Is any of this making sense? Increasing days on market, no buyer traffic, high inventory levels, fierce competition to sell, low ball offers, over leveraged sellers wiht no equity, and no offers... are all indicative of a change in the market! Ya think? Since NAR quote the number of resale homes in free fall from over a high of 6.35 million units a year ago in October of 2006 to an adjusted annual rate of about 5 million units this November past. (NAR) That is a 20% drop in units sold. The other shoe that is dropping is foreclosures which are about to go through the roof. The real numbers lie ahead, not behind us! The most recent number of foreclosures are up in 2007 another 75%. A total of 1.3 Million homes. If we look at the last few years of NAR sales statistics one of the largest blocks of buyers were second homes sales which accounted for over 40% of all sales for the last few years. Most of the money used to purchase these homes were pulled from the equity from their primary residence. The only problem this year is that a lot of that money is no longer available with lagging sales, and declining prices. So I have to sit back and acknowledge that the numbers are pretty bad no matter where you obtain them from. The numbers are so high, you have to ask "Who's buying?" It isn't media hype, it is far worse. It isn't pessimistic to look at the stories, it is factual and needed to plan out profit for my business. I'm not a social worker or a home stager, I make a living selling homes to buyers and getting them sold for home sellers. Perhaps you are starting to wonder where the buyers are..as I am! You are not alone!
Most of the problems that we encountered last year were due to $50 billion in sub-prime mortgages resets. This year the number is 10X worse. There are over 500 billion in resets due in 2008 on sub-prime loans. It will be great that some will be able to refinance their payments lower, but with the neighborhood price declines... owners may still be in over their head, but just have a little breathing room with the monthly payments. Some home buyers in a declining market may assume they have made a great purchase only to find that next year the prices have moved lower still from last years highs. In some markets this will be more pronounced than others.
Wall Streets rise in the maker and volatility for the last few months is almost a classic "Dead cat bounce!" That means that if you threw a dead cat off a very high building chances are it would bounce when it hit the ground, but it does not mean that is coming back to life. A dead cat bounce is also referred to as a "Suckers Rally!" Both of the terms are synonymous with trying to get uneducated investors into a market so they can sell their stock at higher prices, and get out with some money. The last one holding when the music stops has lost all!
Look for some parallels with the stock market. So in the current market what are the rallying stocks? Financial, and builder stocks! That is the last place I would be investing right now. The broader stock markets have already started quietly retreating. Stock buys are more cautious! That is an unsustainable rally. So what about real estate? Are we exempt? It is another market, with similar issues. There has to be buyers to keep the sales up! Wall Street is not exempt from losses, whoy will we be? When buyers disappear, prices soften and drop.
- What are your thoughts on the real estate numbers you read about?
- How do you interpret them?
- Do they apply to your market?
- How are you redirecting your business?
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