How's the Market?

By
Real Estate Agent with Real Living Wareck D'Ostilio Real Estate

As a full time Real Estate agent, EVERYONE I talk to has the same question... How is the Market? I am asked this question while doing listing presentations, at open houses, even out having a cocktail at the local bar.

No matter how many times I am asked about the market, I can never think of a good response. Personally, I think the market is incredible right now. However, if you're older than 6 years old, you're probably ready to call my bluff, first though, let's dive into why I think this is an incredible market right now.

1. Right now, interest rates are low. If you're a first time buyer, you're interest rate will be 5.5% or lower for a 30 year fixed rate mortgage. For conventional buyers, the rate is slightly higher, but still under 6%. Back in the 80's, interest rates were 13-18%. This summer, rates were almost at 7%. To put this in perspective, every 1% that an interest rate drops, it's equal to a 9% reduction in the purchase price.

2. The lending institutions have tightened their lending policies. This may seem counter-intuitive. Basically, I'm admitting that it's much tougher today to obtain a mortgage than it was 2 years ago. Why is this better? This takes a lot of the risk away from home buyers. A few years ago, you could obtain a mortgage if you could sign your name. This is why so many homeowners are in trouble right now. I'm not going to debate who is to blame, was it the fault of the mortgage brokers for writing the loan, the buyer for not doing their homework, or the attorneys for not advising their clients. The bottom line is that if you are approved for a mortgage today, then you will be able to afford that mortgage as long as your job status doesn't change and you don't go and blow your savings on a new car.

3. Prices in Connecticut have come down by 15-20% in the last year. You won't know when the prices have hit bottom until they start climbing again.

4. Sellers, banks and relocation companies have become realistic about pricing. As I stated earlier, prices have already come down 15-20%. However, prices are still very negotiable. Foreclosure and 3rd party relocation companies are having to take large hits on properties to get them to sell. I just represented a buyer of a relocation property. He found a home which was purchased last year for $385,000. He put an offer in for $320,000 and the relocation company accepted it without question! Banks are doing the same for properties which have been foreclosed on already. Guess what, normal homeowners see this and they are coming to the realization that they have to follow suite if they want to move. Right now, most properties are selling for 90-92% of the asking price. This is a far cry from 2 years ago when my track record was selling houses for 98.2% of the asking price.

5. What about home sellers? Most people selling their house who are effected by lower prices are those who are purchasing larger homes. If that is the case, then lets face it, a 20% loss on a $200,000 house is only $20,000. If the seller then goes and purchases a $400,000 house, then they are saving $40,000 on the purchase. That's an overall $20,000 savings! If you purchased your home before 2003, then you are still making a large profit on your home. I do feel sorry for those who purchased a home between 2005-2007 and must sell. If you put 20% down and are now going to purchase a more expensive home, then you are still alright.

I know everyone is uncertain about the future of the real estate market. What you have to remember is that real estate prices always go up and down in cycles. People always need to move so housing will always be in demand. If you make educated decisions and hire professionals that you trust, this is an incredible time to be in the real estate market.

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Rainer
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Dave Hamill
EXIT Realty Legacy - Prescott, AZ
Prescott, Arizona Real Estate

Joe, Excellent post!  Very thorough and succinct summary of why this is a great time to be in Real Estate.  Thanks for putting this one together.

Sep 23, 2008 01:12 PM #1
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Rainer
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Joe Cafasso

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