- Housing will not fully recover until 2012. That is when the glut of backlogged foreclosures is expected to be phased out of the market.
- Housing will recover by the end of the year. Now that inventory has contracted to average levels for what constitutes “normal” regional markets in major metropolitan areas where prices have declined as much as 50% in the past three years, and month to month sales have steadily increased over the past six months, demand has realigned with supply to arrest the freefall in values.
- The housing recovery began in early 2009. Median price increases in some markets indicate that even while many pundits were openly wondering when the bottom of the market would appear, it was actually several months in the rearview mirror.
Many factors and variables, and just as many divergent opinions to boot. So many, in fact, that you almost have to choose amongst the purported experts to determine whether you fall in the half empty or half full category. Job rates, interest rates, unemployment rates … psychiatric rates, for spending too much time poring over the data and extrapolations will render one in need of a head exam.
Overanalysis 101.
You don’t need flow charts to tell you where things stand at the moment. You won’t need a market report to tell you when things are better.
You’ll know the market has recovered when you no longer dread the trip to the mailbox or evening phone calls.
You’ll know the market has recovered when you can confidently re-enable automatic bill pay from your checking account instead of prioritizing which ones get paid this month by how far past due each is.
You’ll know that the market has recovered when you don’t have to decide whether you or a loved one is really ill enough to warrant the cost of a trip to the doctor.
You’ll know the market has recovered when you no longer have to explain to the kids why you can’t go to the zoo or stop for ice cream today.
You’ll know the market has recovered when sleep comes as readily as worry formerly did.
You can stop looking to someone else to tell you when the market is fully healed as the housing implosion is the root of these greater ails. It’s far easier to take stock of your own life, and those of your friends and family, to see where along its arc the pendulum is currently settled. As the finance/housing sector dragged our economy into the muck, it will again lead us back to dry ground. No need to watch the stars for celestial clues. Just do what no pundit can and watch your own life for improvement. You’ll know housing has recovered when both of your own feet are planted squarely on terra firma.
Most importantly, beware the forecasts that don’t jive with your own internal index. Those who would adamantly assert the rosiest or bleakest prognosis are likely more interested in influencing your behavior than in your well being.
“Buy now before prices shoot back up!”
“Sell now before prices erode further!”
When you stop listening to yourself, you risk placing all of your trust in the megaphones of those who have a vested interest in your fear.
Is the housing market improving? Is now the time to buy? The time to sell? For months, I have been asked to provide the answers to these questions. I have dutifully provided my vague predictions with the obligatory caveat that no one truly knows how a free market will behave from one day to the next. I realize, though, that in supplying answers to those who actually give the market context, that we have all been looking at this thing from the wrong perspective. It makes zero difference where I think the market stands at present, and where it is headed. The very consumers who ask me these questions are the ones who will ultimately provide the truth or fallacy to my various hypotheses. So I turn the tables and ask the consumer, the actual authority, the very same question.
“What is the state of the Real Estate market?”
Feel free to comment here or send me an email with your thoughts. Looking for opinions from consumers and laypersons, not agents or financial wizards (all comments welcome, though). I will post the results in a follow-up piece.
Mr. Homeowner & Mrs. Homebuyer, the floor is now yours.
Your source for Scottsdale Real Estate since the dawn of time ... or thereabouts.
Launch your Scottsdale Home Search now!
This is a well thought out post. The consumers internal barometer will really decide how things go. When consumer confidence returns a lot will change.
Very interesting - I agree with David, consumer confidence is the key - will be back to see imput.
You're right--consumer confidence is the key not only for the housijng market but the economy in whole. The most important aspect is employment.
Nice work here Paul. I look forward to the follow up.
Paul...so far only industry responses..........not surprising. ... the public is probably terrified of answering the question.....you see...the market is the same as it has always been........one house at a time............seasoned by various motivations that can not be quantified in one fell swoop..
Don't expect much in the way of commentary from the consumer.
They just want to sell their home so they can move to Florida.
The prospective home buyer just wants a home for themselves and their family.
Oh...back from vacation? Hope you had fun and you are right, the predictions are all the product of perception and sometimes the $&%# gets so deep you need wings to stay above it all!
BTW I just learned that we are pretty fortunate here in Austin, barring any unforeseen disasters the recovery ranges anywhere from Feb. 2010 to November 2010. Yeah , I know there is always a wide point spread but at least it's next year in our area. I hope...
PS, if you made the grammatical errors in the comments above, I am unsubscribing...I just cannot take it! ;-)
John - Same matter cannot occupy same space, and all that scientific jazz. Each house is as unique as the lot it sits upon. Just a matter of degree. At any point in time, you are absolutely correct, a house is worth what one person will ultimately pay for it. Everything fits within the context of the market at large, of course, but I appreciate those who can effectively rein things in to the objective at hand. Whatever larger forces are at play, utilize them to make the best purchase/sale that you can.
I did that and more Russell. Surely you took notice of "May God gave mercy on my soul." Last time I try to keep up with comments on a PDA.
Good points, Paul, as usual. And great comments by everyone else in response. I for one, have been and continue to be cautiously optimistic. Not necessarily for the global economy...but for mine.
