The Bottom of the Housing Market…Are We There Yet?
Categories: Buying Real Estate, Real Estate News, South Florida Market Stats
hiThis is one of the most frequent questions I am asked and one which I ask myself with every little bit of economic data that is released. The truth is no one is going to know when we hit bottom, though some people will get lucky and happen to close on their purchase in the month that we look back and say, “Yep, that was the bottom”.
There are some indications that we are nearing the end of this downturn and that it will come faster than previous downward housing cycles. Last week, the National Association of Realtors had their midyear legislative meeting in Washington DC. Lawrence Yun, NAR’s Chief Economist, had some positive news about the economy and housing market. Mr. Yun is expecting the economy to improve in the second have of this year. His reasons:
- Rebate checks: before you pooh, pooh how little it is going to affect the economy, history shows that rebate checks have a positive short-term effect by increasing consumer spending.
- Business spending: outside of the financial and home building sector, corporations are seeing very healthy profits (any of you have stock in one of the oil or insurance companies?) so they have money to spend on technology, equipment, product development, research, etc.
- Weaker US $: although this fact put a crimp in my plans to travel to Europe (I will be going to Panama instead) it has led to solid increase in our exports.
On the housing front, Mr. Yun expects home sales to improve because:
- Current home sales activity is trending at a 10-year low level and there is a lot of pent up demand.
- Interest rates are still at historic lows.
- There is a credit crunch so interest on non-conforming jumbo loans were high, so consumers shunned them.
- FHA loan application increased as more buyers went for lower interest rates.
- Conforming jumbo loan limits were increased by Congress therefore more loans qualify for Freddie Mac and Fannie Mae purchases. This alone would save a borrower in a high priced area $3000-$4000 in interest per year.
- Fannie Mae and Freddie Mac are relaxing surcharges on loans.
So, back to the original question…Are we there yet? The answer is probably, no. However, if you are in the market for a home or residential investment property, remember that when interest rates start to move up, they move up rapidly and the payment for a $500,000 home at 5.75% is the same as one for a $450,000 home at 6.75%. If you are planning on owning your home or investment for five years or more, now would be a good time to buy; the rapid price decreases and number of foreclosures in certain areas means there are deals to be had.
It’s what I call the kids in the car question: “Are we there yet? Are we there yet?” Good information, thanks.
If only we all had a crystal ball, right?
[...] week I wrote a blog titled The Bottom of the Housing Market…Are We There Yet? I mentioned that one of the reasons Lawrence Yun, Chief Economist for the National Association of [...]