Thursday, May 21, 2009

Washington’s Real Estate Market Trends…Buyers Want Bargains Today's market for residential real estate is made up of deals arising from broken loan modifications, short sales, foreclosures, bank owned properties, distressed sellers, receivership's and bankruptcy trustees. In some markets we are seeing an increase in the number of closed transactions in the lower end properties, stimulated by first time buyers. People want a bargain, and many are willing to wait for several months working through the short sale process. Others are willing to be a part of a frenzied bidding war over a bank-owned house. Worse, in some way, the supply of residential property has been artificially constrained during the past months by:
  • New state statutes requiring banks to engage in work-out negotiations before foreclosing;
  • The federal government requesting a voluntary moratorium on foreclosures;
  • Borrowers filing lawsuits and bankruptcies; and
  • The promise of a bailout of financially strapped borrowers.
To hope to understand the state of the market, we must try to recognize, comprehend and analyze new layers and factors never before experienced by the current group of working real estate professionals and other intermediaries. Such factors include consumer demand influenced by fear, greed and loss; inefficient and artificially constrained supply; stricter underwriting guidelines; contraction of financial products and markets; new state and federal statutes, regulations and guidelines; record high unemployment levels; and over leverage of individuals, families and business. There has been an increase in the number of sales. Interest rates on 30-year fixed conforming loans remain extremely low ---- around 5 percent ---- relative to historical norms. Median income appears to remain comparatively stable, although unemployment is increasing. Overall, market value may continue to decline, but at a slower pace, except for the periods of time when foreclosures are actually pursued in earnest. Areas experiencing a larger number of job losses may continue to have moderate price decreases. For the foreseeable future, the markets will be mixed, troubled and stressed. Yet many are saying that we may be nearing the bottom of the residential real estate market for existing homes. So if buyers are looking at homes in a neighborhood and community in a relatively stable older market, and all things are steady in their personal lives, the time to buy may be close. If prospective buyers want to obtain homes in a newer area and their jobs are not stable, they may want to wait for a little while. If buyers have not purchased anything within the next five years, they will probably wish they had. That’s my take, what ours?

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