Sidenote: Consumers are always timid about commenting on industry blogs. Perhaps out of concern that they may appear naive amongst professionals, are not as interested in the topic as we are or just don't come across my posts with the degree of frequency as I would hope. Regardless, I hope this proves to be the exception to the rule. I really would like to take the collective temperature of the consumer.
Don't be shy!
I agree with everything you have said Paul. I think the other thing we need are banks willing to loan to well qualified buyers with money to put down. There is no way someone who finances at 100% can withstand any downturn in the price of their property. Perhaps willingness to withstand would be a better term. In our area we don't have a bunch of excess inventory, but the banks just don't want to loan on condos even with 20% down.
Just my two cents!
fully recovered? how about almost fully recovered. forget about the foreclosures we have some people so far underwater, and i don't mean in the gulf, that you may be asking them in 5 years if they have recovered yet and the answer will be NO.
now on the other hand we have record numbers of sales. you figure it out.
Paul - I will be interested to see the response you get here. Of course, I have my own opinions, but I am not the average consumer.
Jay, we are still a far cry from record sales here in Phoenix, and the vast majority (about 96%) are sub 400k, but you point holds. The larger truth, of course, is that there are winners and losers in every market. No one ever accused capitalism of not being Darwinistic.
May I guide everyone to this post by Lina Robertson, outlining why we are in this mess and how long it will take to get out of it. HINT: 32% of loan applications in 2005 were 5/1 ARMs according to Freddie Mac.
Oh I just want to buy a whittle house and ice cream for your kids when I read your brilliant wordcarvings...if truth must be told, you cast a perfect balance of light and shadowplay to make Truth stand on its own two feet for us to face...he's better company when he'll just sit down & be quiet...we don't want to know...or do we? He's cast in every character but hardly has any lines. Bravo, Paul...(re-blog time for moi! :-)
Analysis until paralysis! All the predictions -- and all the lemmings who try to take advantage of the "down market -- have very little factual information.
It will be a while. None of us have a crystal ball and none of us are going to be right.
I'm afraid that you'll get more commentary from us industry folks than you can possibly imaginge, but nary a word from mr. & mrs. consumer, my firend. That being siad, it would be nice to know exactly what they are thinking...
Paul - I am cautiously optimistic and unfortunately don't have a crystal ball to predict the future of the market. The predictions go from one extreme to the other making it that much more difficult to know the true direction we are headed in.
I am Mr. Consumer ... though I am very recently began studying for my salesperson license, I would not consider myself in the industry yet. Please see my analysis 1 & 2 The next few years are going to make for an amazing investment opportunity for those who have spent the last few ears preparing for it.
Kyle Buda: This "lemming" does have factual information, straight from Freddie Mac's website. 32% of loan applications in 2005 were 5/1 ARMs. In 2006, they amounted to 26%. It's easy to see where the market will be going in the next 2 years with all of these loan resets.
Looks like everyone except Chris is a Realtor(r). It's going to be awhile before we return to a pre-2004-2006 market. Have to wade through the Alt A loans re-setting.
I think when people ask about the market recovering they are hoping for the quickly escalating prices we saw in 2003 through 2006. They need to understand that the market of those days was not normal either. I think we are heading toward inflation and that will bring a lot of prices up including housing.
Suppose if you ring the dinner bell in front of a group of industry vets, you can't help but encourage pontification on ARM resets, etc. Still holding out hope that the consumers find their voices and give us some thoughts. Naive of a cynic? Probably. I do think that most online material is not very interaction-friendly with the target market. Speeches instead of questions. We'll see if my little test to that theory draws anyone out of hiding. Talking with my peers is great, but I'd like to hear from some with a varying perspective. Any takers?
Paul this is a well thoght out article. Anymore ther is so much bs news that I find myself listening to books on tape and classical music. OUr market means more calls each day and more work all around , but I find that this actually energizes you.
And in tghe end, the consumer will determine when the market really turns. When folks start buying, the market will improve.
Paul this is a well thoght out article. Anymore ther is so much bs news that I find myself listening to books on tape and classical music. OUr market means more calls each day and more work all around , but I find that this actually energizes you.
And in tghe end, the consumer will determine when the market really turns. When folks start buying, the market will improve.
Good post. Times will improve when more people have jobs. If you don't have a job, you can't participate in the recovery.
Paul,
how very true. We and our clients are so loaded with opinions from outside sources that don't really matter in our local market.
Paul - In my area where unemployment is at 12% people fearing for their jobs and until the employment market does not improve the real estate market will be the way it is right now.
As far as consumers commenting, I wish many consumers will comment - this post warrants consumers reaction. Although it is morning, I'm thinking if this article is posted on multiple sites you may have a better chance and if fellow Active Rainers would reblog, it will increase readership as well as comments.
Good Luck - Looking forward to your follow up article :)
Good points and great comments. Thanks everyone.
Great Blog Paul - you are right - we will know....
Great post! I am parking here to see what Mr and Mrs Consumer have to say, we are all ears!
I think people are tired of bad news regarding the economy, they're tired of the bad reports and are "tuning out". Those people will focus on the positive stories immerging and this, little by little will help. Good post!
The post is a lot of fun and the comments are great. I think we're as optimistic a group as you will find anywhere, but even we can't agree that things are going to get better soon.
