Is there any good news for real estate?

In all of my recent articles I have done everything that I can to find upbeat aspects to the current real estate market. On May 8th in my article titled:  “The moral of the story is that it is time to move forward.”  I predicted that although experts were predicting that prices would go up, that I thought that prices would continue to fall. In spite of that I was upbeat; pointing out that it was an excellent time to buy… and a good time to sell if you were moving up, had to sell, and / or could sell short. Most experts are now predicting prices will continue to fall. See: “New home sales drop 12.4% to record low.”

On July 13th In my article titled:  “Which way are home prices headed?”  I made the point that it is an excellent time to buy.

Then on July 22cd in my article titled: “Michigan is a great place to live.”  I argued with the choice of the top 100 best places to live and pointed out that Michigan is a great place to live and is an exceptional value.

On August 20th in my article titled:  “More good news for Michigan.”  I wrote that Michigan cities ranked high the list of the most under valued cities.

Now: All the real estate news seems dire. Here are the bullet points from my research for this article:

• In the article referenced above,  (“New home sales drop 12.4% to record low.”),  it also says that existing homes sales fell 27.2%!!!

• The IRS reports that half of the people (950,000 of 1,800,000), who received the first time home buyer’s tax credit have to pay it back. We can hope that many of them simply made filing mistakes and will eventually get to keep the credit, but if they do have to pay it back, then that will be about an 8 billion dollar drag on the economy. See:  “Homebuyer tax credit: 950,000 must repay”  

• According an article in fortune titled:  “Housing quagmire: Is it time to remove relief?”  record low interest rates have failed to stimulate home sales and home prices may still be inflated by 15% or 20%. They concede that the economy cannot recover until the real estate market recovers but they suggest that we should just give up and let the market go into complete free fall. They say just get it over with. Just get it over with??? Umm… Once the Titanic started to sink no one could have held it up. If you had grabbed onto the Titanic and tried to hold her up, I think we know where you would be now. Can our government hold the real estate market up until the holes can be plugged??? On the other hand, if you were bleeding to death and I was to say; I think that we will just let the bleeding bleed itself out and get it over with… Umm??? Which metaphor applies? The problem with just getting it over with is that we might get it over with. We might get it all over with.

• According to the article by CNN Money titled:  “Plunging home sales could sink recovery”   Home sales are at their lowest levels in 15 years. There were about 15% less people in the US then. Home sales in the Midwest fell 35%.

• According to “The latest real estate rip-off?”  builders want to put a new fee in their contracts that would require owners to pay them every time a house is sold for the first 99 years after it is built. Builders claim that they can use it to raise money to jump start building. I suppose that it is a creative way to structure a higher price for new homes – buy now pay when you sell. Builders do need more money for new homes in order to be able to build them profitably. It is also a creative way to get your hand in someone else’s pocket. I would feel taken advantage of. It is not exactly straight forward pricing.

• According to: “Housing's a wreck. Builders rally. Huh?”  the fact that home builder stocks have rallied just means that investors are mistakenly betting that the housing market has hit bottom and that a housing recovery will lead an economic recovery instead of following it.

But the news is not all bad…

• According to “Near-record affordability in real estate” families that make the median income could afford to buy over 70% of the homes in their area. That is a pretty impressive statistic. What is it really saying? First it assumes that a family could spend 28% of its income on a house. A family may be deep in debt and may not be able to spend 28% on a house. Second, we tend to conflate median with average, but there is a difference. We live in a time when the income gap between the richest and poorest has grown to record proportions. Median is just the middle point between the two. There are many more poor and working class people than there are rich people, so the average income is probably below the median income. Still homes are more affordable than they have been - so - that is good news.

• According to “Fewer mortgages are in default”  delinquencies dropped to 9.85% which is still high and further more first time delinquencies increased after a year of declining. Also 36% of foreclosure starts were for 30 year fixed rate loans which are considered to be safe loans. Nothing is safe…

So where is the bright spot in this black box that we are in? There is no bright spot. “Yet the more things change, the more they stay the same.” My recommendations remain the same: If you are selling and moving up, then you are going to make money because your new home will be an even better deal. If you need to sell, then you need to sell. If you want to sell but you are waiting, how far down the mountain do you want to ride this runaway freight train? You should have sold last year... and the year before that... do you want to say the same thing next year?  There is a risk that real estate will turn into a complete fire sale. Is the chance of netting more worth the risk of losing it all? If you are a buyer trying to time the absolute bottom of the market, you will probably miss the bottom and wind up buying on the rebound when prices and interest rates are higher. Buy now and avoid the rush.

To get more info on any of the homes pictured below please visit: http://www.rayguest.com/