uber-Wealthy, is buying very carefully and they are thinking through their purchase like never before--when they buy, they are investing in something they may live in; or they may plan on renting their new house out if they don't use it.

The middle income buyer has been beaten into oblivion where the housing market is concerned--many have lost jobs and then their homes; they have no credit rating worth anything and they have no savings left either.

So that buyer is no longer a factor in the real estate market--at least for the foreseeable future. This is usually a retiree, a"THROUGH A GLASS DARKLY" Baby Boomer who is looking at life "Through A Glass Darkly"--wondering whatever happened to the exceptional nature of being one of the war babies? What happened to our dream of home-ownership and retirement??? It's enough to make one question ones sanity when it comes right down to it! What just happened here???

The first time buyer is the only bonifide home buyer right now as far as I can tell...They are the ones looking for the bargains and plunking down the cash they have been saving or have earned in their short careers...These are very serious buyers; but there are only a handful of these buyers and there are more houses to choose from than ever before. This buyer has the pick of a life-time: Homeowners need to sell, prices reflect that need and if the buyer qualifiies, the interest rates are the lowest that I have ever seen!!!

Then there are the Millennials, as we call them! This buyer is a 20 -Something and is ready to step into the world of home ownership; they are ready to be the next "BIG" thing when it comes to their place in this world. 

As far as I can tell, the Millennials are buying strictly as an investment. Very few of these buyers are thinking of long, luxurious and relaxing weekends--No! They are the ones you see with their heads bent over their cell phones, plinking away as they text their world into the iphones of others! They have no intention of taking on the mantel of making a home and settling down; they have rental income in  mind and they plan on renting the house to their friends as soon as it closes...a new home is not for the busy Millennial--no, they only see it as a way to make more money!....and Party Down!

Now, this is merely my perspective; I may be off base, as I said earlier, but I think it is worthy of some input from all of the members here on ActiveRain. 

I think it is possible we are witnessing a major shift in the business and we need to identify a way to handle it!

ANY IDEAS???

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Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Paula - interesting read. We do not know how this all works. I know that presidents elections change nothing in real estaate market, and even unem[ployment means nothing in our market, as last time the rise started, the unemployment was the same as 6 months prior to the hike

So far for our market i see the diminishing inventory as fuel

Jun 02, 2012 02:24 PM #1
Rainmaker
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Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Jon: Good for you--I guess that means you still have people who have to buy to live in a house, right? Things are so different here right now that it is almost eerie! I keep thinking that the inventory will drop after so many sales; bu tno, the short sales and forclosures are starting in again!

 

Jun 02, 2012 02:31 PM #2
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
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Good information Paula, I have a couple of sons who are aiming to be some of the Millennial that you mentioned, I think a large section of buyers in our market are also investors, but not the uber rich type, these investors are looking for something to make a modest profit on while other business is slow.

Jun 02, 2012 04:18 PM #3
Rainmaker
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Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Bob: I think you hit it on the mark! The profit from buying real estate at the high end and at the right time can be very profitable indeed! We have seen properties fall from $30Mil to $20mil or less and those are the properties that are snapped up by the Uber-Rich...they love to say: "I made a fortune on real estate because I bought it at the right time!" In the next few years, after all is said and done and the real estate market improves, we will see those price rise significantly---The ones I feel for are the buyers who bought at the height of the market in '06 and '07---there is one 4 acre ocean front that traded for $60mil in 2007 and it will be a long time before that price is seen again here. 

Jun 02, 2012 11:05 PM #4
Rainer
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JOSH EVANS *JoshEvansHomes 516-655-5000
Village Properties of Mineola, LLC - Mineola, NY
Great blog and great job. Keep up the good work and good luck to you this year. Thanks.
Jun 02, 2012 11:35 PM #5
Rainmaker
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Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Josh: Why, Thank you! What's happening in your neck of the woods???

Jun 02, 2012 11:41 PM #6
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Rainmaker
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Paula Hathaway, REALTOR, LBA

...The Most Informed Agent In The Hamptons!
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