This only had 39 comments? A shame because it's well written and though a tad longer than the fruit fly attention span of many in the world of blogging well worth reading! Thanks!
I loved your post. If only the powers that be at the National Association of Realtors would "think" more like this. Have been on Active Rain for a year now and your thoughtful ponderings on this issue are among the best of the best that I've read. Kudos for the inspiration!
Great post! I am used to Facebook, ActiveRain needs a 'like' button. Thank you for posting and I am looking forward to seeing what others have to say in your update post. We definitely saw an increase this year over last year in activity, although a lot more cash buyers and a lot less expensive property. Looking forward to 2010!
Really well written analysis. We have definitely seen a steady increase in prices. May fluctuate a bit more but I think we have seen the worst of it. I absolutely agree with you but of course time will be the real measure.
Nice post Paul. And your grammer is better than you think :-)
Right on, Paul! A long but simple response to a simple but extensive question. Thanks for the thought.
I heard a great, yet simple quote the other day on a radio talk show, which applies to almost everything, and most certainly our current housing market and economy: "Act on information, not fears." I can't tell you how many people I see acting on their fears, but I think we can all guess that the percentage is high.
Great info all! I have no new revelations except a confession. I way overspent in 2003 -2006 On real estate internet programs and lead generation. Now I am very picky on where I spend my money for prospecting! It is good to know that all are working our hardest with the least amount of return. For a long while I thought this only applied to me.
Jobs on consumer confidence are the key. Any for me spending less!(:
Thanks Paul; I for one would love to hear the response of average consumers. Of course real estate is local and the state of the economy is individual. Therefore the state of recovery is not a blanket that covers us all. Thinking for yourself is mandatory and realizing that 'equity' is not liquid yet evaporates in the blink of an eye! Timing and need must coincide in an optimal way for the most positive outcome.
After 2 years of forecasts that defied the odds of being soooo wrong, I have come to the conclusion to trust my own instincts and facts to see where the market is and where it is headed. There is so much use of fear in this industry and this does nothing but confuse the consumer. I am a "half-full" kind of person, but facts are the only things I can back up.
Cheryl Kurek, Sutton-Premiere Real Estate
Consumer confidence is key is any facet of the economy ... financial markets, real estate, etc.
Paul-
Great post and good reading. You accurately captured one of the main barometers of the recovery, the consumer. Although I feel our consumption patterns may have been permanently altered as a result of the downturn (much like the generation that followed the great depression) it is correct to monitor the anecdotal evidence that a recovery is beginning take take hold. The stock market recovery is one piece in a bigger puzzle but we really need to see jobs start to recover before the economy can really begin to gain some steam given the consumption based nature of our economy . Speaking of consumption, I don't know if anyone has read, or believes, in any of Harry Dent's observations in his book "The Next Great Depression" but the Baby Boomer effect is of great interest to me in regard to how it will effect not only our economic recovery but more specifically real estate. Will the second home and vacation markets continue to languish even as other markets recover because of a fundamental change in the behavior of this group?
Great Blog Paul. It seems that we may be in a recovery already, however there is still the matter of 2005 5/1 arms adjusting next year. We also have to be careful to call it a "recovery" when the banks still have a huge shadow inventory. I know in Northern Virginia, buyers are having a tough time finding the right house due to lack of inventory. Most of the recorded REO's for 2009 haven't yet hit the market. The homes are still stuck in the court systems and will likely be ready for sale the same time 5/1 arms are adjusting. This makes for an interesting scenario next year. Thanks for the great Blog and lets take them by storm in 2009!!
The real estate market will recover when jobs and incomes can support the home prices. We are not there yet. Prices need to come down and job losses need to stop and unemployment needs to go below 7%. Until then there is no chance of a true real estate market recovery.
Paul, I agree with everyone else, you did put a lot of thought into this article. My belief is when the employment opportunities get better is when we will see the consumer confidence get better and that is when we will see the economy turn around. Will I save more of my money and spend less? You bet I will. This has been a wake up call for a lot of people.
Truer words were never spoken. Fear drove the housing market free fall, and fear impedes it's recovery. Listening to others instead of our own inner voices also got us into this mess.
Did we REALLY think:
* It was okay to lie about how much borrowers earned
*Using an ARM to finance a home a consumer couldn't afford would not catch up with us
*We'd really get rich with the get rich quick schemes we heard
*Watching The Secret every day would float us to millionaire heaven
I know people like this who left their values behind because they listened to sales people trying to make money. The lady who spent the whole retirement savings she got in her divorce settlement going to millionaire seminars who is still BROKE because she never did ANYTHING with the information. The multi level marketing mortgage company that's out of business whose owner has his $50 million mansion on the market...STILL. The couple who had to work with a debt consolidation company because watching The Secret every day didn't work.
None of my borrowers took a pick and pay ARM when I explained the program fully. Some of them went to another lender and believed their lies, and they are calling me today to see if there is any way to avoid foreclosure ( there isn't! ). None of my clients were advised to take cash out of their homes to follow Missed Fortune advice, and I sleep at night even though business was slow for a long time. I do get calls from borrowers trying to avoid foreclosure, but it's because they lost their job and I didn't make that happen either. My clients refer to me becasue I didn't get caught up in the craziness. I just gave common sense advice and asked them to use the information I gave them to make their best decision.
