Economic factors converging on the real estate market could turn against sellers and give buyers an edge they haven't enjoyed for most of a decade.
Unfortunately, many buyers may not be prepared.
Silicon Valley, the leading edge of California's housing market, is warily eyeing an unexpected April slump that's out of sync with its traditional home-buying season trends.
The spring surprise, on the 10-year anniversary of that market's last crash, comes at at time when economic indicators also point to a slow down in the nation's longest ever economic expansion.
History reveals the national market often follows California -- up and down. While it's too soon to tell how the spring home buying season will pan out anywhere, it is time for buyers to take stock of their buying strategies.
What works in a seller's market could become financially disastrous in a shifting market.
"Currently, it's still a seller's market in most of the country. This is starting to ease in the very tight situation in many markets where there are multiple bids and homes selling very quickly. As we get closer to fall, we should see a more balanced market between buyers and sellers, but certainly not a buyer's market," said Walter Molony, spokesman for the National Association of Realtors.
Perhaps, but after a Wall Street bear grabbed the bull by the horns, the stock market has continued to reel with uncertainty. Also, a host of economic indicators could put the skids on the economy -- with real estate feeling the pinch.
RealtyTimes.com reported two weeks ago that Silicon Valley market's statistics were becoming eerily reminiscent of the last decade's realty market crash, forcing some buyers to think twice about taking the home ownership plunge.
An area heavily dependent upon stock options and other Wall Street perks to compensate employees, recently suffered bearish plunges in stock values. That forced some home buyers out of the market.
"Although we are still in a seller's market, the extremes are going away. For the first time, the market is not hotter than 1999 for the same time and it will soon be cooler than 1999. Buyers should start seeing more inventory to pick from," said real estate statistician Richard Calhoun, broker-owner of San Jose, CA-based Creekside Realty.
Possibly too-hot-to-touch, Silicon Valley could be correcting.
What's so telling is that the region's statistices moving against the normal seasonal trend.
Closed escrows on Silicon Valley's single-family homes yielded median prices moving up from $420,000 in December 1999 to approximately $540,000 in March, according to Calhoun's preliminary figures. The projected median price for April, however, slipped to $525,000. That's in line with the rise in list prices from December ($420,000) to March ($499,950), followed by a decline in April to $499,000.
Likewise, additional single-family home statistics are tracking the unexpected seasonal about face. Inventories are up almost three-fold since December. Sales rose from 784 in December to 1440 in March only to drop off to 1,240 in April, according to Calhoun's preliminary figures.
Perhaps most telling is the theoretical "days of inventory" count. It's the number of days the current inventory of homes would last if no new homes came on the market and the sales pace remained the same. In December, the count was 22.7 days. By April, that number had soared to 40, according to Calhoun's preliminary numbers.
During a home buying season, exactly a decade ago this spring, California's real estate market began a free fall that ripped 50 percent or more off the value of many homes before hitting bottom.
Yet, even as the nation's real estate market followed in a recessionary spiral, the ever effervescent real estate industry chided the media for too much "gloom and doom" coverage.
History needn't repeat itself, provided consumers aren't shrouded in denial and begin to educate themselves about the market forces at work today.
It's time for buyers to rethink home buying strategies. Too many have become reckless with extravagant abandon.
Just as Wall Street revealed it isn't impervious to losses, a real estate market correction is inevitable.
"Buyers should relax and take a breather, finally. There will be less competition and more inventory to choose from as time goes on. Prices are no longer going up 3 or 5 percent a week. When you find the right property, go for it. I might be inclined to say the best opportunity will be in the August through October time frame. The market should at least become a balanced market and may actually become a buyer's market around Labor Day," said Calhoun about the Silicon Valley market.
Tomorrow: Buying Strategies For A Market In Transition will run on Realty Times.