I saw a picture yesterday that reminded me of the real estate market. It was one of those photos they take on a roller coaster ride hoping to get you to buy a copy when you come back to earth.
As the roller coaster has hurtling down from the highest peak, in the front row was a little girl, probably all of 9 years old, sitting next to her father. The little girl had on her face a look of absolute terror. The father was holding his arm across her, like we all would do for our child when we brake hard, but his eyes were closed so tight lines ran down each cheek.
In the back two rows were four teenagers, arms held high with fingers pointing to the sky, and nothing but glee shone from their faces enjoying the thrill of it all…and I thought of the real estate market.
The little girl represents how our sellers feel: the abject fear as we watch home prices continue to plummet. The teens in the back are our buyers. They can’t believe what a great market this is: low prices, low interest rates, tons of homes from which to choose. And the dad in front is a lot like us real estate professionals, trying to protect our sellers from dying of fright.
Real estate is like a roller coaster ride. It goes up and it goes down, and how you feel about it depends whether you are buying or selling right now. Which brings up the question… where is it going right now?
Sales are finally increasing
Home sales are increasing everywhere: nationally, state-wide, and here in Fond du Lac. Comparing sales from July of this year with July of last year: Fond du Lac County is up 44 percent, greater Fox Valley is up 35 percent,
August numbers are not yet in, but a preliminary of this August vs. last August for the greater Fox Valley have sales up 23 percent. These are the first month over month increases for quite some time.
Showings on homes are increasing, building permits for new homes are up, and buyers are getting off the fence and buying. I have a couple of condos listed that just had offers put together—and they’ve been the hardest hit of all.
Prices are still falling
The year to date home prices are all lower than a year ago. The median home sale price is down 8.4 percent in Fond du Lac County and down 5.2 percent in the greater Fox Valley.
The greatest pressure on home prices is the large amount of distressed homes on the market. Foreclosed homes are priced lower than owned homes, and that forces sellers to lower prices to meet their competition. Foreclosures currently represent about 30 percent of home sales.
If you remember last year about this time, the banks were found to be guilty of “robo-signing” off on foreclosures (rather than reviewing each file as required by law). As a result, banks held off putting them back on the market, but are releasing them now. We expect prices to erode further as a result.
What do you do?
The bottom line is that home prices are forecasted to continue to fall into 2012. If you are thinking of selling your home in the next 12 months, selling sooner rather than later will probably get you the higher price. If you price it below your competition, you will still net more now than later. And remember that if you are buying another home, you’ll make up your loses then.
As the statistics show, the smartest buyers are buying now and not trying to perfectly time the market. You never know where the bottom is until the market starts going up. Remember that mortgage rates won’t stay this low forever. If you wait too long, this ride will be over.
photo credit http://www.flickr.com/photos/cefeida/2660869511/