Excellent post. This is a subject that is brought up to me by every client and has no simple answer. Florida has become an "EXIT STATE" for the first time since the 1940's. Unemployment is now at 12% which of course has an adverse affect on all aspects of our economic landscape. Having said this, there are some really great deals out there right now and we're seeing a big increase in the number of homes being sold compared to this time last year. So I prefer to see the glass as half full . . . and climbing!
Hey, here's a consumer comment! Homes in our area (North Shore suburb of Chicago) seem to be selling more now. Also, there is less inventory--maybe because it's the slow season.The low end is doing ok, and some of the high ends are selling, too. The good thing is that some of the mid-range homes are now under contract. There is still an abundance of caution, like people are waiting to be sure the economy is really picking up.
Our CA ranch home (unusual in an area of traditional colonials) shows well, but has been on the market since Super Bowl. And yes, we have had price reductions. There has been interest, but folks have to sell their homes first.At this point, I don't think our place will sell before next spring/summer.
I am a landscape designer, and have noticed homeowners are now doing projects that were put off earlier in the year. I believe some of the projects have been scaled back, or are being phased in. Same thing with homeowners.
Thank you for this very thoughtful article. I totally agree with you that the consumers will show us what the market is doing. Here in rural waterfront Virginia I still see well-located, and especially well-priced waterfront properties selling. I especially see sales in the high-end market. I try and educate my sellers about this market. Buyers seem much more savvy than they used to be, and are very aware of prices being paid at this moment. We just have to get used to a "no easy sales" period, and, as one of my colleagues said above, quietely continue to sell well-priced house.
Diana Burton
Get the consumer confidence back !!
IMHO, as long as interest rates stay low we will continue to see some improvement in home sales. If rates go up significantly, prices will have to go lower on homes in order for buyers to afford them. At that point we would have a "double whammy" of downward pressure on prices, forclosures and interest rates.
Paul,
Great article .
Unlike many younger realtors today , I have been thru 3 down markets. In 1974 , I made a decision to leave a very secure Fortune 500 job with a lot promise to pursue my dream of selling and eventually owning property.
It was 1974 , a full scale recession with home interest rates bumping 10%.Everyone I knew including my boss said I must be crazy to go into real estate .I was 27 and most of the agents in the firm I wennt with were 45 plus.All I heard every day was how bad things were but I had to do it so I just started knocking on doors both residential and commercial .I started getting listings by the train car load and to make a long story short sold over 1mm in my first year when homes averaged 30k.
In 1981 , I had to pay 22% prime for restoration projects that I was able to do.Could buy anything cheap but even then we still had 10% inflation per year in housing prices.
What we have today is different but it all comes down to mindset .
People still want to own property and as agents we just have to help them achieve that goal no matter what it takes.
Some people are creative and most are not .The name of the game in real estate has always benn and always will be "LISTINGS".
IF YOU ARE GOOD AT LISTING " AT THE RIGHT PRICE" or can control the seller after listing and doing a first class marketing job , you will do fine -even in this market.
My game for the last 10 years has been land where today banks will not make a loan so any residential agent that would like to jump ship and get into the land business " come on in the water is fine"
Thank you for this thoughtful post. The content and tone really made my day. Can't wait to see what happens over teh next few months. taruma
Dana
Katherine Mullen (#56) - Thank you for braving this comment stream with your thoughts. I knew we'd eventually get some response from non-agent types.
All - Thank you for your comments. No way I am going to be able to respond to each one individually as this is blowing up while I head out the door to make a living. Definitely interested in hearing opinions that vary as much from individual to individual as market to market, though, so keep them coming.
no hope for the rest of this year or next...the move up market is dead. the price points above $350k are tough to finance and the overhang of "in the system" inventory from the banks has us all waiting for the other shoe to drop. even VERY well qualified buyers are being tormented as they apply for loans.
ther real rate of unemployment is far above the 9.9% that gets reported. the method of calculating unemp is comical. certain demographic bands have unemployment WAY above 10%. here's the rate by age and sex...
http://manyeyes.alphaworks.ibm.com/manyeyes/visualizations/unemployment-rates-by-age-sex-and-ma
here it is by race...
http://verifiable.com/charts/1361 WOW!
may, #54, fear was not responsible for the freefall...that came about as reality imposed itself with a heaping helping of "affordability 101" which was imposed on the market by the markeplace, which was then overlayed with a thick layer economic cycles. we see lots of "traditional" foreclosures now as jobs are lost. most of the folks who fueled the boom were not really buyers except when allowed to lie about their income...they are off the bus now and are being digested first. that component of "demand" was pure pretend and will never return. hold on, the icebeg has been hit, the question is how many will make it to the lifeboats. the bottom will be protracted and shallow and saucer shaped. IMO.
My insight is based on past history, we as Realtors know exactly where the market is and where it's heading and the media takes a few months to catch up. Once the media declares that we are heading toward a recovery we are usually with the consumer already deep in it. However when we speak about recovery I am talking about buyers and sellers entering the market and business returning to average # of transactions and prices leveling out instead of dropping as they have consistently for the past 2-3 years. I believe that many people confuse hearing that the market is turning to mean that the prices will return to what they were a few years back. Not going to happen in 2010 that is for sure. I believe we could be looking close to 5 + years if we are lucky.
