Buyers are Ready to Lead Once More

How’s the real estate market? I hear this question multiple times every day – as if the answer could be “great” or “lousy” and there would be some way to quantify it.

The market certainly was slower in 2008 than recent memory. Transaction volume was down 25%-35% in the region, depending on what you’re counting and how you define “region”. I have previously discussed absorption rate (a theoretical concept that calculates the length of time it would take to exhaust all listed real estate in a particular area if no more houses were added to the market inventory) and have noted that in most cases those rates are higher, though across the region the rates vary from municipality to municipality, school district to school district, zip code to zip code and neighborhood to neighborhood. Time on market for listings is increasing in most areas across the region. Prices are either holding steady or slightly declining across the region. But all those statistics really don’t answer the question, “How’s the real estate market?”

Perhaps that’s because I’m not sure we have a market right now. We have houses for sale, but not enough ready, willing and able buyers to really make any statement to determine if prices will start to go back up, or slide some more, or stay the same. For a market to exist, there need to be both buyers and sellers. Those people help determine relative supply and demand, and market they create for the product being sold determines its price.

Many people out there are believing a myth that says there is not enough mortgage money available for buyers right now. That’s just not reality. It is true that for individuals who can not document their income, or haven’t demonstrated a track record of paying their bills, that it’s tougher to get a mortgage. But for the vast majority of bill-paying citizens who work for W-2 issuing employers, mortgage money exists. FHA loans (even for folks with credit scores below 600) are available with just 3.5% money down. I have lenders who can still do 100% financing with low fixed-rate products and even waive Private Mortgage Insurance (PMI) for first-time buyers. At Weichert Financial Services, there are low rates (5.75% last week) on fixed-rate jumbo loans.

So buyers are able to buy. Many have even sought out pre-approvals from lenders so that they are ready to buy. Pre-approval rates jumped in the month of December and early this year when rates sank to historic lows – where they still are hovering today.

That leaves us with the question are they willing? I think that in this question lies the answer to the bigger question, “How’s the real estate market?” For the last four months, I do not think there have been many willing buyers. Buyers have looked at several properties (since January 1st, I have literally shown more than 100 properties). Many of the properties I have shown are in good condition and priced well. But my ready and able buyers, are reluctant to make offers. There is a collective conscious feeling that there is an uncertainty about the overall economy. This in recent weeks and months has undermined the real estate market.

So buyers are ready to lead the way back into the real estate market, but lack the willingness. Leading to the ultimate question, “What should be done?” Here, I diverge from my Realtor peers and elected government representatives. I believe that there is no need to “fix” the market. There is no need to buy down interest rates for home buyers – remember, they are at historically low levels already. I believe we do not need to bail out the banks who made bad mortgage loans, nor the buyers that got in over their heads. I believe in the personal responsibility and accountability that our new President Barack Obama spoke of on Tuesday. The answer to our problem is that in their own time, the buyers will start to overcome their fear and lead the way back in to the real estate market and economic prosperity. It is my belief that the first buyers back in will be rewarded by taking advantage of their leverage; that should be stimulous itself!

The first time homebuyer has quite possibly never had the amount of leverage that s/he has today. Amid the gathering storm clouds of economic uncertainty, the buyers are ready to lead once more.