Wednesday, June 18, 2008

Market Changes - Can You Hear The Whispers?

The evening news is still shouting doom and gloom about the real estate market. When Ed McMahon is losing his house, surely the sky is falling, right? But, wait! What is being whispered in the background? Could this be it? Are we at the bottom? The only way to really know is when we’ve seen consistent statistics that prove it… and by then, it’s over, we will have missed the bottom of the market. Even so, there are starting to be some mumblings and whisperings about signs of recovery. In one way or another, we all have vested interests in the real estate market, so listen closely.... In a May 6th, 2008 Wall Street Journal article, Cyril Moulle-Berteaux suggests that April 2008 was the bottom of the market. RealtyTrac reported that, nationally, from April to May, 2008 the number of homes going to foreclosure auction reduced by 3%, and Virginia’s foreclosure rate dropped 7.65%. A recent REAL Trends survey of brokers showed 64% of respondents agreed with the statement “Our market is showing signs of improvement as of the end of May 2008.” RIS Media posted an article on June 18, 2008, quoting James Weichert (President and founder of Weichert Realtors) as saying “We have reached the bottom of the housing market and will soon begin to see improvements.” On the same day, an article by Jim Stakem (broker & owner of RE/MAX Select in Ashburn, Virginia) was featured in the Loudoun Times Mirror citing more statistics about absorption rates and prices which led him to believe "we are at the end of a rapid and painful price correction." Everyone cautions that prices will not be automatically returning to the range of 2005, that will take several years… one writer suggests that it could be as much as 15 years from now. What have I seen? In Northern Virginia, the spring brought a lot of activity. Banks finally got real about the pricing of foreclosures, with a 10-15% drop in prices in some parts of the Loudoun and Western Fairfax markets in the first few months of the year. These sudden drops motivated investors and first time home buyers. Buyers were suddenly competing for homes at the lower price points with escalation clauses, cash contracts, high deposits, and quick closings. Higher price points are still slower, but “traditional” sellers (for the most part) understand that they must compete with the price of distress sales in order to sell. So, some sellers will take the sign out of their yard and wait out the market, others will drop their prices and sell. When the price is right, the properties are moving. Activity has returned to the market. That is a good sign. Perhaps the “whisperers” really do know something? Only time will tell.
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