When will the real estate market regain momentum and become a seller's market again?
Yours is among dozens of similar questions I've received in
recent months, some of which are written in dire and even frantic tones.
Lo, do I wish I had a neat "light at the end of the tunnel" answer to
put your minds to rest. But as you suspect, it's still pretty ugly out there
for sellers in many U.S. markets, where sales of both new and existing homes have
fallen steadily since the housing boom ended in late 2005. Alas, the quick and
painless slump that we all hoped for isn't happening.
look at some hard facts:
Last month, the Mortgage Bankers Association
reported that the percentage of mortgages entering foreclosure in the U.S. --
about one in 172 loans -- in the first quarter of 2007 was the highest in more
than a half century, with sub prime borrowers suffering the worst. Thousands
of recipients of those adjustable-rate mortgage loans are seeing rates adjust
beyond their means. Banks and other lenders are responding to the wave of foreclosures
by tightening their loan criteria, pushing some potential buyers to the sidelines.
home-builder confidence is at its lowest mark in 16 years. Median homes prices
continued to drop as mortgage rates inched up over the last year. Currently, existing-home
inventory in the U.S. stands at over eight months and is six months for new homes.
Fed Chairman Ben Bernanke said last month the residential market, "will likely
remain subdued for a time" until more progress is made working down the backlog
of unsold new and existing homes. Some economists say the worst of the sub prime
foreclosures are still ahead of us and that overall home prices must dip from
5 percent to 8 percent further to break up the logjam of unsold homes. A report
by Merrill Lynch says a record 2.2 million single-family homes and condos are
on the market, or nearly one million above normal levels. Ouch!
hit, not surprisingly, have been regions of the country that enjoyed the most
rapid value growth during the boom: California, Nevada, Florida and Arizona. In
those regions, investors accounted for up to a quarter of housing sales before
the bottom fell out.
But there is a smattering of encouraging
news that some say is akin to spotting that first robin at winter's end. Economists
no longer fear a housing-related recession. The retail and service economies seem
to be weathering the American public's diminished ability to tap into home equity
to finance consumer spending. Most job markets are stable. Mortgage rates have
leveled out in recent weeks and the stock market is at record levels. Homebuilders,
who have ratcheted down their production significantly in faltering markets, say
there are some signs of growing strength in Midwestern and Northeastern markets.
Some housing experts point to smaller declines in the industry's already diminished
vital statistics as indications the market bottom has been reached.
don't panic, Khoi. There are strategies you can use to help weather
a down market. For now, I stand with other industry observers who expect a
mild turnaround by mid 2008 and even better results by spring of 2009. However,
I doubt we'll see the return to the kind of robust sellers market we enjoyed from
2000 to 2005 for many more years.
To be honest, no one really
knows the "whens" of a housing turnaround. What we do know from history
is that slumping markets always regain their posture and that when they do, there
is substantial upward momentum.