I do believe that we have finally come to a meeting of the minds. The Buyers because they have missed on some good deals due to trying to put in to many low ball offers realize that perhaps they should make an offer based on what other homes have sold for and not just offering $50,000 or more off the asking price on a home that is listed for $199,000.
The Sellers have finally realized that they are "Not giving their house away" but that the value of their home is no longer what it used to be. Combined we are finally putting more deals together and people are once again starting to enjoy the buying and selling process.
I welcome your thoughts!
Paul: Thanks for this. I appreciate it! I think the recovery is going to be very slow. Especially up here where we always get hit last. Perhaps in 2011. Next year the projections up here are for a 1.9% increase in sales. And 2009 has not been that great. Eventually things will recover up here. There are builders finishing their projects now and this year was better than last. Couple that with a scarcity of land and it means that times will get good again. But practically every community bank here is on life support and they were the ones that lent the money to the developers. So we still have to work through some things before recovery can begin. I believe other parts of the country are already recovering. We just always manage to get hit last. Thanks again for the post!
great post Paul. I am not a Realtor but an insurance agent who works with Realtors. Here in the Tampa area, unemployment is over 10% and getting worse! Foreclosures continue at record pace and the Realtors tell me they're having trouble getting lenders to approve the loans or sign off on the "short sells" or "foreclosures" which is still a majority of the inventory out there. I, for one, am sick of falsehood, media negativity, and fearmongering. May(comment#54) was so true that we need to stick to our high values and not just chase the money.
Paul,
Thank you for saying exactly what you did. I'm right with you, buddy! CNN, MSNBC, Nightly news everywhere, stop the chatter...and just go with what you feel is right for your particular location. Winston Salem and the North Carolina Triad was never "Overpriced" "Inflated" "etc" "etc" .....We are slow in sales volume because of job losses, but our region has held values pretty well.
Thanks for a GREAT POST!
Thank you for your post - I agree to most of it. I think the big question is how we let the market affect our business? I know that there are many agents that are prosperous in every market. We must look for the opportunities. We may have less competition because many agents are gone or grazing. If we sharpen our skills and give great service, we too can prosper.
The silver lining for us as professionals is that the amateurs will eventually give up and go away. That will be a huge win not only for us but for consumers who will be far better served in the next "good times."
Well thought out post. In my area we have seen a steady increase in price and the predictions for the future look good..
Great comments all... I believe like many there will be no way of truly telling when this thing will right itself. I myself living here in the North Texas area will watch carefully the new home starts, here in the Frisco area new home starts have always been an indicator of the market showing signs of recovery. My fear is when the market starts to turn, so will inflation and then interest rates will increase, once again hurting the market.
All we can hope is for a faster recovery. Buyers are getting the idea. Well qualified buyers are buying.
Paul great post. You said "When you stop listening to yourself, you risk placing all of your trust in the megaphones of those who have a vested interest in your fear.". So true! Buyers should look at their own situation and decide from that. I personally think buyers should be asking themselves...
Maybe I am one of those cautious people but I feel the rash decisions so many made is part of what got us into this mess.
What a fabulous post ... really well written and goes right to the heart ofthe matter. The hard truth is NO ONE KNOWS what is going to happen ... everyone ... including the so called experts are just guessing or worse yet ... lying.
The internal index, as you call it, is the best barometer to just about everything in life.
I really enjoyed reading your post.
Yes, a very well though out post Paul and well written too.
Thing is about where we stand at this point in time, that is if we follow the 1929 crash and so far we have followed it to a tee, is that the stock market has retraced 50% of its losses and that is where the market in 29 droped another 90%, so we want to stay extremely vigilant here and not make any hasty decisions.
As for housing. Well the sub-prime is basically behind us, but the ARM resets are just getting ready to hit in a big way starting right now and running through 2010, not a good thing for the consumer or the real estate market.
And with companies only being able to show profits by laying off large amounts of people, well, it looks like, to me at least, that there is no turn around in sight, as with layoffs comes less consumer spending and well the ball rolls on down hill either way here, as far as I can tell.
What do you think?
Well said.From all the "experts" over the years NO ONE WAS RIGHT in my experience predicting anything.Most of the sound like a racetrack forecasters.Real estate is not the stock market,therefore it does not really matter what the economy does.Also remember MOST of he fortunes in rel estate happened in times like this.The rest is just talk.
It is a breath of fresh air to hear your commentary! So, well spoken, don't know that I could add a single word to it that could possibly make it any more realistic and honest about current market conditions. The words you spoke are exactly how I feel when looking at my own market here in Missouri. I can only hope at this point that it will get better. Thanks for your post! It' great!
Paul, you said it all. I will know when it is ok when it is ok with us, until then, we are only guessing as best we all can.
Great post Paul, Fear should never be the deciding factor.
"It's far easier to take stock of your own life, and those of your friends and family, to see where along its arc the pendulum is currently settled."
Can't wait to see what you compile. Love the post!
