Last week, the financial sector was up in arms about some seemingly surprising news. It seems that, in May, housing starts — the number of building permits that were pulled in order to start construction on new homes — were down.
With all of the homes that were purchased this spring, surely the troubles in the housing market were over. Right? In April, sales were positively booming! What on Earth could have happened to put a slowdown on things?
<Psst! Hey! The tax credit expired!>
Wait. What? What’s that you say? The tax credit expired? You mean that didn’t amp up the market and then keep it up? It wasn’t the answer to our economic recovery dreams?
No. It wasn’t.
In fact, I’ve been saying this for some time. For those who were able to take advantage, the Homebuyer Tax Credit was great. But while it gave the spring real estate market a much-needed boost, I have long theorized that the sales it produced were simply being borrowed from the future. People who had already planned to buy a home simply did so earlier.
Now that the credit is gone, the buyers have little incentive to make their decisions now.
There are far too many variables in play for buyers right now. Mortgage rates are in a constant state of flux, underwriting standards are tougher than ever, and a great many sellers are still living in Fantasy Land when it comes to their proposed list prices, so many buyers are simply choosing to sit tight and see what happens. There’s very little pressure on them.
“OK, then … so now what?”
First off, sellers need to get a handle on reality. If you need to sell your house, then understand the rules of the game. Pie-in-the-sky dreams of top-dollar prices and bidding wars will likely get you very little except mountains of frustration. Find a REALTOR in whom you have confidence. Listen to him (or her), for he/she understands the market as it is today.
Second, and most importantly, we must all exercise some patience. It took us some time to get ourselves into this morass of economic detritus, and it’s going to take some time to get out. There are no quick fixes.
The real estate market will come back. It always does. It’s one of the few constants in our economy. In the meantime, let’s learn from our mistakes. Borrowing from Peter to pay Paul isn’t going to work. Let’s use our heads and work toward real recovery, real improvement.