Market Expectations

mojomomSeptember 25, 2011

I read an interesting article last week on CNN which quoted a survey of 'experts' regarding expectations in residential real estate market between now and 2015. I've attached the link. To see who are making the predictions, look at the embedded individual panelist expectations. Some I would trust, some, well, not so much.

I thought it might be interesting to hear GW's perpective and predictions on your particular markets. You don't have to be specific as to the identity of your particular market, but give enough information to show what type of market and region.

I'll start with the two markets with which I am familiar. I'm not a RE professional, so these are just my lay perspective based upon market watching and reading some statistics and local articles. I could be, and probably am, way off!

Market 1: This has been my hometown for the past 30 years. It is a small southern town, good schools, and nice hometown feel. Lots of families have lived here for generations, but it is also a "bedroom community" for a larger city about 40 miles commute. We really didn't have much of a bubble, just a fairly consisent, but modest year over year increase for the past 15-20 years, with maybe a blip every now and then. Compared to national statistics, housing prices and cost to build are low when compared to comparable homes in other areas. Because no there was no bubble, there was no bust. At most there was a slow down in building activity and stagnation in prices for a year or two, but no drastic drop. The market really appears to have picked up again and I'm surprised at the amount of new construction I've seen. My prediction, we're probably back to the pre "bust" trend to year over year percentage increase in values.

Market 2: This is where we have our second home, and where we plan to retire. Located in the Colordo Rockies, and home to a major ski area, it is a resort town of about 15,000 full time residents. Second homes are a large part of the market, constituting 48 percent of all residential units and about 62 percent of all residential assessed value. This market is a lagging market and has always trended a bit behind the trend nationwide. The bubble formed slower and peaked later here than in many areas. This area is still seeing price drops in most segments, although a few segments are doing slightly better than others. Sales are beginning to pick up slightly as prices find their level. Lot prices are down from between 50%-75% from the peak (which was in 2007). There is virtually no building activity. My prediction is that this market going to be slow to turn around and we'll probably see further price decreases at least through 2012, before leveling off.

Here is a link that might be useful: Expectations Survey

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I live in Ottawa, Canada, which continues to do well economically (lots of federal government jobs and businesses). We never had the bubble in prices like many US cities had (fortunately!!). I'm not in the real estate business, but as a layman, I think that it isn't a buyer's or a seller's market, except for hot neighbourhoods. Prices generally go up about 5% each year, and sales are steady with interest rates so low - although who knows what will happen when rates go up.

"The average sale price of residential properties, including condominiums, sold in August in the Ottawa area was $337,372, an increase of 6.2 per cent over August 2010."

    Bookmark   September 26, 2011 at 7:55AM
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Raleigh NC here. We had a fairly consistent increase in house prices and not the sudden jumps that some places saw. We have real economic growth and population increases, so prices won't stay stagnant long. When employment picks up, housing won't be far behind.

    Bookmark   September 26, 2011 at 8:59AM
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Suburb on Chicago's North Shore.'s not as bad as it was. (January 2009 median sale price was down 33% from peak.) It still isn't *good* (Median down 15.5% y-o-y now). There are sales -- about half as many as during peak.

I think we have yet more foreclosures to work through. Some of the most expensive RE in town has gone for bank costs, with more to come. You can buy that $10M lakefront estate for less than half -- if you have a lot of cash to put up for it. If I call up listings with price reductions on Trulia...there are always plenty.

The Chicago Tribune Home section featured a story over the weekend about J.D. Powers. They could not find enough buyers of new homes within the last year to allow a meaningful survey of customer satisfaction with builders.

    Bookmark   September 26, 2011 at 3:45PM
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The link that asks about government intervention helping housing is unclear to me. So far the intervention has been to lower interest rates. They are already VERY low. I don't think that's much of a factor to move RE now, in a slow or declining market. Too many people lack jobs or job security, and banks are (wisely) demanding more equity.

Some RE will sell in markets with established wealth. I'm guessing retirement residences and second homes. The only upward trend I see in RE around here is rising rents.

    Bookmark   September 26, 2011 at 5:52PM
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I understand that NJ has been holding back foreclosures and they'll probably hit next year,further depressing the market. We were a little slow in seeing prices drop, but right now we're well below 2006 prices, closer to 2001. I thought last year was bad, but this year having my own house for sale has really brought out how many properties are for sale and how picky buyers have gotten, the media constantly talking about the glut of homes and dropping prices gives them the impression they can make a killing. We received a low ball offer which the buyer left open for when we got desperate. Thankfully, we got better offer and are under contract now.

Also, the general economy makes people afraid of their future employment causing buyers to be extra cautious and many times buying below their ability.

    Bookmark   October 15, 2011 at 9:27PM
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I think the market is still dropping. I was interested in the house I'm buying in NJ last year. At that time, it was out of my price range quite a bit, about $75,000 and the agent said the seller wouldn't budge on the price. She actually said that it was a thorn in her side because she'd taken tons of buyers to see it and the seller wouldn't go down a penny. We were disappointed and put it out of our minds. A year later, we happened to stumble upon it and now it was in our price range. Of course during this year, I've had to lower the price on my house too a little bit. What scares me is I see property around here priced way below the market and I know it's a seller in financial difficulties. That causes the rest of us to have to lower our prices to compete. So yeah, it's still dropping and I don't think it's going to get much better until EVERYONE is doing better.

    Bookmark   October 15, 2011 at 11:11PM
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When my house was on the market I endlessly analyzed the comps and the listings. Probably overanalyzed them, trying to find a consistent theme when maybe there wasn't one.

But, anyway, what I seem to find was that house prices overall really weren't going down that much overall. However, for higher end houses -- top 5 to 10% of the market houses weren't selling. Houses were sitting on the market for a very long time before selling -- often over 2 years. Typically, you would see a house listed for $X and then selling 2 years later for 80% of $X. Now, that 80% of $X wasn't a bad price really although probably a little less than the house would have sold for, say, 4 years ago.

The houses that sold quickly were, of course, the ones where the owner listed initially for say 85% or 90% of $X.

The thing is that lots of people just weren't willing to take 80% of $X so you would see houses listed for 6 months or a year or two that just then went off the market and there was no sale. You might see 50 houses listed for sale and then see that there were only 5 sales in a 3 month period so most houses just weren't selling. The listing prices were very misleading since most houses weren't actually selling for anything close to those listing prices.

    Bookmark   October 16, 2011 at 1:45PM
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