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Lately, the real estate market has been reading like the famous Charles Dickens quote “It was the best of times, it was the worst of times…” with all the ups and downs we have experienced over the past several years. All in all, things seem to be getting better but when you compare it to the boom that feels only like yesterday to some of us, the question of recovery looms over heavily.
Why is it that the market is taking so much time to recover? And if we can expect some better times ahead, when can we hope to break out some champagne? The truth is that with all the rollercoaster activity ranging from national and local jobs rates plummeting, to housing values subsequently declining to record lows and a mix of scandals in between – no one really knows what’s next.
Two things, however, greatly impact how our real estate market performs and they are the economy, specifically the unemployment rate as well as how banks will handle the myriad properties they now own as a result of millions of foreclosures.
More Jobs = More Money = More Home Sales
The formula is simple. The greater number of jobs, the stronger our housing market will be because when people have money to spend, they go out and buy things – like homes. The bigger question is how long will it take to bring out jobs numbers back to what they were pre-recession? And even though in many states we are seeing a slow and steady improvement in unemployment figures we still do have a long way to go. It is also unclear what impact the 2012 election will have on job growth and consequently, the real estate industry. Also potentially impacting consumer confidence in the near and semi-distant future is European financial markets performance.
Banks Are Expected To Unload Countless Foreclosed Properties
When the robo-signing scandal first broke out in 2010 and early 2011 no one really had any idea how it would impact the housing industry. Now, sixteen months later banks have reached a settlement with state and federal regulators. The money banks will need to come up with, however, will have to come from somewhere. An overwhelmingly negative impact that looms if banks choose to unload the plethora of properties held after foreclosures will hit the housing market hard.
As they try to liquidate their properties the resultant backlash on the nation’s inventory has the potential to hurt the real estate industry severely. Too much supply and not enough demand will end up in a property dumping ground situation that leads to even further declines in housing values.
The alternative, though not expected to be followed through with by most banks in this situation, is for them to hold on to at least some of their inventory in an effort to boost values, allowing prices to level off and ultimately resulting in market recovery.
Right now it’s anybody’s guess as to what will happen next. And despite slightly improved unemployment numbers the Fed has decided to continue the low interest rates hoping to continue pushing our economy in the right direction. What this means for buyers is that it is still one of the best times to buy. Sellers should consult with their Realtors to decide on an individual basis what is best for them.