My clients and friends are asking “if the lower rates will create a stimulus for more buyers and stable out the prices for homes?”

The rates are being lowered in the hopes of preventing a recession. Some experts say we are already in a recession. The reducing rates and the talks regarding “help” for those in default and facing default are an effort to prevent the market from further slipping. The rates are incredible and the rates will help many buyers off the fence… and the rates will hopefully pull more buyers into the market that have the credit to buy. Keep in mind that the rates have been incredible for several years… we are not in this market because rates were not good.  Just because the rates are lower does not change the lending guidelines.  So when you have buyers who cannot get approved, there are no benefits from lower rates.  Lower rates help buyers afford more home which can help every price range but it could also hurt certain price ranges as buyers can push for more home. For instance, a buyer who could afford payments on a $250,000 home may now be able to afford a $275,000 home so the $250,000 does not sell.  Lower rates are not going to have buyers looking at value differently… value is still determined by the buyers looking at the competing homes and determining how the homes compare in price, condition, finishes, and location to other homes.

  

Lower rates are not an overnight cure. It is important to note that homes are still selling when they are properly priced. Buyers are buying.  They are buying the homes they perceive a value.  As little as a $5000 difference in list price can make the difference between showings and no showings for a home. If you are overpriced by $5000 compared to your competition you will lose. Price is that important in this market. In a seller’s market, we can push the boundaries on price and we do not have to be priced perfectly to grab a buyer because supply is limited. But in a buyer’s market, especially the strong buyers market that we are in. a home has to be priced perfectly! And that “perfect” price can change from one week to the next as we are still correcting. Not pricing it correctly from the start can cost a seller thousands because the prices are correcting downward not up. For sellers who must sell their home, it has to be priced for the buyers not for what the sellers need, want, or desire.

Unless there are buses and buses full of buyers that were waiting for a lower rate to buy it is going to take time to stabilize this market.  Stabilization will only happen as more and more sellers understand the market and realize that their homes are not worth what they thought and they make the adjustments to bring their home to market value…today’s market value. In every market there are homes that are overpriced and do not sell…that is nothing new. In every market there are homes here and there that are a “steal of a deal” because it is a fixer upper, etc.  The homes that are selling are not steal of a deal in this market…it feels that way because we know what 2006 prices were but 2006 prices no longer matter. We are in 2008 and we have to work with the here and now market. When you look at the properties that have sold…they compete with each other on size, condition, price, and location. The newer homes tend to sell for higher which is always the case in any market. If another home (that is not as new) compares in size, price, and condition but has a less desirable location and it is priced the same (or higher), then it is overpriced.  Buyers are not buying overpriced homes. Good Morning America took a home in Virginia or New Jersey (I cannot remember which one) last year and had it professionally staged. The sellers did reduce the price, but as it turns out, they did not reduce to where the comps were and where the Good Morning America expert told them to price it. This home was getting national and international exposure on television for a three week period! The day of the open house was even advertised on Good Morning America.  The open house had a ton of people through but not one person brought an offer because the home was overpriced. Good Morning America ran updates from time to time on the property.  It was eventually rented. My point to this story…no amount of marketing will sell an overpriced home it only tells more people that you are overpriced.

Every seller feels their home is worth more. Reality is in the comps.  Reality is with the true buyers (not investors or companies such as We Buy Ugly Houses, etc). And reality for sellers right now does hurt depending on the seller’s situation. Time is not on the side of the seller right now unless they have a lot time such as 2 to 5 years. We really will not see a truly stable market for at least 2 years at which time appreciation will slowly begin. 

 

My biggest warning to everyone is that we do not know what the “market value” will be at the time small appreciation is actually felt again so I caution sellers that are waiting for two years before they sell their homes for a “better market” that their homes value may not be more than what their home would sell for today. If a home is not selling today because it is overpriced, chances are it will not sell in two years at that same overpriced price. The “predictors” are predicting that from 2010 (when they predict we will start to feel appreciation) to 2020 we will see very modest appreciation numbers. We have to look at history to attempt to forecast the future.  But remember, so much can happen to change that prediction.