This is an excellent analysis of the current situation. When I started to think in your terms, I realized that what I see happening around me runs counter to all of the "good news" we're getting about housing in the South Bay of Los Angeles. Unemployment has directly affected my siblings, stores have closed all over town, and there is still a pervasive sense of dread that more bad news is coming. Personally, I have changed my business strategy to survive in this economy. In the past, my average sales price on listings was approximately $1,100,000. Today, our average sales price is about $375,000. We are doing more sales on the low end than ever before because that's where the business is. The loss of stated income loans has severely affected the high end and there seems to be no recovery in sight. I have moved my marketing emphasis from print media to online marketing. I have completely changed how I do business to meet the new demands of this economy. And, while it has been an interesting journey, I would be lying if I didn't say I missed the old days! I mean, really. Who loves short sales?
I encourage buyers to buy based on the enjoyment a home brings, rather than the financial implication should the market plummet. If we can understand our cars losing value, computers losing value, yet we still buy. Why not buy a home for the same reason?
I predict the actual long term bottom will be put in just before or after the job market starts an improvement trend. We are paying for increased sales and prices with incentives such as credits and low interest rates. While this can be kept in place for a long time it is still artificial. Organic gains are probably a couple years out considering 18% of people have no job or are severly under employed. UNtil then, there are still sales happening, jsut at lower prices.
How about : "IF IT IS TO BE IT IS UP TO ME?" Someone is helping people buy or sell properties,even if it is a few, so why not me?
This is from an agent!
Ty
Hi Paul, Very well thought out and presented analysis going forward ! Many of us refused to watch the evening news or listen to the experts and preferred to work hard, staying active and positive ! Now the market, area by area, looks for a solid footing.
Remember, real estate is a LOCAL. If the LOCAL economy is doing well, and people have JOBS with SECURITY, it promotes consumer confidence, and people buy homes. We need JOBS for our consumers.
Here in Louisville, KY, the low end homes in good condition are selling well. Mid-priced homes are beginning to move, and it will take a while longer for the high end homes to sell. Despite what the national media is telling the consumer, you can not buy a nice (non-foreclosure or short sale) home in Louisville for 50 cents on the dollar. Our market is on the upswing.
Great post Paul. Thank you so much for sharing. Go to the beat of your own drummer. More ca ca is sold through fear than anything else.
I get asked the same question from clients and friends and I try to humbly respond that as much as we try to watch the market and things that affect the market and try to form an educated guess with so many variables and things we think we know and do not know( like who could foretell Bernie Madoff and how he would affect so many people). In this market you just have to take it a day at a time and make sure you are not adding to the ca ca.
You have touched on the one subject that is driving agents crazy. Thank you, because it has generated a wealth of healthy feedback from all over the country...and here's my two bits:
First, the housing recovery depends on local area conditions. Some areas (like Austin) are blessed; others (like Riverside County, CA) are not. Obviously, homes in high-demand areas such as beach-front ti will bounce back sooner IF there are enough foreign buyers or wealthy people who take advantage of bargain prices. So, the country is a patch-quilt of some areas seeing a housing recovery while other locations continue to deteriorate.
In my view, several factors will influence when and where the housing market comes to life:
So maybe the 2010 outlook in your geographical location is good. If so, I'm happy for you and envious. Here in California, the 2010 outlook is pretty gloomy. Can you say 2013, 2014 or longer?
When we see jobs coming back and legislation that addresses real world obstacles, that is when the housing recovery will pick up speed. Streamlining short sales and the mortgage adjustment process would be a good start. Giving preference to individual REO buyers over investment groups using bulk discount strategies would certainly help. In short, applying a little innovation and creativity to the nation's problem areas could significantly expedite the housing market recovery nationwide.
Thanks for the post Paul.
I am a relatively new real estate investor. I bought my condo in Chandler as my permanent residence in 2007, and my rental in Maricopa in 2008. And of course that was near the beginning of the free fall in prices. I figure as long as the prices are still low (and until I can afford to buy another investment home) I am renting my fully furnished place as a corporate and vacation rental. It helps pay some bills, and will help me save for a potential downpayment. Sometimes in this ecomony, one has to be very creative with solutions to challenges.
And I completely agree that prices here in Phoenix have bottomed out. As soon as these foreclosures get sold, the demand will drive prices back up, perhaps not at the dizzying rate of a few years ago. But I realy believe on time it will all work out. There's no Chicken Little mentally mindset with me!
I think you really touched on what people are going through. So many read the market reports and listen to the news trying to figure out where all of this is heading when the answer lays right in front of them in their daily life. I loved how your put this together. Did you post it to your outside blog? Since it was featured, you're going to get a lot of feed back from the pros, but I bet you'll get some from consumers via your outside blog or Localism.
I'm not just a real estate agent. I also have a business doing feng shui consults. This is how I judge the economy. Only the best informed are buying the feng shui now. Those who would get a consult just to see how it works, aren't bothering. So, it looks to me that people have stopped speculating with their money and are hanging on to what they have.
There will always be someone ready to buy a house, but right now people are afraid to go into debt for anything. I don't see that changing while this administration is in charge.
Paul, very interesting and thought provoking post.
