Market Conditions

Real estate sales hit and all time high in 2005, everything was favorable for sellers: High prices at closings, high percentages paid in relation to the asking prices, and a large volume of transactions defined an extreme seller's market. But that all ended during the first quarter of 2006; There was a rise in mortgage rates, tax assessment reevaluations were put into effect for many areas that spring, and continued reports of a slowing economy and a "bottoming-out" of real estate sales in the media all contributed to a market softening.  

Then the lackluster years of 2007 and 2008 brought a bit more doom and gloom to the Residential sector of the economy, a good amount of sales occurred in 2007,yet with larger differences between asking and selling prices. Some market segment prices dropped, like in the Condo market, and in cities, but sought after towns and transient communities maintained values fairly valiantly.  Unfortunately, the higher number of sales eventually became a direct result of foreclosures, pre-foreclosures and short sales.  It seems easy money was a bit too easy to come by for people that should not have actually been granted mortgages.  Basically, lenders and mortgage originators were letting too many people without sound financial foundations take-out high risk loans on a wing and a prayer that they would do better, and become fiscally fit.  Well, astounding numbers of those loans defaulted and snowballed into what we now-call the Sub-Prime Market Crash.  With a vulnerable economy in a volatile international atmosphere, the market and pricing slide continued. 

Well now, the first quarter of 2009 is beginning with a glimmer of hope and the promise and “dawn of a new day-“  A new president promising to help the foreclosure notice recipients and put a stop to new foreclosures, a complete cut to the prime rate of interest which has reduced mortgage interest rates to unbelievably low rates hovering around 5%, nearly free money!  And not to mention the ability for Buyers to cherry-pick their favorite house and best deal possible with the smorgasbord of Short Sale listings from which to choose! Nice homes in great areas and in great condition are also being sold at Short-Sale “Lender or Third-Party Approval!”

So, as the high inventory gets higher, we wonder, but wait, where are the Buyers? Well, few Buyers are ready to spend their hard-earned cash, making for a very painful beginning of the New Year, even with the low rates.  Other obvious contributing factors include: Conservative lending practices, a high rate of unemployment, stock market lows cutting our investments in half at times, and homes that are not selling.  This is all contributing to the recession and uneasy financial atmosphere, making Buyers not really feel like true Buyers, but more like look-seers, and hopers. 

But, this too shall pass…All markets ebb and flow, rise and fall, drop and recover.  Unfortunately, our recovery is not right around the bend, but everyone in control is doing what they can to keep the casualties to a minimum, a GREAT thing!

Advice to Buyers

Buyer’s Beware of risky Bank Agreements that tie up your deposit with no guarantee for a Purchase while the Foreclosure Bank or Short Sale Lender decides on your offer.  Do a thorough Home Inspection for yourself on any and all potential homes, and be sure to not get too emotionally involved, stay objective and firm at your price if you are not competing with other Buyers. Be patient with the short-sale lenders you place offers with, though,  they usually accept a reasonable offer and terms, but it takes from 30 to 90 days depending on the Lender, to receive the approval.  In many cases, it is not one person’s decision, your file needs to pass through a committee for approval.  So, make sure your packet that was submitted is complete, and accurate, or else your waiting time will lengthen even more if they need to ask you for bits and pieces after the fact.

 If you are purchasing a fair-market value home, note that most Sellers are aware of the extreme market conditions and are willing to negotiate. They may just not be able to negotiate as low as you want them to go.  But, if they can afford to discount significantly, they will.   For the best deal, zero in on the longer days on market, those Sellers need to sell.

If you are a first time homebuyer, there are still perks… you are eligible for a $7500.00 tax credit from the government, still.  Make sure you speak to your local tax attorney or CPA to learn more about the repayment “grant” that is less like a grant and more like a long term loan, depending on your purchase and resale situation. You may also qualify for the still-available subsidized mortgage rates as with RIHousing and other direct lenders.

But for the masses, FHA is still offering the lowest down payment product out there, with qualified Buyers needing only to come up with 3 to 3½ percent down, even if you are not a first time homeowner. Qualifying loan amounts are under $417,000!  Other low rate products are out there, so make sure to check with your local credit union for incentives and a good Mortgage Broker to shop your rate with premium lenders that only lend to those with very high credit scores.  Your good credit is your ticket to a low rate these days!  Consider, still of course, more money down to avoid high Private Mortgage Insurance (PMI).  

In essence, Buyers must simply have job security, good credit, some money in their pocket, and to know what they are looking for. If that is you, make an offer and let the fun of Home Ownership begin!  You are about to embark on a journey and enter into one of the better investments you can find right now, don’t hesitate if it feels like a good deal. Because in 5 and 10 years, you will be smiling a huge smile for making the jump!  It is these types of times that I like to call wealth-building times…this investment will be a good one, not only in lifestyle but in your fiscal future for years to come.  With your good credit, and a decent real estate investment, you have achieved much that will be very evident in the near future.  Any investment you make right now in real estate, is the best one you could have made in the last 7 years!