The Real Estate industry is a leading indicator of economic cycles. We are the first into a down cycle and also the first out. There are signs that the market is bottoming. There are other factors that could skew a recovery, but the activity reported by some agents on Active Rain throughout the country and in our own market is worth considering.
Historically, real estate values cannot be sustained long without income rising accordingly. This fact was lost in the boom years between 2003-2007 (in some areas of the country the years vary).
During 2007 one by one, sub-prime lenders folded. I remember when GreenPoint folded. They were the go-to guys for challenged buyers long before sub-prime was a buzz word. Apparently greed got the better of them.
The CEO and Founder of Watson Realty has hinted that we are at the bottom of the market. Sales in our office are up 18% over 2008 and we closed over $8,000,000 in January. Showings are almost triple since the first of the year.
Quote from Househunt article.
"- Delinquencies. Another indicator is the rate of late payments on subprime mortgages. Because the delinquency rate on each "graduating class" of mortgages tends to peak about 18 to 24 months after the loans were originated, the mortgages from 1999 to 2005 have already peaked, the class of 2006 is starting to peak and the class of 2007 is "still going through the roof with no sign of abating," Dotzour says. There is no class of 2008 because such mortgages have been virtually extinct this year.
"The party stopped in about July 2007, so if you take that out 18 months, that's the spring of 2009. At that point, the last class of subprime mortgages will have peaked in terms of delinquency ... so the pressure on prices coming from foreclosures is likely to peak" at that time or perhaps 90 days later, Dotzour says."
Since the first of the year, people have commented on Active Rain posts that investors are back in the market (John Novak, Las Vegas, mentioned this in a comment on a post), that there are declining inventories and rise in sales - (Elizabeth Weintraub, Sacramento)
and that properties priced correctly are selling quickly (Bill Gassett, Metrowest, MA)
Did I mention we have had multiple offers on several properties?
Here's a new post (concerning multiple offers) by Elizabeth Bolton in Cambridge, MA
Zip Realty noted inventory in 29 major markets was down 13 percent from January 2008 in the Wall Street Journal. In January, inventory normally climbs, recovering from holiday lag. Inventory must bottom first before prices stabilize.
While all real estate is local, these reports are coming from different areas of the country, not just one area.
Fannie and Freddie have extended the moratorium on foreclosures until the end of February. There is talk of banks allowing people to stay in their homes and rent them, or banks share equity when the properties are sold, or putting a balloon on the end of the mortgage for the amount the property is upside down. Banks are short selling homes back to the owners, refinancng them at the lower rate.
The Senate quickly passed a $15,000 tax credit incentive last week that is expected to also pass in the House. This is amended. The credit is now $8000 for first time homebuyers and as it stands as of 2/12/09, does not have to be paid back. There are guidelines that have to be met to get the full amount. This is still subject to another vote, so nothing is final yet. Please see below for full information:
If this passes, some of the buyers on the fence will return to the market, finding low interest rates and a tax free loan irresistible. Consider also the pent up demand that exists in the market place - people hesitant to buy until 'bottom.'
Are we seeing signs of the market bottoming, or is it a mere lull?
Please share what's going on in your market.
Photo by Big Stock Photo