The market bottom has come and gone and we’re still aliveĂ˘€¦
Well, we've been talking about it all along and wondering together when the time would be right. When would the real estate market "bottom out" and begin the slow healing process we've all been waiting for? Allow me to be the first one to step up and make the bold claim that I think this bottom just passed us over the course of the last week. There are quite a few indications as to why I came to that conclusion, so if I may, please allow me to go over my thinking. Remember … I've been through three of these recessions, and I've seen them as they come, lived through the blood in the streets, and seen them emerge and turn into much better times.
Okay, here are a few of my observations, from being in the trenches with buyers and sellers alike over the last weeks.
1. There is a huge pent-up demand from buyers. Over the course of the last year, many families who should have purchased a home had been holding off , paralyzed with fear. This means that as 2009 begins, we will not only have the normal influx of people who are planning to buy a home, but also all of the 2008 buyers stepping in. This will translate into a huge demand in the first quarter of the year. On the other hand, and much as a surprise to many people, the inventory of really nice, well priced, cream-puff homes is shockingly low. Yes, there are tons of homes for sale, but many of them are just not those great properties buyers have been waiting for. When those do come on, and when they're priced properly reflecting the current conditions, they sell quickly. I had two bidding wars this week over such properties. Furthermore, I picked up a listing last week that had been on the market for six months with someone else. When I took it over, I did nothing different, other than dropping the price 40K. Within hours, the home was on deposit. That means that buyers were there waiting … and as soon as prices were right, they pounced on it.
2. The rates have finally crashed, and the credit crisis appears to have passed. Banks are ready and willing to loan money, as they have failed to do for the past six months. Interest rates for 30-year fixed-rate mortgages have plunged to under 5 percent. When you combine these much lower rates with the fact that homes are essentially selling at 2003 levels, homes are more aff ordable than they have been in years. Think along with me … In 2003 and 2004, we had aff ordable home prices, but high interest rates. In 2005 to 2007, rates were great, but prices were through the roof. Now, in 2009, home prices have fallen 20 percent from the peak, basically wiping out five years of gains, but at the same time interest rates will be at historic lows. That's the recipe for a sudden influx in sales, which usually prefaces any true rebound. Make sure you understand … I'm not suggesting that prices will soar in 2009 … although my guess would be a 10 percent increase in some homes and areas. Rather I'm suggesting that we won't likely see further weakening in the marketplace. Here's a data point for you. Over 4,800 Massachusetts properties have gone on deposit in the last 30 days, according to the MLS database. Near the peak of the market two years ago, guess how many homes sold during the exact same 30 days? Exactly 4,944. Amazingly, the data just doesn't support the sentiment in the streets. When you have a moment, check out the current MLS inventory online at www. massachusettsmultiplelistings. com.
3. The stock market seems to have passed a bottom over the last few weeks, when it briefly bounced off the 7,500 mark on the Dow. This was evidenced by the fact that even the most seemingly upsetting news stories, record unemployment numbers, the auto-maker issues, etc., failed to move the market down an inch. This would indicate that a bottom may have been reached that would form a solid level to move up from. Since the stock market issues were inextricably tied to issues in the housing market, success in one seems to go hand in hand with success in the other.
4. The foreclosure issues seem to have passed their peak and left us relatively unscathed here in Massachusetts. Each day, we hear about the millions of homes which have been foreclosed on nationwide, but did you know that about 70 percent of all the foreclosures in the country are localized into four or five southern and western states. There really just aren't as many out here in Massachusetts as people think, and certainly virtually none of them are great properties. See, down in Florida, Texas, Nevada etc. … you go through neighborhoods of the most stunning homes you've ever seen, and a quarter of the neighborhood is in foreclosure. That's just not the case here in Massachusetts. Here, the bulk of the bank-owned properties are the fringe properties, less sought after, older condos, downtown multi-families in need of work, etc. You're just not seeing the gorgeous 3,000-square-foot home in a stunning neighborhood going back to the bank, and you're not likely to see it in the future.
Ultimately, all of the reasons above seem to point to a way out of this house of mirrors we find ourselves in. Soon it will all be over and we'll be back to the normal market we know and love. The question is: where will you be living when that happens? Are we at the bottom? Who really knows? One thing we do know for sure, though, is that if this isn't the bottom, it's pretty darn close. As you plan for a long-term life in your new home, the key will be to focus on the long-term future. It may very well be that the home which was $400K two years ago and that you're buying today at $315K, may be up to $330K a year from now. It might just as easily be $305K. You just never know … and the key is that it just doesn't matter. Sitting on the sidelines, paying rent, may be costing you $10K a year in tax benefit alone. The real question is: what will it be 10 years from now and how will your family's lifestyles change the very day you move in?
Opportunity knocks … the question is whether you have the courage to open the door.
Steve Levine is President of Steve Levine Inc. and an agent for REMAX First Choice. He's been ranked as the top agent in New England for nine years, and can be reached at 508 735-4663, or online at his website, www. stevelevine.com.
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