As we all know, the real estate market has been in a buyer's market for the last couple of years. Last year, we experienced the mortgage meltdown crisis and all the media hype that has followed. Many people ask whether the bottom is yet to come or if we have hit it yet.
There is no simple answer to this question as it is a very complex and variable situation. There are indicators however of certain trends that we may want to pay attention to. One of the most oblivious indicators is the supply of real estate vs. the number of qualified buyers. Another factor that we must pay attention to is the overall economy and how it's impact is effecting potential buyers from homeownership. Financing is another contributing factor which will directly impact a buyer's ability to get a loan. Let's look at these factors in closer detail:
First and foremost, the current inventory is a huge determiner. Keep in mind that each market in the country is different, and there is not one answer for all. Here locally in Hampton Roads, the markets have been in much better shape than others nationally. A large factor to that is our strong military presence. Over the last months, our supply of listings has been shrinking. This could be looked at in a couple of different views. First, it could be a lag in the market due to end of year and holiday season, or secondly, it could be viewed that due to the interest rate cuts and time, that the buyer pool has increased and available listings cannot keep up with buyer demands, in effect dropping the number of available homes. Time will be the deciding factor, but real estate is a supply and demand cycle.
The economy has been in decline for the last year. We began to feel the effects of a recession long before the government had announced the recession. At this point in time, if we go back to when we first felt the recession, it's been about a year. The average national recession lasts roughly 12 months, or one year. This recession however is not just limited to the United States, it has affected the world globally due primarily because our economies are tied together in so many aspects. The average global recession lasts 18 months. If we have been in a recession for a year, and the average global recession lasts 18 months, then we have about another 6 months before we see improvements. Keep in mind, that this is just speculation at this point based upon past trends.
Financinghas been topsy turby for the last 6 months. When the first wave of foreclosures hit, most lending institutions gave a knee jerk reaction and have tightened lending requirements dramatically. Once this process had occurred, the listing inventory went out of control, making the real estate market even slower than it had been. Due to this unforeseen issue, the Federal Reserve decided to cut rates. After several rate cuts, they dropped interest rates to historic lows once again. In doing so, they have helped many people once again be able to qualify for a mortgage and afford their homes. However this time, the risks we had previously with ARMS and Interest Only programs are out the window. Also, as mentioned, qualifications have been tightened.
With all of these indicators, I have personally come to the conclusion that the bottom is here, or may have already passed. These indicators have shown me that real estate is making a recovery, and only more time will completely cure the ailment. There have been many speculation reports that summer of 2009 will be the turning point, and based upon my conclusions for Hampton Roads, Virginia, I agree. One caveat I hold to this decision will be the impact the new presidential administration will have on our taxes and economy. To view local market trends, please visit www.joshsellsvirginia.com