By Putting the current market in perspective.
I’m frequently asked by agents and managers, "When do you think things are going to start turning around?" That’s a tough one for any individual to predict, no matter how long you’ve been in this industry, but perhaps I can put things in perspective.
The most recent news from NAR is that credit availability is widening and this will help turn around homes sales which dropped to their lowest point in August. Their Senior Economist Lawrence Yun said in a press release issued last week titled "Improvement in Mortgage Market Bodes Well for Housing in 2008":
He also made the point (and I agree) that we need to put the current market in perspective. Even with the severe drop in sales volume over the summer, 2007 is still on pace to be the fifth highest year on record for existing home sales.
Okay, sales are definitely off from the record-breaking pace of 2000-2005, but we knew that wasn’t going to last forever. It’s tough right now (very tough), but we will begin seeing things pick up again. (According to NAR, that should be sometime around Spring 2008.)
Here are some of the signs that will happen.
- There’s a lot of talk right now about the credit markets easing. It’s all over the news. This is positive. The IMF said we’re past the crisis point, although recovery could take months. Click here for the full story from Marketwatch. We’re certainly working with several lenders here at Intero who are continuing to issue loans. Read my blog posting in August for a list.
- In addition, The Federal Reserve and private banks are taking proactive steps to help. (See the latest news on how Bank of America, JPMorgan and Citigroup who are funding a $100 billion dollar “Rescue Fund” for the credit market.) Again, we’re not through the woods just yet. There is still a lingering nervousness about what’s going to happen through the end of the year. Click for CNBC story.
- Foreclosure filings fell by 8 percent in September (from a 32 year peak in August)—but they’re still up 99 percent from a year ago. It unpredictable as to what’s going to happen here, as some 2 million ARMs are scheduled to reset at the end of the year and into next. Much will depend on the credit markets and whether or not people can get refinanced. This is one of the reasons the Feds and Private Banks are taking action now.
- There’s been a cutback in housing construction, which will help to ease the existing inventory on the market and help stabilize home prices next year. Median home prices (existing and new) are expected to slip through the end of the year by around 1 percent (November and December are traditionally slow periods for real sales anyway) and then pick back up in the beginning of next year by about the same amount
- Job growth, unemployment and inflation are remaining steady (a good sign that we’re not sliding into a recession as many feared.)
So, with the typically slow sales months of November and December coming up and the credit markets slowly trying to rebuild after the disaster of this summer, we shouldn’t expect too much to change before the beginning of 2008—or most likely even before the Spring of 2008. The positive side of all this is that when this storm finally blows through, the industry will be cleared of a lot of the characters and practices that helped drive the markets to where we are now.
In real estate, we naturally have good months and months that are not so good, especially around the holiday season. Add to that six years of record growth, and it’s not surprising that the market has taken a pause to adjust. That’s really where we are: adjusting. I predict we’ll be dealing with this for the next 18 months before we can really say that we’re through it.
