This from my Arizona Republic real estate column (permanent link):
Get a load of all that great housing news! Median prices are up! Sales volumes are up! The prognosis for the future? Up, up, up!
Here’s a different take: If it looks, walks and talks like hype, it’s probably hype.
Are houses selling well, compared to a year ago? They are — but the federal government is giving first-time home-buyers $8,000 in free money to buy houses right now. If that tax credit is not extended or replaced with something even more generous, the music will stop on November 30th.
And while median home prices may be up, prices for homes that normal working people actually buy are flat at best — and they have been trending downward since December of 2005.
But what about the shortage of available homes you have read about? What about the multiple offer scenarios, with homes selling for thousands of dollars over list price?
What would you expect to happen when you artificially stimulate demand at the same time that you artificially limit supply? We should be doing what your grandpa used to call “a land-office business.” Instead, even with $8,000 in free money, prices are still trending downward.
And that artificially-limited supply — all of the foreclosed homes that banks are withholding from the marketplace — will flood the market sooner or later.
If you’re in the real estate market right now, what you should do depends on your circumstances.
If you’re a seller, make a deal. Your carrying costs will almost certainly exceed any gain you can hope to realize by waiting out the market.
If you’re a first-time home-buyer, jump. If you’re not under contract by October 15th, you’ll probably miss out on the tax credit — and houses are not easy to get, taking account of the artificially-limited supply.
Buying with a loan? Interest rates are low for now, but they may not stay that way.
Buying all cash? Sit tight. As sweet as prices look right now, it seems likely they’ll get a lot sweeter when the banks finally release all the homes they’ve been hoarding.
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<a href="http://www.bloodhoundrealty.com/" target="_blank"> Phoenix Realtor Greg Swann</a> suggested I share this with you:
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Shannon Lefevre says:
According to @getabidnow people who are current are dropping off all sorts of toys they’re actually current on at banks across the country stating that their lenders can have them back like vehicles, boats, rv’s etc. Now why would so many people be doing that when they’re current if we’re on such a great economic upturn? It starts with the little stuff and creeps up to the bigger stuff like real estate…I think we’re about to hit round 2 or is it 3…?
September 5, 2009 — 8:40 am
James Boyer says:
Hmmm, here in North Central New Jersey, the homes that are selling are those that normal working people can afford. Basically the lowest end of the market, as well as the moderate section of the market is selling here. Start looking at mid-range homes, or upper end homes and the market starts looking progressively worse.
This means 80% of the transactions I have done this year are condo’s and small starter homes. Am I complaining? Nope, these kinds of buyers and sellers are fun to work with.
September 8, 2009 — 12:33 pm
Russ says:
“Buying all cash? Sit tight. As sweet as prices look right now, it seems likely they’ll get a lot sweeter when the banks finally release all the homes they’ve been hoarding.”
Thanks for stating this outright. It seems obvious to me when I run searches in areas like Surprise, Goodyear, and Casa Grande that massive foreclosures are still in the pipeline. Heck, this is true in many parts of Phoenix proper as well.
September 8, 2009 — 8:32 pm
Greg Swann says:
> Thanks for stating this outright. It seems obvious to me when I run searches in areas like Surprise, Goodyear, and Casa Grande that massive foreclosures are still in the pipeline. Heck, this is true in many parts of Phoenix proper as well.
I have investors lined up like blackbirds on a telephone line. If I’m wrong, they’re going to peck my eyes out. But if I’m right, we’re all going to make a ton of money.
September 8, 2009 — 9:24 pm
Robert Kerr says:
RE: “I have investors lined up like blackbirds on a telephone line. If I’m wrong, they’re going to peck my eyes out. But if I’m right, we’re all going to make a ton of money.”
I’m sure you’re right.
I don’t know if it’s intentional hoarding, to prevent oversupply or just backlogs of work, but there are significant – 30%, 40%, or more – amounts of defaults that are not showing up for sale, yet.
They’re going into the pipeline, but not coming out.
September 10, 2009 — 11:17 pm