All the numbers are headed upward: pending sales up; sales up; visits to open houses up. But to every Ying, there is a Yang – and in the real estate world, the Yang is inventory, prices and interest rates. The numbers that are down are the reason the sales are up – prices and inventory have both dropped to their lowest levels in years. In addition, interest rates are hitting NEW historic lows around 5 percent.
In predicting the market, the astute observer must look at more than just prices moving up to determine a market has turned around. Sellers and buyers must also look at more than just prices. Those who do and have, usually get caught standing in the rain with a soggy contract, wishing they had bid more for the little house on the prairie, while the winner, walks away to settlement.
If you have been watching the reports from RealtyTimes. com on Hot Markets over the last 18 months, you saw that markets across the country were simmering, while the spices of foreclosures and short sales were added each month to the mix. To continue this cooking example – think about when you’re making gravy or adding a thickener to a stew. The corn starch or flour sits in the pot for most of the time it’s added.
Then SUDDENLY, it thickens and the cook must remove the stew from the burner before it overwhelms the concoction. (If you’re a canned gravy person, this example will be totally lost on you).
The same is true here – foreclosures and short sales have been the thickener in the market. Government got involved, because they didn’t want the stew to thicken naturally – they added incentives for those who would dip into the stew earlier with $8,000 tax credits for buyers and now $6,500 tax credits for sellers.
THEN, interest rates added a little more seasoning by lowering below 5 percent and now you have a perfectly seasoned market about to boil over!
Various markets across the market have already thickened in the lower price ranges and bubbling over: Washington, D. C., Central Florida; Southern California – just to name a few. And yes – these are the markets that were overwhelmed with foreclosures. Here’s the thing – it doesn’t matter. When you don’t have enough houses and prices hit a psychological low – buyers start writing (in droves), and prices start edging up.
For buyers who have been sitting on the sideline – get off or you’ll be paying more for your next home, in price, in interest rates and in the loss of the tax credit cash in your pocket.
For sellers – we need your inventory on the market. If you’re in the median price range and want to move to a higher price range, it’s a perfect storm. You’ll be selling in a seller’s market where there’s hardly any inventory and moving up the price range where there is an ample supply of homes and the competition is not as great.