Who is right about where the real estate marke tis going?
Posted Feb 18, 2007 @ 7:04 pm, Viewed by 670 Visitors, Read 671 Times.Yesterday I showed one of our listings to a man who brought along his friend. The home has been totally remodeled and is very nice. The friend of the prospective buyer kept saying that people need to get used to the idea of losing money on selling a home as the market is going to keep getting worse for another year or two.
He was basing his view on what happened in a previous down-turn in the real estate market. That downturn was caused by the basic economy going into recession. There is a big difference in then and now when our economy is quite good with low unemployment and good consumer confidence. The only real problem we have with the market at this time is an oversupply of homes and one of perception on the part of buyers and sellers. Our real estate market consists of three major parts. First is the buyer who wants to live in the home full time. We call this the user market. Then we have our second home buyers or our “snowbirds” and we have investors.
We have two classes of investors that had a big part in the run-up in prices and the dramatic drop off in sales. We have the knowledgeable investor who will always be in the market for a good buy and is fairly prudent in their purchases. We had a good number of amateur investors who jumped in to the new home market to buy and flip. This started out with some savvy investors and some people who put money down of a home and either needed to sell or no longer needed the home and sold for a good profit when the home was finished.
The word got out that it was an almost painless, risk-less way to make 50 % to 100 % on your money in a year. This caused a lot of people put money down to buy a house to flip. The surge in demand was disguised because it was a lot of small investors who only bought one home. The builders didn’t catch the magnitude of the investor part of the market or ignored the looming consequences. As the homes were completed and those would be profiteers tried to sell, they found that the number of people who actually wanted to live in the home they bought had not increased much. The glut of homes coming on the market flooded the user market.
The word got out not to buy and try to flip and the investor part of the market dried up completely. As the number of unsold homes built up and the newspapers preached doom and gloom, our second home buyer stopped buying to wait for a sacrifice sale and the bargain of a lifetime.
The user buyers are holding off as long as they can and making low-ball offers because they hope the market is going lower. Our second home buyers are mostly sitting on the sidelines waiting for distress sales. Our sellers are holding off lowering their prices because they think the market will come back to life as the season gets in full swing.
Let us see where the market is going in the next year and see who is right.
Jim Jacobs www.YourUltimateTeam.com
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I am a Real Estate Broker in Florida. I had been a broker in Alaska for a number of years. My wife Ruth and I had our own brokerage there for over 20 years. Read More
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