On Tuesday the Nations Capital is expecting a record crowed to show up for Barack Obama's Inauguration. The city is already filled with tourists, stars, reporters and traffic has been horrible for the past couple of day and weeks, but don't worry traffic will get worse before it get's better. Well traffic isn't really what I want to talk about but it but it brings me to my next point.
With the change in administration as well as Mr. Obama's much talked about economic stimulus package will the Washington Area and in particular the Prince William real estate market change for the better? From economic classes, back in the days, I remember the supply and demand theory. Let's look at the supply first: Supply is extremely high due to all the foreclosures in PWC. However, there is talk about a foreclosure moratorium, as well as help to troubled homeowners. Now in theory that would mean less supply, but wait........ How long will it really take for any government help, change, and regulation to filter down and have a real effect? Everyone probably knows the government doesn't always work very fast, even though Mr. Obama has the best intention of providing assistance quick. It will take some time to sort out the details, communicate it and most important reach out to the people that need help. So to get back to the supply. In the long run supply will go down but not any time soon. Also keep in mind we have just seen the melt down from the subprim mortgages, but according to some economist we are in for worse a second mortgage disaster might be on the horizon. During the real estate boom ARM's were very popular and they are starting to reset for many borrowers soon. Having said that it might take even longer for the supply to go back to "normal levels"
Let's talk about demand. With interest rates being at historic lows and supply up demand should be high too. Well not so fast, there is something called a recession and credit crunch. Looking at the Washington Area with the change in power, with the massive planed stimulus package could this area be isolated from the current recession? Consumers aren't spending as much as they used to and that's hurting even this area. Even though it isn't as bad as in Detroit or other hard hit areas. So demand is slowly coming back but because of the credit crunch not everyone that would like to take advantage of these historic conditions (high supply and low interest rates) is able to. You have to have a good credit score in order to be able to take advantage. I hared the incoming administration will put pressure on the banks to lend more money and to unfreeze the credit market, but I am not so sure that will happen any time soon. Consumers have huge credit card debts and no savings and this combination makes it very risky for a bank to lend to individuals with no savings high debts and bad credit scores.
So to summarize and to answer my own question, yes I do believe it will get better especially since we are in a great area and we are somewhat isolated from the troubles around us. But I also think it will take some time to get better. Buyers need to win back the confidence in the market and once that happens we should see a turn around. Personally I think if you have some money it is the best time to buy your first house, your second or third or investment properties. Real estate has always been and is still a great investment; you just need to find the investment that fits your needs and your budget. Of course finding a good real estate agent that can help you and guide you through this process is equaliy important.
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