I have really good news. The real estate market is going to come back in 2012!
"How could she possibly know this?" you ask. I know it because a real estate agent told my sister. And he didn't just tell her -- he guaranteed it. Guaranteed!! So it must be true, right?
There are many, many really great real estate agents out there, but this guy was being a little ridiculous. I'm an optimist, but I'm also a realist, and I tell the truth. So I'm not going to promise roses and sunshine just because it serves my own self-interest.
And so, from my perspective, I can tell you one thing about the market:
"The market is weird."
That's what I know. Prices have dropped overall, there's no doubt of that. The Office of Federal Housing Economic Oversight (OFHEO) is my favorite index, because it bases its rankings on price increases and decreases for the same address, instead of just averaging sales for an entire area. OFHEO ranks Denver as 125th best market in the country (out of 308 total), with a 1.86% decrease in housing prices for the first quarter of 2011, a 2.87% decrease over the past year, and a 6.93% decrease over the past five years.
On a human level, activity has been sporatic because so many people are waiting it out. A lot of them want or need to sell but are upside down on their mortgages or just don't have as much "wiggle room" as they'd like. Others want to buy, but they aren't sure if prices have hit rock bottom yet or if they should wait a while longer. Everybody wants to know when all of this economic uncertainty will end.
One thing that is clear is that buyers and sellers can't wait forever. After a really slow winter, I saw an amazing little mini-rush over the summer that led me to four closing tables in three days. The houses sold for less than the sellers would have liked, but those who were also buying were able to buy for less than they otherwise would have. So it all tended to even itself out.
The other piece of the puzzle is the interest rate -- which on a 30 year fixed loan is at 4% as of today. That is insane. When I bought my first house, rates were at 8% and everyone was telling me what a great bargain that was. For 30 years people pined for the "good old days" of the 1960Õs when rates were at an unbelievable 5%. Now we're hoping they don't rise back there too soon.
What Does It Mean for You?
What do these market numbers mean for you? Has your house decreased 6.93% over the past five years? Not necessarily. Some neighborhoods are dropping much faster than that. Others are dropping slower or even appreciating. I ran across one house last week that just appraised $85,000 higher than when it was built five years ago -- a $25,000 (5%) net gain after factoring for aftermarket basement finish and wood floors. I'm also aware of houses that have dropped 50% or more in value over the past five years.
Is the market at bottom?
I honestly have no idea. There are plenty of convincing prognosticators on both sides. What I do know is that prices are for the most part lower, and that locking a 4% interest rate for the next 30 years offers pretty darned good protection against the economic uncertainty that is to come -- provided you're buying a place you'll be happy in for a while.
I don't know if the market will come back in 2012, or 2022. I just know that whatever happens, I'll keep plugging along, doing the work that I love -- whether prices or up or down or sideways!
Blessings to you all, and as always feel free to call me if you're trying to figure out what do to real estate-wise. I'd love to help in whatever way I can!!