A Great Time to be a Buyer!

 

Values have dropped, rates are low, and it’s a buyer’s market.  If you are a buyer, what are you waiting for?

 

Buyer’s Market:  Buyer’s should not wait for a seller’s market to purchase.

Markets go up and markets go down.  Isn’t it odd that buyers rush to purchase when the market is climbing in fear that they will be left behind.  They enter a market where there is tremendous competition and, often, they feel rushed to settle on a home that may not fulfill their wish list.  Yet, as markets climb, affordability drops until it finally reaches a point where demand drops, cooling price appreciation.  The current market is completely different.  It’s a buyer’s market where values have already dropped over 30%.  Affordability has been restored and interest rates are at all time lows.  Current interest rates improve home affordability dramatically.  The historically record low rates translate to the lowest possible monthly payments.  Unfortunately, buyers just don’t shop based upon the monthly payment.  Too much emphasis is paid on the purchase price and not enough on payments.  People shop for cars based upon the monthly payment.  Why not homes?  As new homeowners mail off their monthly mortgage payment, wouldn’t they rather pay a few hundred dollars less?  How about $1,000 less?  Cashing in on today’s rock bottom interest rates saves anywhere from hundreds of dollars to over a thousand dollars per month, depending upon how high interest rates will climb.  As the market improves interest rates WILL GO UP.  This is the absolute best time to purchase, during a buyer’s market.  The buyer’s market will not be around forever. 

 

Market Changes:  The real estate market will move along its normal cyclical pattern, but don’t expect abnormal changes.

Regardless of what you hear or read in the news, the market is not going to drop off a cliff or skyrocket anytime soon.  What you see is what you get, a lot more of the same.  For the coming years, the real estate market is not going to change much at all.  As a buyer, holding out for another 10% drop is not wise.  Values have already dropped over 30% and today’s affordability has propped up demand, keeping values stable.  Likewise, for sellers that need to sell and are waiting for real price appreciation, they may have to wait a few years.  Boring is the new normal.  The market will slow during the Holiday market, from Halloween through the first few weeks of the New Year.  It will pick up in the Spring, cyclically the best demand of the year.  Then it will cool a bit during the summer.  There are no more surprises.  It will take a few years to exhaust the infamous “shadow inventory” of homeowners in default.  The market has already been slowly working its way through the shadows already.  As a buyer or seller, expect more of the same.  It really is what you see is what you get.

 

Active Listing Inventory:  The listing inventory dropped by 3% in just two weeks.


After increasing unabated for the entire year, the active listing inventory finally dropped a couple of weeks ago.  Two weeks ago it posted a 1% drop.  In the past two weeks, the inventory dropped substantially more, shedding an additional 311 homes and now totals 11,493 homes.  This is the time of the year when fewer homes are placed on the market and unsuccessful sellers throw in the towel and pull their homes off the market.  The net result, the inventory dropped.  Last year there were 3,570 fewer homes on the market.

 

Demand:  Increasing slightly, demand continues its recent trend of improving.


Bucking the normal cyclical patter for the Autumn market, demand, the number of new pending sales over the prior month, increased slightly by 35 homes and now totals 2,791.  It looks as if demand has finally restored to more normal levels, after the end of the first time home buyer tax rate temporarily cooled first time home buyer activity.  Slowly but surely more and more first time home buyers will enter the market, lured by increased affordability and incredible interest rates.  This could be the beginning of a surge in first time homebuyer activity.  Only time will tell.  All of the ingredients are there: low prices, historically low interest rates, more realistic sellers.  Last year at this time demand was at 3,197 pending sales, fueled by a first time home buyer tax credit that was expiring in November 2009.

 

Foreclosures and Short Sales:  Once again, the distressed inventory remained unchanged.

The active distressed inventory dropped by only 9 homes over the past two weeks and now totals 4,030 foreclosures and short sales.  Over the past month, the inventory has grown by 4 homes.  It is apparent that the distressed inventory has hit a temporary peak for the year.  With foreclosure moratoriums due to “Robo Signing,” the inventory will probably stay right around the current levels or drop slightly.  The distressed inventory now represents 35% of the current active inventory.  Last year at this time, there were 2,398 distressed homes on the market, 1,632 fewer than today.  The number of foreclosures within the active listing inventory increased by 22 homes in the past two weeks, from 698 to 720.  The expected market time for foreclosures is 1.89 months, still an exceptionally HOT seller’s market.   Short sales, where a homeowner attempts to sell a home for less than the total outstanding loans against a home, requiring lender approval, decreased by 31 homes over the past two weeks and now total 3,310.  The expected market time for short sales is 3.09 months, not as hot as foreclosures, but better than the Orange County housing market as a whole.

 

 


    

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