Watching both broadcasts of the local and national news for the past few nights started with housing news. In fact the headline from MSNBC reads “Sales of Existing Homes Plunged In July, Record Drop of 27% To The Lowest Level Since 1995”. I just wanted to yell at the TV, like the comedian Lewis Black, “Are You Kidding Me?!?!?!?!?!” This is not news this is what the experts have been predicting for months. The real news in the NAR report is that home prices have pretty much remained stable and the big question is how long? If there has been one message we have been screaming since the beginning of this year it has been “If you are going to sell, make sure your price is right to sell prior to the tax incentives end because the serious buyers are going to disappear, the shadow inventory is going to hit the market and interest rates are going to go up.” The rates haven’t gone up but everything else has come true.
The auto industry had a drop off of after buyers after the Cash For Clunkers and so is the housing industry after the tax rebates. What the First Time Home Buyer Tax Credit did was to force the buyers who were planning on buying in summer time to the spring time. KCM and Calculator Risk Blog reported back in Feb of 2010:
As you can see from the graph above that was printed in Feb this is exactly what has happened. As a result sellers are chasing the market by lowering the price of the home so they can sell it faster. In a normal market this strategy would help. Later next week in the blog I will share information on the Case Shiller pricing index predictions for pricing. However, we have a few of things going on such as a large number of people who have to sell because of relocation for employment, unemployed and cant afford their home, ARM mortgages that are coming due and to top of all this the market is now getting flooded by shadow inventory of foreclosures. The data is lagging but you will see this will be the next big news story for the housing market.
Now, I know I have simplified this a great deal but when you boil this all down, this is the supply and demand laws. Demand was brought in early with the tax credit, supply is high and foreclosures is making it higher. How do we get out of this mess, in my opinion the rot cause now is JOBS. People need jobs, period! When we have jobs people can afford their homes, they buy new homes, they buy bigger homes, they build new homes, etc. and the demand will increase.
So you are selling your home now what? You need to step in the shoes of the buyer and ask why are people buying. Regardless of the economy, age, marriage status, race, sex, etc. people need a place to live. According to a Fannie Mae National Housing survey the major reasons people are buying are the following:
1. 80% – You have a good place to raise & educate children.
2. 79% – You have a place where you and your family feel safe.
3. 71% – You have control over your own living space.
The housing numbers aren’t great but the fact of the matter is generally people do not buy and sell homes based on the market. This is a extremely emotional and logical reasoning why people buy. It was pointed out in our production meeting this morning. If people are buying solely by the numbers Muskegon Heights housing supply would be zero since you can buy a home there for under $5,000. Yes under $5K, I have sold two homes this year under $5K in Muskegon Heights myself. Since crime is high in Muskegon Heights and the basic infrastructure of the town is crumbling people generally aren’t interested.
Because there is so much competition in this Buyers Market to sell your house, your house has to shine. Keep your home spotless, keep the yard clean, keep up with the maintenance, update the paint, clean the carpet, stage the home if possible, etc. I know buyers that have been shopping for awhile are tired of walking into bank owned homes with a ton of repairs and cleaning needed, the “As Is” home scares a lot of buyers. I am not saying go crazy with home remodels because home loan plus remodel does not equal new home value. Make what you got shine and move in ready.
What I am trying to say here is, DON’T PANIC!!! You might be thinking you are taking a huge loss on your home based on the 2005 price, but you will make it up on the purchase of your next home. Don’t chase the market in your listing price, work with your realtor, make plans to get out the home for an hour or so for every showing, continue to do the open houses, continue to work with your realtor, maintain your home, and last but not lease work with you realtor. We will get through this!