The “now is the time to buy” mantra has worn pretty thin over the last few years. With all the talk of foreclosures and shadow inventory, its a rallying cry that still rings hollow for many even though we currently have low interest rates, tax credits, and the lowest prices many areas have seen in years.
At the same time we’ve seen move-up buyers disappear from the market. Unwilling to sell because they think their house is worth more than they can currently get. And unwilling to buy because they fear prices might fall further. But reality is their house won’t rise in value while the one they want falls. And unlike the first time buyers and investors that this market has come to rely on, move-up buyers have the least to lose if the market did fall further… as their current home would fall in value in that event anyway.
In August 2009 the Federal Reserve approved an extension to the Term Asset-Backed Securities Loan Facility (TALF), committing funds to support asset-backed securities through March 2010. In November 2009 the Federal Reserve announced they would not extend the TALF past March so we may find interest rates rising shortly. In addition, move-up buyers may also benefit from current housing tax credits that will also disappear in the months ahead.
So while I believe short-sales and REO’s will be with us for years to come, dont’ forget that two-thirds of homeowners in California still have equity, still have jobs, and may not be in the house of their dreams, the school district of their choice or as close to work as they’d like. There may be a short period of time, right now, where the rallying cry of “now is the time to trade” actually makes good sense. Don’t miss the window.
I agree with this post. Some people are so stuck on getting a high end price on their home but don’t realize it just isn’t worth what they think. Might as well trade while you can and get out from underneath something that isn’t what you really want anyway!
I watch the Seattle / South Puget Sound area and pay attention mostly to the upped-middle to high-end market. Historically, this market closely mimics California phenomena but with a nearly one-year lag.
It’s not a technical term, but the “seller stubbornness” factor in that market has got to be at an all time high. It’s highly neighborhood dependent, of course, but in most areas properties are selling for slightly less than the assessed value, but it’s amazing how many sellers keep their homes on the market for very long periods at levels far in excess of those amounts. Multiple years to sale used to be extremely rare, but is now increasingly common.
And I’ve watched at least several dozen underwater “distressed” homes stay on the market for over a year before simple disappearing into the “shadows” at various stages in the process, unsold and unrented, sometimes “un-foreclosed” despite a long history of delinquency, and just indefinitely held for “later” I suppose.
Suffice it to say, we still have a long way to go to achieve “normalcy” and true price discovery in that part of the country. It’s just psychologically difficult for most people, even aspiring “move-ups” to buy in such an environment, and people prefer to “wait it out” until the smoke clears and things make more sense.
My guess is that Seattle won’t really see good progress on these issues until next summer – and that’s if the economy’s recovery is sustained. If it’s not, well, best not to think about it while I’m still in a good mood.