The following question was recently posed by the Realtor.com blogging team…
In my opinion, the stimulus package will only serve to delay the inevitable and prolong the pain. There is a basic concept that is being grossly ignored and it is as strong as the law of gravity.
Supply vs. Demand.
There are simply too many homes priced too high to spur interest from the pool of ready, willing, and able buyers. The only thing that will fix this economy is time. It took several years of fantastic appreciation to get to the point where the decline began – and the appreciation was astoundingly quick and strong. Life is about balance – in all things. Including real estate. Just as we have had several strong years of appreciation, so must we now have several strong years of depreciation. This is not a surprise, folks. Real estate is cyclical and always has been. It goes up, then down, then up, then down. We just had such a strong “up-swing” that the down-slide is significantly more potent and is affecting many other facets of our lives as well.
The $8,000 tax credit to those who purchase a home is a nice benefit…but I don’t think it’s going to spur anyone to buy a home who wasn’t already planning on doing so in the near future anyway.
I’m scared out of my mind that it will help to spur more new construction. I hope my builder friends don’t get upset, but the last thing we need to turn this market around is more inventory for sale.
The stimulous plan is a struggle to fight the laws of nature. It goes against the natural balance and order of Supply vs. Demand economics and it’s trying to force an outcome that isn’t supported by my metaphorical gravity. Again – it will not turn this market around – it will only prolong the journey and hurt more people than it helps.
I still maintain that the best way for this market to turn around is for us to speed up the process, not slow it down. The faster home prices drop, the more properties will be purchased by first-time homeowners and investors, and the more the inventory levels will shrink. As inventory levels will shrink, relative demand will increase and prices will stabilize and over time increase as well.
Sticking a band-aid on a broken leg will not help it to heal. It needs time.
This question was recently posed by the Realtor.com Blogging Team:
How do you think the Real Estate market will be affected by Tuesday™s election?
Well…I have to say I don’t think the real estate market will change much at all…at least not in any major way. People don’t buy houses because there’s a new president…they buy houses because they want a home to live in and/or a sound investment for their future that will always appreciate over time (for those that have lost money in the current housing market…the key words are “over time”…real estate always goes back up…you just have to wait for it).
Will the emergence of our new president spur some people to feel more confident in our “soon-to-be” burgeoning economy?
Possibly…but I would suggest that the vast majority of those people were already on the verge of buying a home anyway.
Let’s put this into a local perspective…
With regards to Hernando County Real Estate, towards the end of 2005…we had about 700 homes in our salable inventory (in the whole county). It’s no wonder it seemed like every home sold overnight – it almost did! With so much competition for homes and so little inventory, things sold quickly and usually with multiple offers (keep in mind; even then, only the homes priced for the market sold, granted the market was much more lenient…but it still held true that if you were priced too high, your home would sit with no attention). Using a buyer’s criteria in a search would routinely narrow that 700 homes down to 10-15 that fit their needs, and after looking at those, maybe 3 that the buyer was truly interested in purchasing.
Right now we have over 3,500 homes available. Using the buyers criteria, we routinely have 50-100 listings that fit…oftentimes even more…then the buyer narrows those down to the ones they are truly interested in…and we have 15-30 homes…Buyer’s have a glut of inventory from which to choose…as long as this is the case, lower offers will prevail. Why? ”Because if ‘you’ don’t take it, the next guy will”…and a buyer isn’t concerned because they have 15-30 “next guy’s” on the list.
Given that there’s a new president being elected on Tuesday…would that make you want to pay one penny more for a home than you absolutely have to? Would it make you want to buy a home when you aren’t already in the market to do so?
I don’t think so…but let us know what you think – fill out the comment form below.