As we head into the hot and humid days of summer it seems the housing market continues to cool down in QAC. (See the bottom of this post to see the homes that sold last month).
Although, we have an overabundance of house seekers and speculators who are keeping real estate agents very busy, we are not seeing real hard numbers of successful contracts. Need I say, we also have an overabundance of homes on the market in QAC, which is making it hard to sell and driving the prices down.
(Oh, the pic is what I would like to be doing right now, instead of trying to sell homes in this crazy market! Doesn't that look refreshing and really cool? I will give anybody $10.00 if you can tell me who the couple is in QAC.)
What needs to happen to change things here, are a couple of things:
1. Sellers who aren't really motivated to sell (meaning they won't bring their listing prices down to reflect the market conditions) need to remove their homes off the market, and that will reduce the over inventory of homes.
2. The media needs to quit pounding away of how terrible the market is- it is a great time to buy-with the inventory and interest rates (if you can meet all the requirements).
3. Buyers need to stop putting in ridiculous offers and become realistic, if they find their dream home. It is a value, if it is the home of choice for you!
4. Buyers need to get off the sidelines and stop waiting for prices to drop. Who knows, you may wait too long and miss your opportunity and the prices head up again. Or worse, lose your dream home to another realistic offer.
Friday, June 20, 2008
Over Inventory of Homes
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5 comments:
How do you think the Kent island pricing compares to the just-released 1Q2008 S&P Case Shiller housing price index?
Looking at the Wash DC metro area (which doesn't include QAC, but prices probably are similar due to a halo effect), it shows that middle-tiered average home prices (those bought and resold in the normalized $327-467k bracket) peaked in June 2006, and returned to January 2004 prices in April 2008. This means a 20% price drop in 19 months, and the slope is still steeply negative.
I would like to buy a house, but am concerned that the next 24 months will see house prices continue to sharply drop until the meet the inflation adjusted original value.
This would mean a house that was purchased in Aug 1995 for $225k, resold in Feb 2003 for $325k (not a fictitious example, it tracks almost perfectly with the case shiller mid-tier index for DC), would have a peak value of $568k in June 2006, and would have a resale value of $438k in April 2008.
Looking at the slope of the line, the positioning of a 3.5% annually adjusted inflation, that house could drop to $376k in April 2009 and the inflation adjusted base price of $313k in April 2010.
What does it mean? I sold my last house in Nov 2007 before moving here, with the expectation of buying a house. I hate renting, and would like to dive back into owning a house. I have shopped every community within driving distance of Annapolis, looking for a rural setting close to the water, and Kent Island looks like the place. Unfortunately, the joy of home ownership isn't going to wipe out the pain of seeing $50-$120k of equity disappear in 18 months.
So I guess I will continue renting for another 6-12 months until there is actually a recognizable settling of the housing price index.
Mid-tiered Wash DC Case Shiller price index:
http://quietboating.com/tmp/case-shiller.JPG
Dear Tim,
I have given this some thought, and I definitely emphathize with you on this erratic housing market. Since you have done your homework, house hunting can be daunting; especially listening and reading the news daily. Here's my two cents, depending on the zip code there has been some "dips", but average is average, the mean # reflects a better picture. Regardless, if one plans to buy and live in the home for 5-years, this is still an excellent time to buy. Any further depreciation will correct itself an then some over 5-years, rates are still low, there are plenty of wonderful homes to choose from and sellers are paying the buyers closing costs. One can pretty much, with good credit, purchase a home with as little as $2,500. I believe if you find your dream home- it is a value, no matter what it costs today. If you can find peace in your home- that is priceless. And renting, well is renting...you never feel like you can claim it or leave your thumbprint.
There are really good buys out there right now, especially on Kent Island. One of the reasons, I moved here over 22 years ago was the serenity of the rural surroundings and the Chesapeake Bay. Once you cross over the Bay Bridge you can feel the stress melt away.
Please call me if you are ready to look at some potential homes.
thanks for the response, Camille.
While I would like to think that I could stay here for the next 10-15 years, being in the military, it is always possible that I will move away unexpectedly in 3 years, which could leave me severely upside down on my mortgage.
This is definitely a frustrating time; it is obviously not a sellers market, but at the same time I would say it is not yet a buyer's market (contrary to what is claimed by many realtors), since while prices are better then they were 2 years ago, it is hard to predict whether or not a buyer will see anything other then a drop in equity values over the next 5 year period.
Adding to the complexity, it seems like alot of home owners responded to the meltdown in home prices by putting their houses on the market. They did this not because they want to move but because they fear that they will not otherwise be able to (ever) cash in on their "investment".
Between those who don't really want to sell and those who are unfortunately upside down and can't lower prices (either because they bought houses in 2006 or because they unfortunately took out large equity loans in 2005-2006to add hot tubs, ceramic tile and custom cabinets to their house... in many case "gilding a pig), I believe most sellers are setting prices that are not realistic in today's market.
The projected continue meltdown of 1-1.5% of price per month should energize sellers to set prices now that are realistic, because the longer the home is on the market, the less likely it is that it will sell as the gap grows between perceived value and the sellers price. Dropping the price of a $500k house by $10k after it has been on the market for 3 months doesn't even make a ripple in the pond.
Sell it now for $50k less then you are asking now, or wait 12 months (paying $2k a month on an empty house if you have already moved) and sell it for $50k less. Do the math. I did when I sold my house in November for $50k less then I wanted.
That being said, there are obviously intangable benefits of home ownership that are unrelated to money. Many buyers are still reeling from the destruction of the long cherished concept that buying into real estate can be approached from the same viewpoint as buying stocks and bonds, but I believe that in the short time (5 years) that it is important to focus on your home ownership in a different way.
Dear Tim,
I congratulate you on being so dedicated and following the housing market and personalizing a plan for your needs and goals. Especially, when you are in the military and realizing things can and do change overnight for you and your family. You are being realistic and I have to agree with your scenarios and summary.
When the time is right and you have that gut feeling; you will make the move of homeownership.
One more thing: Thank you for standing up for our country and going the extra mile of sacrifice and duty!! Have a great Fourth of July.
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