A few years back, in Michael’s Memo, I ran a series of articles focusing on the benefits of a nice, balanced market—one that is neither boom nor bust and neither buyer’s nor seller’s, where there is a level playing field. At the time, well before the severe downturn in the housing market, some people were lamenting the fact that the heady days of bidding wars were over. Some sellers were disappointed that they didn’t receive their asking prices—or even more! They didn’t want the balanced market that we were lucky enough to have at the time; they wanted the double-digit home appreciation figures that had somehow become expected.
Well, these days, most sellers have less lofty goals, to put it mildly. Things sure have changed, and that’s the point: the cyclical nature of real estate. Right now, we are working our way toward the goal of regaining that nice, balanced market, where the inventory is not too high for the demand, and where prices are on an even keel. The market went from one extreme to the other, and now it is struggling to get back to the middle. Here’s a report on how this is all playing out in the Three Village area:
The great news is that our market is extremely active. Buyers of all stripes—first-time buyers, move-up buyers, and luxury buyers—have jumped in. Mortgage rates are still historically low, and have been under 5% for months now, but it’s quite possible that we have seen the bottom. Inventory is still high, which of course is a plus for buyers. The home affordability index is way up, meaning that more people can afford to purchase a home.
On the flip side, prices are still falling, in part because there is simply too much supply for the current demand, meaning we have excess inventory. And the fact is, Long Island will not likely see the bottom in terms of prices for another year or so, and it will take even longer in other parts of the country. Also, unemployment is high. These factors together do contribute to the likelihood of further foreclosures, or in many cases “short sales,” where the home is sold for less than the amount owed to the bank. Unfortunately, these are occurring in our area right now.
My advice for sellers facing the possibility of a short sale, or even just a disappointing sale, is to take a long-term view, as I discussed in some of the recent articles posted at my blog. Yes, these sellers may lose on the sale, but they are likely to more than make up for it, when they in turn become buyers and make a purchase at a deeply discounted price. It’s a tough pill, but until the nation as a whole works through this process, prices cannot begin increasing and the market cannot fully recover.
As I have stressed over and over, homes that are properly priced will sell, and that is indeed the case right now, right here. It certainly is not all gloom and doom! However, sellers must understand that finding a buyer and agreeing on a price are not the only steps to closing. The home must be appraised, and if the appraisal is lower than the contract price, the buyer is fully released from the contract. The seller will have wasted a month or two on a failed transaction, only to have to begin showing the home all over again. For this reason, it is more important than ever for sellers to be realistic about pricing and to enlist the aid of a qualified professional realtor in this regard.
There is one very important intangible factor to keep in mind as we all grapple with the state of the economy and the housing market and the flood of statistics thrown at us by the media every day: We are blessed to live in one of the most beautiful areas of the country, in the shadow of one of the world’s premier cities. This is prime real estate, and prices will not be down forever. We will eventually reach that nice, balanced market. And from our new perspective, it may actually look like a boom!
As always, I am committed to keeping you abreast of market conditions. As anationally 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.
All Rights Reserved
Copyright © 2009 by Michael Ardolino