Every industry likes to see itself in the best possible light. Residential real estate in America has been in some tough straits lately, value-wise. The average price of a home in America was approaching an amazing $250K in 2007. Today it’s in the $170’s. Which is correct–which is the way it should be? Hard to say. It’s complicated. The market rules.
If you have a job and income that meets or exceeds your needs, this can be a time of great value in housing. Low interest rates and low prices. What a combination! But who can take advantage?
If you’ve lost your job and can’t buy, or have lost huge value in the home you bought just a few years ago–you’re in pain. You may also have lost your job! You’re angry. You may decide to bail out and take a big hit. You may decide to stop paying your mortgage and wait to see what happens (increasingly, the answer is “not much” or at least not for quite a long time.)
Unit volume (the number of sales) dipped in 2008 but rebounded some in 2009. A first time home buyer tax credit which may or may not have been a good idea (it was if you got a credit) caused a buying spike in late 2009 and early this year. Now it’s gone and a lot of buyers who would have been present from here on out have already bought. So they’re gone.
Too many agonized sellers and not enough buyers, in general. Not a pretty picture right now. And then there are the foreclosures. A lot of those people who aren’t paying the mortgage aren’t because they can’t. They are getting notices of default and are being forclosed on in record numbers that continue to swell. Expert say the end of the swelling is maybe a year or two away. So, there will be all those foreclosed properties to sell to someone for years to come–if the buyers exist. And that will surpress prices.
We’re paying a big price for the home ownership/home value bubble of 2004-07. Some foreclsoures are being sold to local governments–to be rehabbed for public housing. Some are being sold to investors who are likely to sit on them and wait for a better turn of the market. Some are becoming rentals. Many are vacant and unwanted, damaging the neighborhoods around them.
Short sale (selling by agreement with your lender for less than its worth) is an option for some of this property–and for some homeowners in distress. More short sales are happening. Lenders (and their representatives) are painfully slowly learning the value of a short sale over a foreclsoure. Short sale agents are the fire brigade in the burning town–in a number of our biggest markets (mainly in Sunbelt regions–and some Rust Belt ones.)
The Adminstration in Washington has gone “all in” on a debt load of unprecedented proportions to help prevent a prolonged recesssion. A few major financial institutions have been saved. A few staged remarkably fast recoveries with taxpayer money! They’ve been saved–but they’ve stopped lending.
Unemployment remains high with no prospect of waning. Now economists are worried about the debt that’s been created. Economists always worry–but maybe they have more reason than ususal this time.
V or W? Double dip (recesssion, followed by mild recovery and more recesssion?) It feels more like W than V to me. And I’m one of the lucky ones. The best practitioners in real estate will do well through it all. Those who can’t figure out how to thrive are leaving the business is big numbers. Some say that’s a good thing. The quality and productivity of agents overall should be improving. It”s probably happening already. That’s good for the agents who remain, and for the consumers who deal with them.
But, where will we be a year from now? It feels like the pain will still be there. We’ll just understand it better–and hopefully be thinking more creatively and energetically about how to make it go away, and stay gone. Real estate brokers, agents and buyers can’t solve this one alone. Large-scale energy solutions, breakthough medicine, a clean environment–they all can be economic engines in their own right. It’s what we need. Is it coming? Will we all insist on it for our future, and our kids’, and their kids’?