Linda Landry, I agree with you that Re Estate is local and the economy is individual. Some areas are recovering, but in the end it is always supply and demand. There is a demand for homes in good locations and good condition in my area. Interest rates are so low, prices are down 25%PLUS , if you have been waiting it out, and have a job, now is the time to buy. Here is where need and timing collide. Let's hope that means a recovery.
Diane Williams, I agree employment and consumer confidence are of major importance.
Trudy
Working for a company that offers real property information and statistics about the real estate market, we naturally think we know what's going on. Statistically and analytically, we do. But, as Paul so eloquently points out, what consumers think about the economy and their own livlihood is the real barometer.
If you are a stat head like me, you won't give up on the data - just keep it real.
For more stats on your market - go here --> www.dqnews.com
I have stopped making predictions. My joke is that people should listen to all the experts and then do the opposite.
The market will recover when the economy starts moving again. No jobs = substandard housing market. 10% + unemployment doesn't lead us into a housing recovery.
I really loved this post. Really heart felt and well written. If you doing well God Bless You. For those of us who got caught with our pants down - well hopeully someday soon we'll be able to sleep soundly get up with a song in our hearts. Great post Paul.
A very interesting perspective on how to know when the market improves with a lot of validity.
I'm curious to see what the consumers say.
We have hit bottom in Denver, likely in June of this year. Now we went into this housing crisis first. Colorado was number one in foreclosures like 20 out of 24 months from 2005-2007. We went into this first. We came out of this first. When it was happening though the media missed it because we are not on one of the coasts.
"When you stop listening to yourself, you risk placing all of your trust in the megaphones of those who have a vested interest in your fear."
Very well stated...
You sure know how to invoke a response! I always look to see how many months' supply is in my market. If its 6 months or less, the housing market is healed. Its a long way from there. Maybe this is known as the market temperature.
There is alway positives and negatives in every market cycle. We are a long way from having all the negative equity out of the market.
Still I choose to focus on the positives.
Nice post.
Great post...thank you. I read alot from NAR, Realtor journals, real estate web sites and think the market has many positives and is making slow improvements. My husband, a consumer, reads the real news in the paper, internet & business journals and he believes it's going to get much worse than it already is because of the global economy.
Wonderful dialogue here Paul, even if it is us industry folks and not the consumers you were hoping for. This is the kind of wonderful sharing of insight and frustration that makes blogging and AR so valuable. Thank you!
Paul,
You are right of course. The current economy is personal to each and everyone of us. I have investors who are taking full advantage of these low prices and do not seem to have a care in the world and the other extreme, seller's who are losing it all.
I also have my personal take on how it is affecting me. For me personally, the market has not yet turned positive as far as the ability to be able to sell my own residence. When that happens, some of the pressure will lift. On the other hand, I am having my best year ever as far as number of sales and volume go. The economy can truly be a double edged sword.
Great post. I re-blogged.
Great post & some good comments. Think of the market correction & recovery as the Nike symbol. A rapid down & flattening off & a long tail back up. Also think of the market as one of many smaller sub-markets. In my area, some sub-markets have hit bottom & started their way back up, while others are still in decline. Knowing each particular sub-market & its characteristics is important in answering peoples questions about "their" homes recovery & where it is. Supply & demand, Days on market, list price to sales price ratios, seller consessions, percentages of normal sales vs distressed sales, etc are all factors to look at. There are different factors that could dictate a persons need to do something NOW as opposed to later, & each case is an individual one. This is a time when we need to be in the know consultants more than ever. Sometimes that will not lead to a NOW sale.
My comment is for Sandra Nickels. Evidently you forgot that you were once an amature. Paul is right, there are no experts, even he doesn't claim to be one. We are all in this together. A true professional is a leader and a leader is someone who is honest, reliable and credible. Home Buyers and Sellers need to know that we are all of those before they will trust what we say to them. We need to be leaders by supporting one another as all of us are going through these hard economic times together. We need to help our clients gain confidence in our industry so they don't fear coming to us. We need to help our clients understand that the bottom line isn't more important than they are. Once housing starts to move, our economy will start to move.
Loved the post Paul, I couldn't of said it better myself!
Kelly
I am in Michigan in Metro Detroit and we are asked this all the time and publicity pretty much says we are one of the worst - not to mention the negative press with the Mayor fiasco etc. However, this is my best year yet. The market is what it is and we do what we can to adjust and keep being the professionals that we are. I work with a couple of invesotrs - a lot of buyers right now with less focus on listings. I don't spend a lot of time speculating - I look at my life like you so insightfully pointed out and then do what needs to be done. My investors are losing out on many offers because of out bidding - good sign - and then I can find an equally negative sign. I love being a Realtor and I focus on the positive and know the market will shift. Thanks for the great post.
"You'll know the market has recovered when you can confidently re-enable automatic bill pay from your checking account instead of prioritizing which ones get paid this month by how far past due each is."
Beautifully stated Paul. You are exactly on the money. Now as to when the market will fully recover I have this to say:
Sorry, I've drawn a blank.
Great post.
