How does the current economic downturn affect the real estate market?
- It’s clear that the housing market will play a critical role in our economic recovery. While national economic headlines seem gloomy, the residential real estate market shows several positive signs that could be signaling a tipping point. Home inventory according to the National Association of Realtors is at 7.2 month supply, down 11.1% from a year ago, the lowest level since March 2006. Total inventory is 3.29 million homes.
- Because the overwhelming majority of home buying activity for most of 2009 was in distressed homes – foreclosures and short sales – the median price nationally came down. But as inventory has leveled off, so have prices. In fact, December saw the median home increase in price to $177,500, up 1.4 percent from a year ago. For all of 2009, the median price was $173,200, down 11.9 percent from 2008. This was largely because of the number of distressed homes that sold and they average for 15-20% lower than traditional homes.
- There is a consumer crisis challenge impacting housing. Job loss – and fear of job loss – is keeping people from engaging in the process even as mortgage rates remain at near historic levels. The hope is that the extended and expanded tax credit will help bolster the housing market, allow home prices to stabilize and at the same time infuse some much needed strength into the national economy.
- Today, the large number of homes available for sale provides home buyers with a wide range of choices. Interest rates remain low. Affordability has improved in many markets. This is the smartest time to buy a home in my 35 years in real estate. While many might understand that, they are being influenced by the economic downturn and their decisions reflect this concern.