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Signs of a market bottom surround us

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At the middle of last year, it appeared that home buyers were in near hibernation. Sellers continued listing property, typically way overpriced, and predicated on the “here’s how much I need to get” theory of house valuation. The buywww. ers saw little need to take any action, and homes, even gorgeous ones, languished on the market for months. After four or five months, and multiple price reductions, buyers viewed those homes as having “something wrong” with them, and wanted nothing to do with them at any price.

This all changed to a large degree with the implementation of the Home Stimulus Package, which provided huge tax rebates to people who purchased property. This hit at the same time that rates plummeted to near all time lows, and home sellers, weary of the market, began pricing closer to market value. Suddenly, buyers seemed to come out of the woodwork, with multiple offers on property, each conditioned on being able to close in time to get the rebate. This singular event apparently pegged the bottom of the market as just prior to the rebate taking effect.

Since then, of course, the rebate is gone. Yet as we look at what that really means to the consumer, we find that its value was clearly more psychological than anything else. The same can be seen with the annual sales tax free weekend we often see here in the Commonwealth. Suddenly, people are lining up at stores to buy that long-needed vacuum cleaner, on which they saved $5. In the grand scheme of things, the tax rebate was just that. Had you purchased your 400k home back in April, you would have received a 6K rebate on your taxes, which you could have applied right to your mortgage. This means that your total loan would have been for 6K less, resulting in a savings of about $30/ month. Of course, back then rates were about ½ – ¾% higher than they are now, and as a result, buying now would be the same payment anyway. As you can see, it wasn’t about the money then, nor is it now.

So where do we see things going from here. Well, I certainly think that the worst is behind us, and that we’ll be seeing prices jumping upwards down the road. Before that, we’ll likely see the Fed start pushing rates up, because that in and of itself is actually hurting the economy. You see, people will continue to buy homes whether the rates are 4 or 7%. At the same time, however, many consumers derive large portions of their income from CD and Money Market interest, especially in the “over 55” market, and when you have your life savings in the bank earning 0.2% interest, that’s killing huge portions of the market all by itself.

For first time buyers, the increases to come mean that now is likely the best opportunity they’ll have to enter the market before rates and prices go up further. For home sellers, the potential rise in prices down the road is only going to be a good thing if you’re planning to sell, put the money in the bank, and rent a property for the long term. If not, then what you’ll find is that while the price of your home may increase slightly over the next five years, so will the property that you’re planning on moving to. If the delta between the two stays the same, but we see a rise in rates of even 1%, you’ll find that you may have been better off selling at the bottom and consummately buying at the bottom as well.

I suppose I’m running too long, as usual! Before I go, I just wanted to call your attention to a new map-based home search interface that you might want to try out. It’s hosted at www.shrewsburymassachusetts. com but don’t be fooled by the domain name, it’s a state-wide search tool. This new program will allow you to look at a map of the state, set up home search criteria, and then zoom in and out on different towns, pulling up on the map details on all home listings on each street. I think you’ll love it. Be well everyone.

Steve Levine is President of Steve Levine Inc., and an agent at REMAX First

………… Choice. He has been ranked 10 times as the Top REMAX Agent in New England, and can be reached at 508 735- 4663, or steve@stevelevine. com

Short URL: http://www.communityadvocate.com/?p=8003

Posted by on Sep 24 2010. Filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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