The lady across the table was hoping to sell her house and have enough money left over to purchase a newer house in the area. She had owned her home for over 30 years and was hoping to find something smaller and easier to maintain. When she saw the recent values in the neighborhood she said “If that is all my house is worth, I’ll just wait for a while until the market bounces back”.
I think what we have been seeing and experiencing with home prices and market activity defines the new normal. For those home sellers who continue to think we are only experienceing a dip and a rebound is just around the corner, are you also waiting for gasoline to return to $2.50 per gllon? Prices are going to fluctuate a few percentage points above and below the flatline for a while. Perhaps a long while.
Housing Market Characteristics
For the last couple of years if you were trying to sell your house, your chances were much better during the January – June period than they were during the July – December months. Could it be back to school, could it be the holiday season? Whatever it was, there was a tapering of demand in the back half of the year.
The other thing to point out is that monthly home sales are characterized by sizeable volume swings. So the next time you hear a media report that says monthly home sales increased or decreased by X %, you will understand that its nothing to get alarmed or excited about. That is one thng that has remained normal in either a bull or bear housing market.
Signs of Improvement?
For the housing market to begin appreciating again (and we are not speaking in terms of 2004-2006 appreciateion) certain things have to happen:
- interest rates have to be favorable. There is no doubt that current interst rates have never been more appealing. If you have not refinanced or if you have deceided to buy, what are you waiting for? Your housing dollar will never go farther.
- easier access to money – current lending policies and qualification requirements are keeping many people out of the housing market and placing a lid on demand. As business runs in cycles lending policies will eventually loosen up but it will be a slow process
- employment numbers will need to improve. Until more people are working and can meet the qualifications (see above) there will be a sluggish housing market.
- distressed properties – as long as there are plenty of short sales and foreclosures available for sale, price apprciation will be harder to obtain. Looking at markets where there are reported signs of a turnaround in housing, the market is either defined by fewer distressed propertis or a healthly local economy.
While our economy in Pasadena may be better than ther parts of California, we do have an above average inventory of homeowners who are either behind or underwater on their mortgage.