For those who read yesterday’s Blog, about real estate pricing in the metro Phoenix, Tempe, Scottsdale area when I took a leap of faith of faith (or as some have suggested, forgotten how to read) when I was either bold or crazy enough to suggest that the S&P/Case-Schiller Report that announced home prices have plunged more than 30+% as “Good News”!!
I am not retracting my belief just qualifying it as an assessment that the news was a case of the Glass Half-Full v. Half Empty. Here’s why ….
1) It’s a Buyer’s market – for the Half of every real estate transaction, the Buyer, opportunities are created for those who have the conviction to step in when value in home prices is in their sights and the patience for long-term growth which historically real estate has given
2) Lenders easing credit – the lower prices, offer less risk for lenders. Let’s face it, values are not going to $zero. Lower purchase prices, lower loan amounts, lower payments for borrowers, more upside in appreciation, than downside
3) Lower interest rates – how you finance a home, is often times more significant than what price you pay, 30-year fixed rates are hovering near all-time lows. You can lock in a fixed payment with a reduced price and reduced rates than seen in many many years, thus lower monthly payments for the same house 3-4 years ago.
4) Reduction in inventory – we need to get past these inventory levels and reduce the glut of homes on the market. Not until then, can home prices rise again. This will happen. However, not until prices are lower. This negative price drop is a positive for reduction in inventory. The statistics show we are clearly moving in this direction.
5) Consumer confidence – every day , at least in Metro Phoenix , we see negative news. Negative news, is negative water cooler talk. Misery loves company, etc… you fill in the cliché’ . With lower prices, we will see more sales , more happy buyers who feel they got that “Deal” they have been looking for. Happy consumers, good news, buyer spending, confidence in the housing and real estate sector will return.
Yes, if you are a seller, times are tough. However, be patient. Prices are starting to correct enough to stimulate buying. Lower prices, means more buying, more buying means less inventory (supply) . Less Supply, in simple economics, means more demand. Prices then go up. It’s almost that simple.
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Copyright © 2008 By James Wexler, All Rights Reserved. *5 Reasons why Bad News for real estate buyers is Good News!! (continued from yesterday)*
Contact James Wexler (480) 221-8080 for all your Phoenix Scottsdale area Real Estate needs.
Great info – Great Blog!
One of the major reasons that interest rates are low is that the Fed is actively purchasing mortgage backed securities in the secondary market. Many believe that the 10 year T-note dictates the direction of fixed mortgage rates however, the only thing that moves rates is the demand and price for mortgage backed securities – BONDS. When bond prices are up, mortgage rates go down (and vice versa).
The Fed announced today that they will continue their monetary policy as it relates to purchasing mortgage related debt – which should lead to continued low mortgage rates. The Fed originally committed to buying mortgage bonds (which will keep price and demand up and rates down) through June of ’09, we will see how this unfolds.
Yesterday’s housing stats were very positive and much of it has to do with the current low interest rate environment we are in. Existing home sales outperformed expectations and cut down standing inventory. California also reported that foreclosure notices were down 20% in Q4 when compared to Q3 (down 7% year over year).
There are some good signs popping up!!
A good blog; some hope in these times. I haven’t seen an revisions to the estimates that say we will probably hit double digit unemployment by the end of ’09. Is there any concern that all of the people getting government financing could be at risk for losing their jobs in the next few months and then defaulting again on their loan? That could cause another drop in home prices from another deluge of foreclosures, similar to a bear market rally that the stock market may be experienceing now.