When the stuff hit the fan, most Realtors didn’t know what to make of the changes and most missed the boat on foreclosures and short sales. By 2008 the market was dominated by “distressed sales” – foreclosures and short sales and the leasing side had been driven up by the need for all of those displaced people to find a place to live, while they rebuilt their credit.
We started to see the market bottom out in 2011 and by the end things looked like the chart to the left. Distressed sales still make up almost 50% of all sales and leases are still going strong; however, the retail side of the business – what some are want to call “regular sales” have made a comeback and now represent 35% of all sales again. To be sure, at a combined 47% of sales foreclosures and short sales still dominate the market and heavily influence prices for the entire market. So, where are we headed? I guess it depends upon how far out one looks. For the next few years (2-3 years at least) we will be dealing with the aftershocks of the big recession – the release of foreclosed inventories by banks who were holding back as well as new foreclosures and lots of short sales. It will likely take a decade or more for values that were decimated by the recession to creep back to pre-recession levels and some may never make it back. Many areas locally lost 30, 40, even 50% of the values at the peak in 2006 and many homes will suffer from obsolescence or deterioration that will limit how much of that lost value is regained.
When will the real estate market get back to “normal” for Realtors? An argument can be made that this is the “new normal” for us. I suspect the better question might be when will some level of stability and positive appreciation return to the market? I’ve seen various opinions by learned “experts” that seem to point to 2014 for a return to positive value growth, but then I wrote similar words in 2009 that pointed to 2011 for the same thing.
Many have been waiting for a magic bullet from the Federal Government, but so far most Federal programs have seemed to be shooting blanks. There is little political will in Washington to force some of their biggest campaign contributors to bite the big equity reduction bullet that needs to fired off. So, we’ll continue to muddle along with dissatisfied middle class homeowners trapped in their underwater McMansions and more and more honest, hard-working, but tapped-out, people being forced into short sales or foreclosures. Sometimes being a Realtor is like being the weatherman who is to predicting rain on the day that you have an outdoor wedding planned.