Folks – When I’m not going on political rants or writing about my crazy family adventures, I sell houses. It is something I love doing, as I’m either helping someone get into what could be their dream home, or helping someone sell so they can move on to their own next adventure.
It’s so much more rewarding than anything else I’ve been paid to do.
As for you, whether whether you are planning to buy, sell, walk-away, invest or stay put, the real estate market will have an effect on you, and I’ll tell you why in a moment.
First though, a quick recap and a forecast.
In case you haven’t heard, the real estate market peaked about mid 2005, and then started a slide culminating in record equity losses, foreclosures, countless family fights, and even divorces.
As recently as 2 years ago, in some areas it seemed one couldn’t give away a house, then suddenly, and I mean suddenly, it all changed.
Why did it change so suddenly? I’m exactly sure. Interest rates have been low for years, and prices have been as well, but the market was very unstable, until it seems, that one day, everybody and their brother thought it was time to buy, and buy they did.
Maybe it’s because rents are rising and are close to or even more than mortgage payments in many cases. Maybe people feel the worst is over.
Whatever the case, people are buying.
At the same time, inventory has been shrinking, as foreclosures dry up and with equity down, many home owners deciding to hold on.
As a result, we’re back, in many markets, to the days of multiple offers and bidding wars. It doesn’t happen every time, but every market seems to have a price point at which people come running.
I live in Folsom CA, and I think it is somewhat typical of the improving housing market, I’ll use it as an example.
During the worst of the crash, in August of 2006, there were 561 homes on the market in Folsom. In December of 2012, there were exactly 56 homes available. That is the lowest number of homes on the market since 2004.
At the same time, 77 homes closed escrow, so we’re actually selling more than are coming out on the market. And they are selling fast. Average days on market for Folsom is 23.
How long will this last? I don’t know. Some say it’s temporary. Some say we’ve turned the corner.
Nay-sayers have been saying ‘nay’ for years now, each month predicting a flood of new listings from the banks, the dreaded ‘shadow inventory’. It just never happened. Experts point to a variety of reasons, from banks doing a better job of processing and approving short-sales, to them selling foreclosed properties in bulk to big investors.
Whatever the case, it looks like buyers aren’t waiting any longer, and the new demand combined with the short supply has resulted in steady price increases over the past year.
There’s one other twist: The big money guys are recognizing the opportunities, too. In the Sacramento area, the Blackstone group is buying 40 to 60 homes per month, on properties priced below $350,000, which happens to be where most buyers are looking.
So, what’s it all mean to you?
- If you have equity, rejoice! You held on and now your property’s value is rising. It probably won’t be back to the peak values any time soon, but we’re up about 10% over last year, and the demand continues. And if selling is on your radar, you now have an opportunity to sell right now with little competition. Low-ballers need not apply, unless you are bidding on something that’s been on the market a looong time.
- If you don’t have equity and plan on keeping your home, know that depending on how far under water you are, you may not be for long. I have a friend who went from being a little under water to slightly above. He’s happy.
- If you don’t have equity and want to do a short-sale. Fear not, the horror stories of short-sales are mostly those of days gone by. Today, lenders are much better at processing them, and the new California Home Owner’s Bill of Rights and the Federal HAFA (home affordable foreclosure alternatives) program have set rules and guidelines for lenders to follow, making it easier for you to sell and get out from under your mortgage debt. Many lenders are even offering relocation funds to help you get a new start.
- If you are looking to buy a place to live in, get an underwritten pre-approved so you can be ready, do some market research so you know what homes are going for in your desired area, know what you want and be ready to make a solid offer if the property is priced right and meets your needs. With multiple offers, sellers are often ignoring the low-ballers and negotiating with the highest bidders only.
- If you are looking to buy an investment property, take the same advice as above, and perhaps consider some less expensive areas. While home prices can be $100,000 different in another community, rents are often reasonably close to the higher priced neighborhoods. Fixers are still an option as well.
- If you are a renter, and you don’t plan on buying, do what you can to lock in your rent rate and don’t be a day late or a dollar short. Landlords would love to get a few more bucks coming in.
- Lastly, if you’re living with your mom, be nice to her. She might be reading this and will kick you to the curb. Take out the garbage, give her the remote, and no loud music.
Wishing you health, wealth and growth,
Steve
www.thepointheard.com