Housing Market
Is my market going up or down?
Anxious homeowners want to know if their market is going up or down right now. It's certainly a fair question. During normal times, homeowners have a good idea of where their values are headed. But right now does not qualify as normal times for the housing market. An unprecedented housing correction has been going on since 2006 and as of yet has no end in sight.
A home's value is not an empirical value. Rather, it's the price which a prospective buyer is willing to pay and what the seller is willing to accept. It's a dynamic market not unlike any other exchange (stock market, bond market, or even a flea market).
So how does a homeowner know if their market is going up or down? Take a look at public records to see what comparable homes have sold for in the last few months. Listing prices are not the same as sales price. Take the sales price and deduct any seller concessions from the sales price to derive the bottom line sales price.
In a slow market where excess inventory is building up-one should suspect values are falling. Time on the market to sell is a good guide to excess inventory. Homes that take longer than 6 months to sell may be overpriced. Once the seller gives into this reality, they will usually reduce the sales price even more to move the property.
Additionally, foreclosures in a neighborhood will negatively impact home values. Vacant homes can attract vandalism and crime - another factor that will lower the perception of a neighborhood and thus the neighborhood home values.
Areas that were overbuilt during the last few years are typically areas of falling values too.
It's definitely a buyers market right now. And buyers are using their leverage to demand seller concessions. They can because buyers are few and far between. This is a result of and compounded by the fact that underwriting guidelines for mortgages have dramatically tightened over the last year and a half. Subprime loans have mostly disappeared as have high loan-to-value stated income mortgages. Some say this is a positive, as we are getting back to make sense underwriting. Others see the cutbacks as onerous for the future of mortgage lending and the housing market recovery.
In either case, home buyers with strong credit and who can prove their income are the most eligible homebuyers right now and are credited with propping up the housing market however feebly. They have a lot of homes to choose from and are taking their time. Understandably, buyers are waiting on the sidelines believing home values have further to fall. This very reasonable assumption is also contributing to the overall descent of home values.
Are there areas that are appreciating? Yes, however they are in the minority. Look for signs that home sales are increasing over a few months and this will most likely be the beginning of the end for one of the worst housing corrections in history.
For more questions about purchasing a new home or refinancing your current home, call Envision Lending Group, or Apply Now!
