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My World: Whence the market? A brief look at my broken crystal ball.

By
Real Estate Agent with RE/MAX Properties SW, Inc.

I've had my head down lately, just spending time working at real estate. We've been getting a lot of buyer inquiries, particularly in the lower price ranges. Many of these people have filtered to us through some of the on-line lead generating web-sites. Unfortunately, the data that is out there isn't always very accurate and most of the would-be buyers are disappointed to find that they've gotten all excited about a house which was sold months ago. Nevertheless, it is activity and sometimes one of these people actually decide to work with us and end up buying a house.

Even with the fairly constant stream of wanna-be buyer activity, I'm concerned about where the market is headed. If one reads the popular press, one is left with the idea that everything is getting much better. This is largely due, I suspect, to the presses' desire to support the current policy makers. If one reads the NAR press releases, and believes them, it's an easy conclusion that everything is coming up roses, so-to-speak.

What these sources don't deal with are the structural changes that our nation has undergone recently. Many of these changes are having a direct impact on the shape of the real estate market. Since we, as Realtors, work in this market, we'd better be prepared for the inevitable changes to the "traditional" way it works.

While I broke my crystal ball yesterday and, thus, can't make accurate predictions, I can provide a list of factors which may possibly impact the market. After reading them, you can draw your own conclusion on how best to prepare.

1. The impact of technology has left the seller with additional ways to sell property as opposed to using a Broker.

2. The huge number of foreclosures has left lenders with a large "shadow-inventory" which will be placed on the market at some point. This will cause a huge increase in supply, if the banks release their inventory in bulk.

3. Demand is lower because it is harder to obtain financing. Despite the ridiculous interest rates currently supported by the Fed, many lenders are only reluctantly making loans.

4. Economic conditions are impacting the would-be buyer population adversely. Employment is weak, temp and low-paid service jobs abound, but those don't usually provide any cushion for saving or purchasing a home.

5. Demographics are impacting the real estate market. The Boomers are starting to retire (or going to work at low paid service jobs to make ends meet) and downsize. More people live alone and there are more single-parent households. These last two considerations would seem to imply that there is more demand for housing and that is true, however, it is manifestly difficult to make ends meet as a single homeowner, so the net result is an increase in the rental market.

6. Many of the younger generation are opting out of home-ownership. Their value structure is somewhat different and owning a home and starting a family may not be as all-important as it was to their parents. I get the impression that they'd generally rather have a 4G smart phone and an X-Box than save for a down-payment.

7. Student loan debt is rapidly becoming an unsustainable bubble and many college graduates are saddled with large student loans that they must pay on less-than-optimal wages. This obligation competes directly with housing requirements.

8. The continual fooling around with the economy by the Fed and the government has caused those members of the populace who actually pay attention to these things to approach any financial commitment with a considerable amount of caution.

9. The fear of the possibility of rapidly increasing tax rates has also factored into at least some possible buyers' decisions to stay out of the market.

10. While I personally get the impression that many investors are currently trying to snap up bargains, that flow of cash will probably dry up if the market actually shows some signs of real recovery.

So, there you have it: my list of factors which could (notice I say "could," not "will") impact the real estate market negatively. Even if you can successfully argue that some of these factors are non-starters, there will be some of the others which will have an effect. The question remains, "How do we, as people who are making our living at the point of inflection between supply and demand, deal with a decreased demand paired with an increased supply?"

I hope that I've given you something to think about for at least a few minutes. As the old saying goes: Fore-warned is fore-armed! (Or, is it fore-warned is four-armed? --- sorry - couldn't resist.)

Namaste!

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