I am a mortgage broker in Chicago, own 3 places in the Phoenix area. 2 are high rise condos in a building in BK for the developer, not the owners: however, 55% of the tenants are hanging on. My concern is will they recover in 5-7 years. I paid 30% less than 80% of them who wound up closing in early 08. I bought in early 05 and they were finished in late 07. That's why 45% never closed. I can't walk away because they are investment properties and the lenders could take my other money so I am stuck but grateful to make the negative 20K cash flow on the 3 of them each year. To walk away, would ruin my credit and I would have to pay the money anyhow since I have it. No forgiveness for investors. Investors that are BK don't need to worry because they have nothing left to worry about.
5/1 is nothing to fear. Most probably have 4-4.5% and the current margin for most is 2.5 and the 1 year libor index is under 2. My guess is they will reset between 4.25-5.25 for most, so that shouldn't hurt anyone. And since they are arms not ballons, they need not worry about refianancing and not being able to qualify. The high reset arm loans are done. They were all 2/1 arms taken out in 05,06 and early 07.. Those people have left the keys on the counter last yearand in the first half of 2009.
Not that real estate is wonderful here in southeast Florida but it is still local. We are selling but no where near the pace of the last few years.
It is a constant fight to stay ahead of the negative and depressing news and sometimes facts.
I REFUSE to Give in or GIVE UP! Joy
Don't give up. I entered the mortgage biz in 1993 after 11 years w/ a corporation and made 40% what I had made which wasn't that great to begin with. In 1998 I made 4X what the corp. paid me and in 02 and 03 I made 7X. Back in the dumps worse than ever in 06 and 07 and now as bad as it is 2x of 06 and 07.
Plus I invested the huge money I had made in Az. real estate in 04 and 05 and the stock market. Anyhow, I don't have as much money left from those huge years(partly do to my fear) but I still have the same life, wife, etc. and I enjoy being a mortgage banker even though the government has made it very difficult. Hang in there.
Hi Paul! Very insightful and thought-provoking. Like Diane, I've enjoyed reading the commentary and do wish that the consumer felt more comfortable commenting as well. Our market is in the upward swing with a decreasing, increasing sales and flat sales prices--however, it's a SLOW upward tick! I hope for all of us to stop dreading the walk to the mailbox and giving it the old, 'which one do we cover this week.' Best of luck to you, Paul--you SO deserve it!
Paul, what a great post. As to #56, I am a realtor in the North and Northwest suburbs of Chicago, and you hit the nail on the head!
There is a shortage of homes, - I am currently looking for a home in the $400,000's that is decent for my client and having a hard time finding one. Other than short sales, the inventory is low and my client doesn't want to gamble on a short sale since he is moving here and needs a place to live.
As to prices, they will eventually go up, sooner than later for the lower priced homes, but the higher priced homes are still unfortunately going down.
Paul - We may not know where home prices are headed, but we sure know that interest rates will be moving up and the tax credits are only available until spring. If you are buying a home to live in and don't plan to move for the next 7-8 years, then whether home prices move up or down in the short-term shouldn't matter. Get a 30 year mortgage below 5%, take the tax credit, and enjoy owning your own home.
I am a consumer who just signed an offer to purchase. I am nervous about the market and whether my offer price was too high based on predicted market fluctuations, so of course I googled "housing market predictions" and fell across this blog. I like it; it's empowering.
My family was as affected by this economy as anyone: I lost my job in February 2009. By September, I was back to work and my family's household income is higher now than it was earlier this year. We carry very little debt and we are optimistic about our future. In our town, inventory is scarce and good homes are moving quickly. We are happy that we qualify for the tax credit, and glad to see rates so low. We had not one problem securing financing, and in fact were surprised to hear lenders still offering us mortgages well beyond our means (which we will not take, of course!).
All things considered... For MY family, the RE market has never been better.
Christina - Welcome to ActiveRain and thank you for commenting. I hope you and your family enjoy your new home.
Thank you for your comment, Christina. It sounds like you made an informed financial and personal choice. I hear the same sentiments often. Many clients of mine know there are good potential deals available to them, but hope to build in as much cushion as possible (by purchasing something below even today's value) to insulate them from further erosion in value. That is never an easy task, but always the objective. Like most any commodity, you really make your money on the purchase, not the ultimate sale. Those matters aside, you made a choice to tackle home ownership at a time in which it is personally appropriate and feasible. That the market at large is currently conducive to securing a good value is just the icing on the cake. Best of luck with your new home and thanks again for lending your perspective to the thread.
Hey man...just dropped by to say i have enjoyed the daylights out of your cryptically funny and sometimes insanely absurd comments on facebook. Thanks for the laffs!
Hope you and family have a great Thanksgiving!
Hi Paul, A very good expose. And of course " the crystal balls all over the country are cloudy". If I were to speculate and we love that temptation, the indicators this time are not only not clear but in some ways defy logic. We see sales and markets improving in the number of sales while the economy in those locations may defy the improvement. We ignore most of the empirical data that indicates that so many are upside down in loan to value. I have the belief that we are in for a long ride over new yet to be discovered territory. But I like your take of turning the question back to the consumer to answer from their perspective. Their perspective and action is the only one that can keep us professionals engaged in the market.
Hi Paul! I love hearing a consumer's point of view and how refreshing to hear the one by Christina! Things have turned around for her family and staying debt-free (with the exception, of course of a mortgage), is a very smart way to live. It makes times like those she experienced a bit more manageable.
Have a great week...
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