Two very obvious things to state with the November/December sales...the anticipation of the 1st time buyers credit expiring had a buffering and possibly even creation of a housing bottom (I know sellers of 200k-400k homes don't think so, but we will talk about that more later). Notice the HUGE drop off in December sales. Some people suggest that the housing credit 'hurried' or brought buyers into the market that were not considering a home purchase.
I can only agree with that last statement so much. I mean, you can only hang on the fence for so long before all the kings men have to put you back together.
However, let's see what happened in December by looking at the 200k-400k graph I have here:
What a GREAT JUMP in home sales from November to December. For those that do not already realize why, that jump was likely because of the amount of buyers that bought the sub 200k homes in November (record numbers by my count) allowed many of those sellers to become buyers of more expensive homes.
Studies suggest that when a household decides to 'move up,' that they usually end up buying a home that is priced 50% higher than where they sold at. Let's face it, its a great time to 'move up' in this market.
If a 150k seller takes a 10% price hit in this market when they sell, but then can take a 10% discount on a 225k priced home that has been on the market for a while, they've saved money by selling and buying in this marketplace.
Remember, this kind of reduction in price does not usually occur for new istings. We have seen the overall sale to list price ratio dip to between 95% to 97%. Each market, home style, age, new construction, etc though is different.
For example, you are not going to go far in negotiations if a builder is successfully building in this marketplace and expect a 10% reduction.
I recently had a home seller turn into a buyer locally where we had to evaluate our negotiation strategy. We had reason to believe that the builder had eight foundations poured with two existing homes completed. Both those homes had accepted offers and we were told that four of the poured foundations had accepted offers. Not much likeliehood that a buyer is going to get a discount there.
Every market is different. Get the opinion of an experienced real estate professional to keep you aware of what the market is like for your own situation.
Looking forward then, what will happen with the expiration of the April stimulus that was expanded to existing home owners? My personal hope is an extension to June or July...anytime before the start of the next school year.
What is important to remember is that BAD lending and investments in the housing market created record home sales and job losses. Job creation, in my opinion, thru the use of tax credits for home ownership may be the strongest way 'out' of this.
Some people say, "Scott, isn't that a liberal tax policy to credit credit credit?" My response is, Washington is taking our money anyway, isn't it better if we keep our own monies for job creation?
When homes sell, jobs are created by way of new appliances, new carpet, new windows, new roofs, new roads, etc.
Job mobility and the housing industry are a great source of efficiency within our marketplace. Because of our highly cyclical home sales trend being based upon weather paterns and school, an extension of the April deadline would be most appropriate for our area.
I realize that there are some 4.5 million homes that are on the books for foreclosure, with some of those being able to 'escape' with 'more realistic' financing options. This is not going to be a 'V' shaped recovery, as it will take a while before jobs come back...some say as many as 10 years.
Back in my dating days I was told by a friend that for them it took a month to get over a person for every month you dated them. (not going to talk about the friends that counted in days) If that's the case, and we think about our local real estate market being 'juiced' for three or four years, thats maybe what it will take before we see recovery for the 200k-400k market.
The local 200k-400k market is getting hammered. H-A-M-M-E-R-E-D. Some people have decided that they would rather wait a few years and are renting their homes out. I personally am very wary of this option unless there is a land contract option or significant security deposit. I have seen too many times how homes have not been taken care of by tenants.
The success of our sub 200k market has a direct effect on the 200k-400k market. Don't get me wrong, it's entirely JOB driven, with confidence in one's job being at the core.
My hope is that we don't see a 'burn-out' of home purchases in April/May like we did in the December sub 200k market, but I realize that many of these first time buyers focus on presents/gifts for the Holidays and knowing their financial status as it pertains to taxes. Many home buyers do not appear until they have calculated their tax liability. As we wait though, more of the 200k-400k sellers are carrying more and the 'newly' expanded tax credit may help.
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