What is going on?  Is the world coming to an end?  Should I buy that house I want?  Should I sell my house?  How does all of what’s going on affect me?

Are these questions you have been wondering?

I am hearing these questions asked daily.  I keep my ear to the ground, and will do my best to help you understand briefly the answers.

Q. What is going on?

A. We are in a buyer”s market.  For quite a long time, here in Central Texas (and in most other areas) we were seeing a very long and strong seller”s market.  This occurs when there is less than 5 months of inventory in a given area.  Of course, when that happens, sellers have less competition, and therefore are able to sell at higher prices, and get them much quicker.  In many cases, homes would have multiple offers on them by the end of the first day they are on the market, and they usually would sell for more than asking price. 

Across the country, for the most part, this was the case.  Mostly due to the fact that more people were being able to get loans than usual.  This of course meant that there were more buyers than homes to buy.  So you have 10 people looking to buy, and only 5 homes to sell, duh, supply and demand.

Well, since a major amount of those buyers in recent years, really should not have been able to get loans (due to bad credit, and poor judment with finance, and bad track records, no money saved), a large majority of their mortgages went bad.  Therefore, now you see a large amount of foreclosures and short sales on the market.  There are also those large amount of owners who are proactive and trying to sell before they see foreclosure in the near future.

So as a result, there are more than 5 months worth of inventory on the market.  In fact there is more than 7 months (which constitutes a buyers market).  Coupled with this is the tightening of lenders criteria to loan. 

So, there are lots of homes on the market, and not as many buyers.

Q.  What does this do to the market?

A.  This is great in alot of cases.  This strong buyer’s market means it is an oppurtune time for many people.  The large amount of homes for sale means there is a lot of competition.  This means that homeowners who really want and/or need to sell, are having to lower their prices.  For a buyer, THIS IS PERFECT!  Also, a buyer now has more homes to choose from. 

Q.  So you are saying this is good as a buyer?

A.  Definetely!  This is great for buyers.  If you are a buyer, who is able to get a loan(if you have good credit, a stable job), it’s like being a kid in a candy store.  Not only with the resale market, but with new homes as well.  Homebuilders overbuilt during the last few years trying to keep up with the markets demand, resulting in most of them having way too much inventory.  Now they are willing to jump through hoops with incentives to get rid of this abundance, while also trying to compete with the resale market.

Q.  So as a homeowner, you are saying what to me?

A.  If you are comfortable where you are, do nothing.  Do not be in fear of your home going down in value either.  This is a normal fluctation.  It is a cycle that always returns.  The only unknown is how long it will be.  For as long as we can track, we have always moved back and forth between a buyer and sellers market, and will continue to do so.

Q.  What if I’m looking to sell and buy another property, is this bad news?

A.  Not necessarily.  If you have lived in your home for at least 2-3 years, chances are you have good equity.  If you are looking to sell, it’s true that you will more than likely be selling it at a price lower than you would a year ago, but look at this scenario. 

EX.  If home prices dropped by 5%, here is what it could look like if you decided to sell and trade up(size, neighborhood, city).

Home Price $200,000              ————–>   Home Price $400,000
Sell at $190,000 = $10,000 loss                       Buy at $380,000 = $20,000 SAVINGS

Falling home prices are a great oppurtunity for a savvy homeowner looking to move up.  Even though your home sell price may be lower, the smaller loss at sale will be compensated by greater savings at purchase, resulting in a significant net gain.  It’s like stocks, you make your money by buying when the stocks are low.  It is always said, that in real estate, you make your money when you buy the property.

 Please feel free to contact me for further information regarding the market.