Monday, August 18, 2008

Good Local Real Estate News Ahead?

The Real Estate market here in Metrowest Massachusetts has been in a slump for a good 3 plus years. The peak in the Real Estate market was in the Spring of 2005. Since then things have been marked by declining home values, extended market times, short sales, foreclosures, and in many areas a rise in housing inventory. Not a lot of fun if you need to sell your home here in Massachusetts.

Is it possible this could all be a distant memory in the near future? According to a news story in Banker and Tradesman it may be. The article suggests that the worst housing market market in the United States since the Great Depression may be nearing an end.

The strongest indicator that the market may be changing is the fact that the pace at which housing values have been dropping has slowed. There are also certain pockets in the US where home values have actually already started to increase.

“Anybody who tells you they know when the housing market will bottom is delusional, but anybody who denies there are some positives out there that could make the housing market bottom fairly soon is equally delusional,” said Karl Case, the co-developer of a widely watched gauge of the housing industry and an economics professor at Wellesley College in Massachusetts.

The Standard & Poor's S&P/Case-Shiller home price indices, which case co-developed, has shown a slow down in the downward trend in home prices in recent months.

There is also other data that has shown signs that we could be in for a recovery sooner rather than later.

New housing starts fell to 975,000 in April from a peak of 2.27 million in January of 2006. In the past 35 years, the three other times that housing starts fell from more than 2 million to under 1 million, housing market activity rebounded within a quarter.

One of the states to watch is California which has been battered by foreclosures. The California Real Estate market has taken quite a hit. In fact prices have dropped so much in California that the cost of a mortgage and taxes is the same as rent in many locales. If California starts to recover it is a good bet that the rest of the country will follow suite shortly thereafter if history is any indicator.

While I am the furthest thing from a pessimist and always look to see the bright side of things, it is hard to imagine the Massachusetts Real Estate market recovering in the next 6 months. Unfortunately here in Metrowest Massachusetts we have just started to see more short sales and foreclosures. This will have a further impact on home prices.

There are other factors in place as well that will prevent the Real Estate market here from all of sudden just turning around and heading back up. These factors include:

1.) More people leaving Massachusetts than being transferred in.

2.) A much tighter mortgage market.

3.) Sky high energy costs. (Certainly makes people more conservative).

4.) Inventory levels in some communities that are higher than six months.

I don't pretend to have a crystal ball but logic and the fact that I see what is going on the Real Estate market everyday leads me to come to this conclusion.

So for now if you are thinking of selling your home make sure you price it properly and work with a Realtor that will create an online presence for your home. These two factors will go a long way in determining how successful your are.


Susan Hilton said...

I'm with you -
Sure would like to see real estate improve across the nation and hope to see California start soon but some areas will find it difficult to recover in a short time period.

Bill Gassett said...

Hi Susan - At some point we will start to see a recovery. It would be great if it was sooner rather than later. Getting past the election could help spur the Real Estate market across the country.