One of the hot topics lately: when will the real estate market begin its rebound from the turmoil of the past years decline?
As a real estate professional that works full time in this market, I can go any number of directions on that one questions.
First off, is this market a bad thing?
For sellers, obviously, yes. The market has been tough. Really depending upon the specific market and price range, sellers are experiencing what my romantic life was like in high school: from a complete void to varying degrees of hopeless.
The real problem cases are those that really HAVE TO SELL. Some seller's really don't have to sell and should do what they can to avoid the urge to sell during this market.
Now for everyone else, is the downturn in pricing and sales a bad thing?
Pricing between 2000 and 2005 had escalated at an unprecedented rate nationally. Based on CPI data, new construction pricing rose from an average of $175,000 to $250,000 in a 5 year period.
What we see that fueled the market in the first part of the decade was a fear that if one didn't enter the market, they would be priced out of owning their own home. Additional upward pressure was caused by investors flipping houses rapidly, and builders working harder to meet the demands of both normal home buyers and investors. With price drops, investors began to flee the market, showing the artificial stimulus created by their activity. During much of this time, banks tried to increase profit and growth by sacrificing the more strict underwriting standards of years past. At various levels, approvals for lending were made that defied common sense. The best example is that a person with a 580 credit score could get 100% financing. This same person would find it difficult to get home insurance based on the insurance carriers reliance on historical data to guide underwriting while their counterparts in the banking industry were relying on the new automated underwriting programs to make decisions. Appraisers, looking to maintain a steady stream of business from mortgage brokers often times appraised homes at whatever was required to keep the deal (new purchase or refinance) alive. All this activity has to come to an end to keep the real estate market balanced and fair.
Its impossible to predict how quickly the real estate slowdown will last. As a non-clairvoyant Realtor, my methods are limited. What we can say is that with interest rates remaining low, inventory at record highs, and prices staying low, buyers will be swarming soon.
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