It is being reported by multiple outlets today that home sales are down 25% to 40% nationally and locally respectively. This is a huge year over year change for sure. However, this could be easily predicted by anyone in the housing industry or anyone that has even a loose understanding of economics. Up until June 30th of 2010 the federal government had been effectively paying people to buy houses in order to stimulate the economy as a whole. Haven’t owned a home in the last 3 years? Well, here’s $8,000 if you buy before this date. Of course anyone who was thinking about buying a house this year made sure they closed before June 30th! It should come as no surprise that this is the largest drop in housing from one month to the next in 42 years. We went from giving a large subsidy to buyers to taking it away very suddenly and this would be to expected effect.
http://money.cnn.com/2010/08/24/real_estate/existing_home_sales/index.htm
The question is how this will affect sales in the coming months of September, October, and November. These are traditionally strong months for home sales. I for one have noticed a
Housing Sales Down Sharply In July Both Locally and Nationally
good amount of activity in the month of August which seems encouraging. Investors, in particular, seem to be very active. This is a great sign in my mind because we need investors to work through the back log of foreclosed homes and underwater mortgages that we will be dealing with in the coming months (and most like…years). There is a new crop of buyers that are starting to become active. These people were not ready or incapable of closing in time to take advantage of the tax credit.
This is beauty of real estate. The demand can never completely go away for the average buyer. There will always be growing families, newly weds, and empty nesters. Certainly, in better economic times there will be more of these people. But in the midwest homeownership is at is most affordable in decades with the low prices and historically low interest rates. In many cases owning will be cheaper than renting and with tax benefits of writing off mortgage interest its obvious that homeownership is still the way to go for most.
If this decline in July has the far reaching negative affect on the economy that some are predicting we all may be in trouble. But for now we have to continue to work through this bloated inventory of distressed properties. A healthy housing market has about a 6 month inventory at the current rate of sales to get through all the houses on the market. In our current market we have more than double that at 12.5 months worth of inventory at the current rate. What this means is that if you want to buy now is truly the time. Banks are giving away money for free and they have some properties and bad loans they need off their books as well. Investors are going to clean up over the next 36 months until all these deals are gone. And let’s hope they do because the faster this inventory is gone the quicker housing can get back to normal. If you want to be a real estate investor or buy a distressed home on the cheap get in touch now so we can get you set up to start making money.