Real Estate Outlook: Positives Taking Shape

Written by Posted On Wednesday, 20 February 2008 16:00

If you're looking at housing statistics over the past quarter or year, there's no question you're going to come up with a lot of negatives.

But if you look ahead -- there definitely are some positives taking shape.

On the negative side, we've got a bumper crop: The National Association of Realtors reported last week that median home prices in the fourth quarter of 2007 fell in 77 of 150 major markets compared with year-earlier numbers. And the median price of an existing home nationwide dropped by 5.8 percent.

On top of that, total sales were down in the fourth quarter by 8 and a half percent from the previous quarter and were 21 percent below where they were in the fourth quarter of 2006.

I've got one word for those numbers: Ouch! They're pretty sobering. But let me ask this: Is anyone really surprised that after the biggest run-up of prices in American history and six years of record-breaking sales that the correction phase following the boom cycle has been tough?

Even in the face of all this, roughly half of the 150 major markets -- 73 of them, spread from Yakima, Washington to Binghamton, New York -- saw median price GAINS last year during one of the worst real estate environments in a century.

Now let's turn to market developments still ahead: No one is predicting any quick turnarounds or sudden bursts in sales, but think about these facts:

  • Thirty-year mortgage rates continue to be in the mid to upper 5 percent range -- among the lowest in half a century. If they stay low, most economists agree they will stimulate home sales.

  • Federal Reserve chairman Ben Bernanke told Congress last week that he is committed to lowering short-term rates even further to help stimulate the economy -- and hinted that the Fed could cut rates another half point in mid March.

  • The new, higher mortgage maximums for Fannie Mae, Freddie Mac and FHA will kick in by mid-March and should help thousands of first-time buyers in high-cost markets like California and the Northeast and ultimately help clear out some of the unsold inventory clogging those areas.

  • Combine low-cost money with sharply lower prices and at some point, you hit bottom -- flatten out -- and sales begin to pick up.

Downcycles aren't forever, nor are upcycles.

Here at Realty Times we think in a slowly expanding number of areas as the year proceeds, you'll see the arrows start pointing up again.

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