We are on the verge of something big. The flood of good news from several sectors of the economy has all eyes on the stock market’s rallies, the carefully measured steps of the Federal Reserve, and the government’s various plans to turn the economy around. What does it all mean for real estate? I can tell you, unequivocally, as a real estate expert, that this is the time to buy and this is the time to sell. Sounds counter-intuitive? Read on....
We generally view a particular real estate market as a buyer’s market, a seller’s market, or a neutral market. But today, we have a market situation like no other in history, and we must look beyond the usual “rules.”
For buyers, it’s a slam dunk: high inventory, reduced prices, and the lowest mortgage rates since the ‘50s. For first-time buyers or those who have not owned a home in at least three years, there is the additional incentive of the $8,000 first-time homebuyer tax credit. Plus, the home affordability index is at an all-time high. In other words, a lower percentage of income is needed for housing expenses, meaning that more people can afford to purchase a home.
This is truly the opportunity of a lifetime, or as Forbe’s put it, perhaps the best time in a generation to buy a home. (See Exhibit 1.)
People seem to be catching on, because according to a recent survey by the Pew Research Center, 75% of Americans said that now is a good time or a very good time to buy a home. (See Exhibit 2.) But buyers, don’t become complacent! Generally, according to recent stats, after rates go down, they often dramatically go up. Don’t miss the boat!
For sellers, the news is not quite as clear-cut and may not be as easy to swallow, but the message is the same: Now is the time to make your move. Though you may not get the price you originally wanted for your current home, you may make it up on the purchase, by getting a better home at a greatly reduced price, and improve your quality of life as well. You could even end up with roughly the same monthly payment, thanks to astonishingly low interest rates. Be a seller in order to take advantage of the benefits of buying! When things do turn around, as they always do in our cyclical real estate market, your new home will have increased in value. This is how wealth is built. Real estate is a long-term investment, and should be viewed as such.
Most important for our area is the fact that right now, our market is very, very active. As I have stressed in my blog and my newsletter over the years, homes that are priced right for a particular real estate market will sell, and will sell quickly. The concept of pricing is something I discussed during a recent interview with News 12 Long Island. More sellers seem to be realizing that if they keep waiting for a better price, they may have a very long wait.
The fact is, as noted by Case-Shiller, it is likely that prices will not bottom out until November 2010. (See Exhibit 3.)
As I have been noting for several months now, in a strange way the market is not actually in decline. It is getting to where it should be. The skyrocketing appreciation in home values from 2000-2006 was simply not sustainable. (See Exhibit 4.)
Certainly, things seem to be brighter. Recently released March figures brought news that surprised many economists: Sales of existing homes, pending sales, and new construction were all in positive territory. (See Exhibit 5.) Refinancing activity is almost overwhelming, which should help the bottom lines of both individual consumers and the credit market. Mortgage applications for home purchases are up sharply. Sales activity is up. (But keep in mind the important distinction between sales volume, or the number of sales, and sales prices. Occasionally, mass media reports are unclear on this point, and the results may be misleading. Do not expect sales prices to increase soon.)
When enough homes are sold to create a healthier level of unsold inventory, the downward pressure on prices will lessen and home values will increase. As more and more buyers enter the market, more and more sellers can move up. The time has come....
As always, I am committed to keeping you abreast of market conditions. As a nationally recognized real estate expert with decades of professional experience, I’ll continue to provide updated, pertinent information. For additional data, visit my website at www.Ardolino.com, where you’ll also find my blog. If you have any questions, call me at 631-941-4300 or e-mail: Michael@Ardolino.com.