Hear From An Agent Working In The Trenches Who Makes Sense Out Of All The Hype And Confusion.

The problem with trying to understand what is happening in the real estate market today stems from the many contradicting and confusing reports from our nation's soothsayers who profess to have the answers. Numbers are thrown around and mish-mashed together so that nothing seems to make sense anymore. Are we getting back to good times in real estate, is the worst over? Or are we headed for darker days?

When you're out here traveling the neighborhoods, working with home buyers and sellers every day, you can see how the real estate market is moving. There are subtle, yet accurate signs of it's direction and momentum if you just listen to buyers and sellers. They determine the market.

What's happening today is very simple. All the people who were looking to buy a home did so over the last three or four years and they are now living the American dream and there just aren't nearly as many buyers as there were. They all have a house now. Think about it, if there were buyers waiting in the wings, they would be jumping at the still low interest rates and mortgage options that are still available and they would be out buying houses, especially now that home prices are dropping way below previous years.

What caused this buying spree can be clearly traced to interest rates dropping precipitously about three to four years ago and mortgage lenders offering programs that made it possible for almost everyone to qualify for a loan. And everyone jumped at the chance and the real estate rush was on. People who thought that they could not afford a home suddenly found out that they didn't need a down payment, good credit score, or even closing costs to buy a home. And buy homes they did, with a frenzy, driving up home prices and enticing home owners to sell, even if the seller didn't have a compelling reason to, just because they saw the equity in their home skyrocket and they wanted the cash. Many sellers made out like bandits.

Then, by the latter part of last year, all these buyers had found homes and the demand for houses dropped like a lead balloon. However, the number of homes on the market continued to grow as new home builders, investors, and sellers were still putting properties on the market, unaware of what was happening. Once property owners realized that the market was slowing, more of them put their homes up for sale to try to cash in before the market worsened. Too late. The buyers were gone. On top of that, foreclosures are at record highs and that has added to the number of properties on the market.

Now you have all these homes for sale all over the place and only a small pool of ready, able, and willing buyers who are taking their time choosing a home and demanding more for their money. So, a disparity in supply and demand exists and that has created a buyer's market and this trend will continue until the number of homes to the number of buyers comes back into balance.

What we see happening here in the field is the beginning of a reduction in the number of homes for sale as owners who are not forced to sell take their homes off the market, investors are turning to renting instead of selling, fewer homes are coming on the market, and buyers are buying more homes. We are seeing an uptick in buyer activity through more requests for showings and purchase offers, indicating that more buyers are starting to enter the market. With mortgage rates remaining low and apartment leases expiring, the number of buyers should increase at a steady rate as we head into 2007.

All this will result in a normal, healthy real estate market that is driven by people moving due to employment, divorce, retirement, etc. and first time home buyers entering the market. Prices will once again fall in line with affordability and availability and that is good for everyone. The big question is when will we get back to normal.

What we can expect is a gradual decrease in housing inventory and an increase in the number of buyers. Home prices will drop back to normal appreciation rates (which are still very good, by the way) and interest rates should stay at historical lows in the short term, at least from indicators given by the Fed. It is difficult to determine exactly when all this will come nicely together, but I expect the real estate market to pick up by April and strengthen through the summer if interest rates stay low enough.

For the longer term, I expect the market to remain relatively flat through 2007 and begin to accelerate again by late next year and into 2009 as a new surge of buying activity begins to take hold based on a number of factors that are starting to take root now. More on that in future articles.

If you are a seller, you don't have to drop the price of your home if your agent has done his or her homework and it is priced in line with the comparable homes in the area. You just need patience because it is just going to take longer to sell your home. Period. Unless you undercut your competition's price and offer more value, it is going to take months instead of the weeks or days, which was the norm the last few years.

To sell your home in today's market, you merely need to price it right and spruce it up to look and smell pretty and then allow reasonable time for the buyers to come. It's not a matter of what you think your house is worth. The buyers out there will tell you what it's worth because they are comparing homes inside and out and they are only paying for what they want, not necessarily for what you have. Remember, buyers still have only two criteria that determine if they will even come to look at your house - location and price. Like it or not, your stainless steel kitchen appliances and brass deck screws don't make a difference to people if another house is priced less or is in a more attractive location.

If you are thinking of buying a home, there is no better time than now. As I mentioned, there are plenty of fine homes on the market and competition is driving prices down and sellers are making concessions that make home buying a smart move right now. Even investment property may be an option as more foreclosures and desperate sellers hit the market.

It is the best of times if you are a home buyer. It is the worst of times if you are forced to sell. Basically, I guess, a lot has to do with one's attitude about the whole thing. From what I have seen down here in the trenches, home buyers and home sellers generally experience a reflection of their attitudes towards buying and selling a home. Those who expect the best generally get it and those who expect the worst generally get that as well.

Ciao for now,