Welcome Home: Buyers are still waiting
Sellers don’t need reminding that the pace of real estate purchases is slower than in the past. Despite an increase in numbers of transactions over 2009, 2010 will still go down in history as a slow one in overall volume. Likewise, sold prices in this market continue on a downward trend, and we expect that curve to remain negative for a while longer. A recent article by Lawrence Yun, Chief economist of the National Association of Realtors, sheds some light on why buyers are still waiting, and we have some advice for sellers who actually want to sell. Published in the November/December issue of the Realtor trade magazine, Yun reiterates what we’ve said numerous times, “Housing is at its most affordable level in decades!” Because of record-low mortgage rates (the average 30-year fixed rate was at 4.3 percent in early October), the monthly mortgage payment for a median-priced home purchased with FHA-backed financing is $1,150 – down from $1,658 in 2006, at the height of the boom. It seems logical that “Now is clearly a good time to buy for those who are willing to stay within their budget,” as Yun states, but taking advantage of current market conditions is reliant on a few key items:1. Buyers must have great credit. Lending restrictions are keeping even the most successful self-employed entrepreneurs from getting loans, due to the lack of W-2 forms. Take steps to bolster your score.2. Buyers need market confidence. Although home values have stabilized in some markets over the past 18 months, many believe prices are going to fall further. Unfortunately, as Buyers prolong purchases, their prophecy will become reality – inventories will grow and we’ll see additional downward pressure on prices. Sellers who are able, should reduce their price to sell now.3. The third factor is confidence in the overall economy. Slow economic growth leads to economic insecurity, even among those who have jobs.Again, Yun restates the obvious, “Once consumers regain confidence and banks increase lending to sound individuals, buying activity should start to pick up.” The market has shown signs of healing – August existing-home sales were up almost 8 percent, and pending contracts suggest further gains. It will take time before we can say the economy is back to normal, but in the meantime, high affordability and low mortgage rates will benefit those who are willing and able to purchase. These circumstances, once achieved, will have a delayed effect in the resort markets, always second to primary housing markets. The benefit may take up to two years to reach us.If you’re a seller waiting for prices to recover, you could be waiting for awhile, depending on your segment of the market. If your plan is to liquidate assets, relocate your primary home and/or downsize, remember that prices elsewhere are also lower and there’s a very real chance that your perceived loss on this end could be more than made up in the combination of a lower price on your next home, reduced capital gains, lower taxes, and of course, historically low mortgage rates. So again, if you want to sell, “meet the market” and achieve your goals. Welcome Home is written by Butch Elich & Paula Parker. Search for them by name on Google, Twitter, or Facebook.
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