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Sunday, October 14, 2012

Dan Elsea's take on the real estate market...

Dan Elsea is President of Realty Operations for Real Estate One and a member of the founding (and still owners) Elsea family. He and his brother Stu basically run the company these days. Dan comments on the state of the market each month is a missive to agents who make up the Real Estate One team. Below are his most recent comments onthe current state of the real estate market in Michigan.

The best way to describe the current market seems to be "just enough". Both the economy and market values are rising just enough to bring just enough sellers into the market to satisfy just enough of the buyer demand to keep the market moving and prices rising.

There is a significant shortage of available homes for sale. We are at a low point for listing inventories as we come off a high point for sales, creating a depleted inventory going into the fall and winter. This is good news for Sellers with upward pricing pressure through the winter months (which is a rarity). For many Sellers, the spread between what is owed and current values is still wider than they would like. This means there is a chance the sales rate could slow through the winter simply because there are not enough homes to sell. We could see a strange phenomenon of the sales rate falling (compared to last winter, but still a good pace) while prices rise.

As the market recovers, it is interesting to note that most of the issues holding back a real explosion in real estate have been artificially created, as are many of the key factors fueling the recovery.

On the stimulus side:

  • The Federal Reserve buying Bonds (Quantitative easing) helps keep mortgage rates at record lows
  • Government entities, Fannie Mae, Freddie Mac and Gennie Mae (FHA) are the funding source for nearly 90% of all mortgages
  • Government refinance and short sale programs are helping reduce the foreclosure overhang

On the holding back demand side:

  • The concern over the potential lender restrictions under the Dodd-Frank act has banks holding back on lending
  • Government law suits against banks to buy back old loans have caused many to stop mortgage lending all together, restricting available credit
  • Uncertainty about what will be the underwriting standards imposed on lenders going forward causes lenders to be more cautious
  • Congressional inaction on extending the Rural Lending programs have reduced access to credit for many rural markets

Combined, they seem to cancel each other out, allowing for a steady real estate recovery. Both Presidential candidates are unclear as to how they will address any of these artificial issues, so we will have to wait until next year to get a clear direction. In the mean time, Buyers keep pushing to buy and Sellers are gaining more confidence, regardless of which way the political winds blow.

I've certainly seen the slowdown locally, with an inventory that is so low that we can't find houses for would-be buyers. There are just too many people who are still underwater on their mortgages. One thing that I thnk needs to happen is for those people who are holding back because of imagined rather then real loss of value to get on with life. Many people, most in my own age group, are sitting there with homes that they own free and clear, yet they can't seem to let go of the value that they thought was there at the peak of the market. Those are imagined losses, not real losses. They exist only on paper and in the imagination of the owners.
This is one instance in which a saying that I really don't like applies - it is what it is - so get on with life. If you are sitting on a home that you'd rather sell and that you own, because you are waiting for the "value" to return to 2005-6 levels, you could be in for a long wait - one that you might not get to the end of in time to enjoy the retired life that you've waited so long to enjoy. The market is begging for houses right now. You'll get top dollar at the current market value and get it quicker than if you wait. So call me and let's see what your home is worth in today's market. The market analysis is free and it might allow you to see how you can get on with life by selling your home now.

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