Based on the past, real estate over time builds wealth. For the homeowners that have purchased another home or would like to and could rent their current home versus sell for less than they really want to if a buyer does not come along willing to pay their price then I think it is great to create that rental portfolio. Ideally, you would want to hold on to the home as a rental until which time we enter a strong sellers market. That allows you to buy your new home in a strong buyers market or for bottom dollar and then sell high in a strong sellers market. Renting a home is not for everyone! Some people just do not have the financial stability to start a rental portfolio…they would be financially hurt possibly bankrupted if the tenant did not pay on time or just moved out with no notice plus leaving damage. Others do not have the patience to deal with tenants.

It is my hope that the current inventory does drop because sellers begin to refinance instead of selling which in turn lowers the inventory and brings fewer homes to compete with in spring.  Lastly keep in mind that some of the huge fed cuts discussed will also affect consumer debt such as credit cards, etc much more than mortgage interest rates. The government is trying to get people to spend more because of lower interest on the debt they accumulate.

There are no doubts that this is a great time to buy a primary residence or investment property! 2008 is the year to buy… 2009 is expected to be a stronger market which means fewer deals. This is a great market to sell if you want to buy a home. Rates are great so you can get more home for your budget.  A seller may not be selling their home for what they feel it is worth; however, they will more than make up for their feeling of loss on the buying side with the great deals and the great rates.  Because new construction rebounds faster than resale, a seller who waits could put themselves in a position to sell low and buy high. That is a costly mistake.

 

Remember there are homes always selling and there are always buyers needing a home. There are not bad markets, only buyers and sellers markets.

Is the market really as bad as the media would have you think?

Watch the news lately? If you are buying or selling a home the news can be disheartening.

If you are a seller the news creates a picture that your home will never sell. If you are a buyer the news creates a picture that prices will continue to drop futher creating a picture that buyers will soon be able to purchase a mansion for the price of a bungalow.The truth is the Atlanta real estate market is experiencing a strong buyers market.  Atlanta does have an abundance of inventory on the market which has led to a slight depreciation in most areas.  And yes, homes are on the market longer than they were a year ago, but overall our market is still holding strong. This is very evident when comparing the Atlanta market to most other markets nationwide.  There are just a handful of markets that are doing better than the Atlanta market.  Data from the FMLS listing service shows us that we will have closed as many homes in 2007 as we did in 2002 and 2004. This tells you that we have the same number of buyers.  The same number of buyers tells us that our market is not only surviving but thriving.

This means that sellers can sell their homes. Even with an abundance of supply you can get your home sold in a short amount of time. It simply takes the proper positioning which includes price and staging among other things plus you will need an aggressive and creative real estate agent. The only thing that has changed for sellers in this market is the competition is more fierce.  And because there is no room for error, I would make sure you are represented by a strong agent. Otherwise, you could sit on the market and lose money.

For buyers, this could not be a better time to buy! Interest rates are at all time lows. Sellers are negotiating more than ever including builders.  The market is not going to get much better for buyers… it is pretty darn good!   There are a lot of properties on the market, but when you take a closer look you will soon realize that there are not so many great properties…the “creme of the crop” properties. If you want a great deal on a great property then get ready to make the offers because the great properties are selling and in a shorter amount of time. If you want a steal of a deal on the not so great properties you will need to wait… wait for them to sit on the market and become stale. Do not be afraid to purchase property. Real estate is a long term investment, not a short term get rich quick scheme.  The Atlanta market has always appreciated at a modest rate. This explains why we remain a more stable market.Is the media wrong with their reporting? No, it is just that their reporting is nationwide which includes the hardest hit areas like Florida, Detroit, and California. These areas skew the overall numbers.  These numbers do not represent our local market.The bottom line…Get with a great agent and your home will sell. Get with a great agent and you will get a great deal on your new home. A great agent is not just an agent that provides great service. A great agent is an agent that tells you what you need to hear and not what they think you want to hear!