The Market Now – Reality Check
Part 1 of this post focused on the peak of the real estate market in 2005, longingly remembering the rush those prosperous days brought. This is certainly the antithesis of that. Our expected ‘correction’ seemed endless, leaving economists scratching their heads, save for a few who predicated the bust. But the real estate world as taken on a different face, for buyers and sellers alike, with agents and industry folks in the thick of it. We’ve all faced some tough stuff. But there are some positive things going on as well.
- Equity has diminished greatly for some sellers. Others have none at all and faced the worst – short selling their homes or losing it to the bank. Economists say we bottomed out in 2009. We may never see the kind of double-digit appreciation we once did, but many markets have stabilized . Gratefully, that seems to be true in the San Francisco Bay Area.
- Lenders have implemented guidelines, much more restrictive than in the past. They are insuring buyers can afford their homes for a long time to come, at the lowest interest rates in 50 years.
- Distressed property sales have caused values to plummet. As terrible as that is, it’s created opportunity for others, with affordability in California now at 70%. The dream of home ownership is now within reach for a new crop of buyers as mortgage payments slip beneath rental rates in many price ranges.
- Paperwork has certainly become more cumbersome, as contracts and disclosure requirements have increased. A focus on transaction transparency has provided more protection to the consumer, and less chance for collusion.
- Investors and homeowners alike walked away from properties, leaving vacancies and blight in their wake. New investors are re-habbing those properties, restoring neighborhood quality. And for the first time in a long while, investors are buying properties that cash-flow at the onset.
- 30% of mortgages are greater than the value of the home. However, it’s also been reported that 30% of homeowners own their properties free and clear.
- The number of real estate and lending professionals has dropped dramatically. Many part-timers closed up shop, and some unsavory players were squeezed out. Those still standing have had to adapt and get educated fast on the new landscape of real estate to counsel clients on the many types of transactions now part of the new ‘norm’.
- Low Inventory is giving fewer choices to buyers. Sellers who elect not to sell, or those who can’t, constrict the market. These factors do create multiple offer situations, which in turn can help stabilize prices.
- Double-digit appreciation appears to be a thing of the past. Homeowners and buyers are re-thinking what a home should be, and making more prudent choices knowing what they know now. In the end, that will benefit everyone.
This two-part blog shows that there are positive and negatives to every market. Down the road, we’ll be able to reflect on this market in its entirety and have better clarity on the quality of changes that have come from it.
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