I attended the quarterly meeting of the Pennsylvania Association of Realtors in Harrisburg this week. One of the sessions was given by Lawrence Yun the chief economist for the National Association of Realtors and it was very interesting. Admittedly the situation right now is VERY fluid as each week seems to bring some news of another challenge to the economy and with the election ahead none of us truly know what lies ahead.
But Alan greenspan has said he believes that the bottom of the market will happen in early 2009, eight hundred economists have said they believe that the housing market will stabilise in mid-2009. Now recent events may push those forecasts back a little but how does that affect you in your market?
What came through very strongly is that all real estate is not just local, BUT very local. Just as the market can be different in Scranton to Philadelphia or Pittsburgh, it is different between Devon and Media or Exton and Downingtown. It can even be different between developments in a township. So the market is very local and depends on a whole host of factors.
What are some of these factors? Well determing the market is a matter of looking at regional statistics and then narrowing them down. As you may know, an appraiser wants to use stats from the same development where possible and only if these are not available will they look outside to support a price. So we may look at township, then local area and then development to see what prices are doing to truly know what the market is for your home.
Another point to come out is that whilst Pennsylvania has weathered the real estate storm fairly well with stable prices, stable employment and even employment growth, it has not remained unaffected. We have seen this over the last few months with prices dropping, sales taking longer and buyers being affected in their ability to obtain mortgages. Now it still has not affected us as drastically as Nevada, Florida or California where prices had shot up dramtically in previous years so the rebound may not be as dramatic either. It is all about postioning your self and your property correctly to take advantage of the current situation.
So it is ot easy to answer the question without knowing some details about your location. For more information about your home and market feel free to contact us.
Have we reached the bottom ?
My opinion is that residential property prices have over the long time followed the inflation graph.
I think that the bottom will be at 2001 prices plus 30 %( assuming the bottom is in 2009).
At that price level I feel OK to buy a second home.
I recently was at an investment seminar with a well known professor of a major university in PA. his opinion was indeed that we are close to the bottom in PA, but that FL, AZ and CA still had a long way to go down.
Lawrence Yun said at the seminar last week that prices in many areas of FL and Ca have started climbing slowly again. Because of the big drop a lot of people who had been priced out of the market who had good steady well paying jobs are now able to buy homes. This has helped to remove much of the inventory that was sitting there. However, none of us have a crystal ball and we all have to make our own judgements when is the right time to buy.
I think that it is good to consider a home as somewhere that you live and not simply as an investment.
Real estate markets might be local but global banking crises are not.
The bottom of all these markets will be achieved when global finance has been stable a while unless/until lending also becomes local.
Good luck on that for now.
Also. Lawrence Yun is paid to spin a happy story. Do not base important economic decision on his analysis.
He has been wrong for months. Period.
I agree Lawrence Yun is paid by the National Association of Realtors, but his statement pointed to what other economists were saying not just his own thoughts, including Greenspan. Now this was all said before the last little crisis.
Everything at the end of the day is cyclical and the stock market and the housing market will come back, it may take a little while, but in the meantime we should stop looking at real estate as an investment but as somewhere we live and work. In the same way the stock market changed when it became a place where you could make large sums of money and not just a place that companies raised capital and you placed funds for retirement. Let's get back to the basics and we will see things settle down and markets improve again.
Side note:
Greenspan said there was no housing bubble, drove the Fed funds rate to 1% and was a cheerleader for Option ARMS.
Point still is that Yun has been wrong consistently. He makes a good mouthpiece for the industry, but his statements are no longer credible.
Like that David Lereah guy who wrote that book that there was no bubble, even as prices peaked. These guys are free to discredit themselves, of course.
If you study the banking industry as I do, then you know how stressed the financial world is. We're not even halfway though the write-downs of previous value.
House prices are not likely to rise in INFLATION-ADJUSTED dollars for at least 3-5 more years. To much credit is being destroyed, banks will be too cautious, and the attitude toward overpaying for houses has changed.
In the old days, appreciation was a MINOR motivation for buying a house. That historical fact will need to reassert itself.
In the old days, appreciation was a MINOR motivation for buying a house. That historical fact will need to reassert itself.
I totally agree with your final point. It will be a pretty novel idea for many who have been investing in houses as others have invested in the stock market to make money. That the primary reason to buy a home is to live in it and work close by and contribute to your community will be an awakening for many. I think, hope that we will see a moving away from the commuter neighborhoods where no one knows each other and frankly does not care for each other either.
The joy of owning your own home is to have the "security" of having a roof over your head and having friends and family close by.
Great last point there. We should try to lesson the focus on housing as the quick dollar investment and move the focus to the value of home ownership.
The one fact is, housing has not dropped from a value standpoint as sharp as the stock market and since housing was the first to correct, it is likely to be the first to rise. In that context housing is the safest investment "bet" combined with the fact that you cannot live in your stocks, you cannot cut the lawn or paint the walls of your stocks either.
We need to accentuate the fact that even in this turmoil - dollars are better used and enjoyed in your home.
David,
Thanks for the comments, as you say real estate is something that can be touched, it is more than just a paper transaction and maybe we all need to re-assess our priorities and get back to putting off purchases till we can actually pay for them rather than using credit. We need to save and budget ourselves so that we pay out less than we take in and start bulding reserves to tide us over the downturns in our lives. So we may ot have the new car each year, but the one we have is paid off it will still get us to our destination. This way we will have the savings for our down-payments and be in a better place when buying oportunities present themselves.