Three new reports are rattling the housing and stock markets -- that home sales have slowed for the sixth month in a row. California home sales plummeted, although the state was able to hang on to a sliver of a price increase. Finally, the Fed has held short-term interest rates at 5.25 percent, perhaps in the belief that housing has slowed enough to cool inflation in the economy.
The National Association of Realtors says that sales of existing homes dropped 1.9 percent in September, and prices slid 2.5 percent from September 2005 to $219,800, for both condos and single family homes.
The California Association of Realtors reports that home sales decreased 31.7 percent in September in California compared with a year ago, while prices squeaked upward 1.8 percent. The state now has seven months of inventory on hand, slightly above the six-month to six-and-a-half-month rate widely believed to be a balanced market.
Despite misgivings that inflation is under control, the Federal Reserve took note of the cooling housing market and concluded that while inflation risks remain, the economy seems likely to expand at a moderate pace.
What does this mean to the average homebuyer?
Opportunity. There's a strong chance that housing is nearing its nadir.
Interest rates are just above 40-year lows. Gas prices have eased enough to grease the upcoming elections. Housing inventories at 25 percent higher than this time last year afford better selections. Pundits are beginning to call a trough in the housing market.
Yet buyers continue to sit on the sidelines, hoping for a clear bottom. What can you tell your buyers?
The greatest stock trader in the world -- Warren Buffett buys low and sells high, but rarely buys at the lowest low or sells at the highest high. His skill is in recognizing opportunity before someone else does.Your buyers can improve their vantage points before someone else snaps up that better house in better condition in the better neighborhood.
The Fed reports that "holding gains" on household real estate from mid-2005 to mid-2006 was nearly $1.7 trillion. Balance sheets show a year-over-year gain of 10.5 percent in market value, says David Seiders, chief economist of the National Association of Home Builders.
New home inventories of unsold homes fell 1.9% to 557,000, a 6.4-month supply in September compared to an inventory peak of 7.2 months in July. While inventories of unsold homes are up 14.4% for the year, the median sales price dropped 9.7 percent in September to $217,100. While that's the largest percentage decline in price since December 1970.
Unemployment is below 4.6 percent, a cyclical low equivalent to rates in May and June.
According to the Mortgage Bankers Association, fixed-rate mortgages should stay at about 6.3% to 6.4% through 2006. Rates are expected to rise to about 6.7% by the end of 2007 and to about 6.8% by the end of 2008.
David Lereah, chief economist of the National Association of Realtors says, "The worst is behind us as far as a market correction. When consumers recognize that home sales are stabilizing, we'll see the buyers who've been on the sidelines get back into the market."
C.A.R. President Vince Malta agrees. "Unsold inventory (in California) is holding steady, and is close to the long-term historic average typical of a more 'normal' market."
Bottom line? If a trough is near, inventory levels will shrink, prices will rise, and so will mortgage interest rates. If pundits believe that the market will reignite in the spring, the time to buy is now.
Published: October 26, 2006
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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment.
Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's.
Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68.
In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.
Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans.
Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR
"The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors
Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment.
