Well, the news in the real estate market is mixed, to say the least. According to the Standard & Poors/Case-Schiller Index, which tracks real estate data in twenty major metropolitan areas, real estate prices rose again in August 2009 for the third straight month. The quick rate of recovery, a 7% annualized price increase, in the face of continued unemployment and job losses, has some experts baffled.
In contrast, the other real estate article in today's Richmond Times-Dispatch Business Section reports on the local market and does not have great news. It reports that while Richmond comes in No. 101 on the list of Top Foreclosure Cities, the rate of foreclosures is up 24% over the previous month and 90% year over year. OUCH! So while our ranking has dropped us out of the Top 100 Foreclosure Cities, all that really means is it has gotten so much worse in other markets, that even significant increases in foreclosure activity here are not enough to "keep up" with the worst markets.
All in all, a pretty confusing picture. We real estate professionals are worried, and watching the activity in the market closely. I will say that in my office, which has a significant chunk of the market share for several of the more stable and consistent City of Richmond neighborhoods, an informal poll of the agents shows people are VERY concerned about the lack of activity. Frankly, there are only two buyer demographics driving this market right now:
- First time home buyers; and
- Investors with cash.
Both of those buyer groups tend to focus on lower priced properties, so are no help with the inventory priced above $200,000. Investors can't get credit from banks to buy, so only those with cash are in the market, and there aren't lots of those folks.
With first time home buyers, everything dropped off a cliff last week, once the chatter about the extension of the tax credit began. It seems like all the first time buyers have decided to sit on the sidelines to "wait and see" what Congress will do with the $8,000 first time home buyer tax credit. Some are betting that it will get bigger. That's big gamble in my mind, against what my stepfather calls "The Hungarian Cinch," a bet you can't lose, $8,000 FREE dollars. It's super-frustrating as an agent, because the other elements of the buying environment - inventory, affordability, interest rates - will never get better in our lifetime. Even if the credit comes back as $10,000, if the interest rates start to creep up, which we've been seeing, that extra $2,000 is chump change compared to the additional interest you'll pay over the life of the loan.
I have no idea what Congress will do. I do think if the tax credit is not extended or expanded, the activity in the market will come to almost a dead halt until possibly Spring 2010. Buckle up and hunker down, people. Unless you are one of those two buyer groups above, or just have lots of money and have fared well in this recession, it's going to get worse before it gets better.
Comments