A balanced market is good for everyone except the news media!

By
Real Estate Agent with Associate Broker

For a long time it was a "seller's market" - now we're mired in a "buyer's market" -
However, we very rarely hear anyone talk about a "balanced market"

Before we get to that, let's remember what "Fair Market Value" is.

FMV is defined as what a ready, willing and able buyer and ready, willing and able seller agree to; with fair exposure to the market place; and no undue duress.

In other words, in the most recent seller's market, FMV was artificially pushed up by extreme duress, (on the buyer's side - buy it or lose it); nothing was fairly exposed to the market place, (one day on the market!); and no buyers were truly "able" as we now see their loans falling apart. Contrast that to the early 1990's buyer's market, when loans were no problem and values were low, but homes were still on the market for a year with nothing to do with foreclosures anywhere!

So a balanced market is somewhere in the middle. Take away your divorce cases, and your foreclosures and the rest of the market is not nearly as bad as the mass media would like to make it out to be. In the most recent NAR report, fully 25% of the country is actually seeing appreciation and in a larger part of the country about 1 out of 6 homes are selling.  I'll grant you the larger then normal amount of foreclosures is putting some extra stress and downward pressure on values however we actually are very close to a balanced market. Additionally "foreclosures" are technically not FMV and many appraisers will discount their weight on value because of the very definition of FMV - ..."no undue duress"

In fact, I predict we will look back at this September / Fall / as the bottom of the market.  Why?

1) Regardless of who wins the presidential election, the entire cabinet will turn over. That will create a lot of real estate activity in the Washington DC metro area, which includes all the suburbs, Baltimore, and Northern Virginia. A large number of people moving in and out also means related activity in all the other areas of the country they are moving in and out from!

2) The recent tax credit is causing a lot of buyers to at least THINK about starting to act, and those who were already looking have one more reason to buy now!

3) Interest rates remain low and seller's are still willing to negotiate - however that window is starting to close and as THAT message gets out more and more buyers will actually buy.

and finally, 4) historically, a look at the average length of all market depressions in the last 30 years shows they typically last about 10 months. Most pundits put the "technical" start of this depression as November 2007, meaning September 2008 will be 10 months. (Note: The slide downward from  July 2005 to late 2007 was not technicaly a depression. It was part of the "correction" leading to the depression)

Understand, I am NOT predicting home values will start to SOAR! Just the contrary - all we want is stability. Historic annual appreciation of 4 to 6 percent is perfectly acceptable. The speculators are gone and so they should be. Your primary residence is a place to raise your family, break bread and b-b-q. It is NOT supposed to be an "investment" FIRST. That is an ancillary value, a long term benefit.

So a truly prosperous market would be and should be balanced. 45 to 70 days on the market is NORMAL. It gives buyers time to shop around. It makes sellers have to compete but not defeat their neighbor. It allows adequate time to make an INFORMED decision and adequate time to negotiate, shop for the right loan, be properly underwritten, etc.

A balanced market is good for everyone except the news media. It's not glamorous and there's no titillating disaster stories, just buyers and sellers going about there everyday lives moving around.

Happy selling!

Adam Rich

Licensed since 1989

 

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Rainmaker
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John Walters
Frank Rubi Real Estate - Slidell, LA
Licensed in Louisiana

I really believe the news media loves negativity.  They are way to much doom and gloom.

Aug 12, 2008 11:22 AM #1
Rainer
37,895
Ron Moore
RE/MAX Professionals/Regal Builders - Retired - Florence, SC
MOORE Thoughts

Thanks for the encouraging words on the housing market.  I hope you're right.  As for the news media, nobody will ever accuse them of being BALANCED.

Aug 12, 2008 12:10 PM #2
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