Everybody is wondering where real estate is going now. It has been many years where real estate was
a sure investment and many investors, people and banks did not doubt of
increasing value of the real estate.
However, we became observers of a failure of plans and assumption. I would not say it is a crush as many reefer to but more a correction in a bloated value
bubble that expanded on fake assumptions and overestimation. Now free market rules take its action and correct
the values. Let’s look on what is happening
today .
As it can be hear from many news sources as well as statics,
buyers (especially first home buyers) activity picked up significantly in the last
few month. Well lets think about why it would
not. Prices are very low, and came down
to almost affordable. People who could not
afford a house can now assuming they have a stable job and their investments
are not in total mess. 8000$ government credit incentive is there and one
of the lowest mortgage rate averaging 5% and lower. No
wonder activity picked up, no matter what happens people need to live somewhere
and invest in something that is more stable then securities. However, looking at the statistics we can see
the activity is compared to last year activity where it was so minimal where
anything can be better than it was. Though, we see healthy correction and activity
on real estate market. We do not expect
overnight changes but all incentives are there for a buyers: low mortgage rate, government credit and low
prices(according to Chase-Shiller Index averaging first Q of 2003). However, I do not expect huge surge in uprising
activity until market stabilize further due to the fact that there are many
people who lost a job, on the verge of losing one, or just does not have good
credit since banks are not so easy on mortgage( I wish they realized it before
this mess) and finally people lost confidence so some are just sitting with cash and afraid to make a move.
Prices – are still going down. No wonder why, number of forecloses where almost
historically high, buyers activity was lowest in past year and house inventory
grew very high. Regardless of picked up
activity market equilibrium (supply and demand) is not reached and will not be
a for a little while until inventory decreases.
According to
Chase-Shiller index (http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html)
average national prices as of March(last reported) are avarging beginning of
2003 (unbelievable). However, as first
time home buyer I see an opportunity. For the past 6 month prices come down in average
2-4% a month what is high but I suspect this number to slow down and start bottoming
in the near future.
Activity across US is not evenly spaced. Some regions like Charlotte, Boston and some
others(reefer to index) has not come
down(10-15%) as much as Florida, Arizona and California did. This was manly attributed to inflated prices
in that above regions due to many investments that people did in the regions
and low primary residence buying.
In conclusion, if you are a buyer it is all in your
hands. No reason to rush but is good to search
and if you see a right house, make a fair bid and do not miss 8K government
credit that is over this year but do not rush for this as well. Another reason to start picking up in your
search is Mortgage Rate what slowly going up and will continue. Due to all government spending raising inflation is inevitable what will cause the rate to go higher. Locking low rate is important even if prices
still come down because when inflation will equal you arte and it will
eventually if rate stays as low as it is now you are the winner. Also, do not forget that regardless of the situation
good houses go quick so do not take long time when you see a right place for
you to live.