As we all know, the housing market for sellers has not been exactly easy for the past several years now. It’s a little difficult to pinpoint when exactly the buyer’s market started, but in any case we are a good couple years into the downtrend at this point.
Anyway, I think we all know that, and the question now is, has the bottom of the market occurred or is it still to come? Well, the only way to know that for sure is hindsight, we’ll know the bottom of the market after it’s arrived. So, what is the current situation?
From personal observation, one thing that has made the market so difficult in the past couple years is determining the value of a property. When there are few sales, and each sale has such a variety of motivations behind it (such as impending foreclosure), the value of a property can be really difficult to determine. Normally, an agent will want to suggest a list price that is pretty close to the current market value of a property. When values are hard to predict, this is when you have extended market times and a closing price that is far below the original list price. This is seen in the following graph.
September 20, 2009
As you can see, the predictability of values has dropped off since about August of 2007 (with slight declines before that) and has begun to improve again this summer. If people know what their properties are worth, they can plan accordingly and the health of the market improves. Likewise, if buyers feel confident in the value of the property they are interested in, they are more likely to make a reasonable offer, which is good for the overall health of the market.
There is another important factor influencing the market right now, and that is the impact of the $8000 tax credit for first time buyers that will be expiring at the end of November. This incentive has brought a lot of new buyers into the market, particularly into the lower end of the market. This activity has increased quite a bit in the past couple months, skewing the normal statistics. With so many active first time buyers, the average price has dropped substantially in the last month or so as people rush to take advantage of the $8000 incentive.
This drastic looking drop off must be due to the government interference in the market ($8000 tax credit). Once the interference expires, that should finally allow the market to find it’s own natural value and we should be back to normal again. In other words, for a buyer, it would be good to take advantage of today’s low rates and incentives to make a move. For homeowners who would like to sell, the market looks like it has improved enough to be able to plan for the future. Call or email me today and let’s put a plan together.
Ward Spears
(503) 522-8269
wspears@equitygroup.com
