Many people ask where is the real estate market headed, and have we bottomed out? If you bother tracking national news outlets they are divided as to the real estate market’s direction. Some are predicting that real estate is driving a slight national economic recovery; meanwhile other people are blogging about another reality. Who are we to believe? Unfortunately I don’t have a crystal ball, but based upon the insights of a few sources and a look at the local MLS statistics a few trends are noticeable. What we don’t know is if these trends are sustainable, and if so, for how long will these trends or factors impact the direction of the market.
A few factors to watch include the status of foreclosures (why … because a flood of foreclosures on the market tend to pull the market prices downward); Federal stimulus package changes (whether these policies really benefit the broader market is arguable; however the perception of these changes does cause market shifts); unemployment rates (locally and nationally will affect people’s ability to purchase and keep their homes); and longer term mortgage interest rates.
Before you can plot future trends you might want to understand where the market is currently. The following are a few relevant residential market data points on Long Beach (source – So.Cal MLS). The snap-shot (time period) for this information is taken between October 1st through November 5th:
Number of closed transactions: 220
Number of pending transactions: 143
Number of active listings: 528
Average days on market: 61
Inventory (measured in months): 8.65
Foreclosures (set for auction): 99
What do these numbers suggest? Typically when the inventory turn-over is less than 10 months that evidences a low inventory of product on the market, and a seller’s market. I would hardly call this a seller’s market; however the low inventory has helped stabilize the market and the price free fall that has occurred since 2007. If inventory continues to be tight and if interest rates continue to be low along with the buyer’s incentive through April 30th ($8,000) then we might see prices level out or even rise in a few micro-markets. This runs contrary to recent reports predicting a ten percent (10%) erosion in prices in 2010.
What are the key indicators to watch over the next six months that will affect the real estate market? A large influx of foreclosures and short sales on the market. This will drag prices downward. The other two major drivers will be national and regional unemployment rates – high unemployment will jeopardize people’s ability to afford mortgages; and thus create more mortgage defaults. The last market driver will be the status of interest rates. There are rumors that the Feds will raise interest rates to prevent inflationary fears in 2010. Although, interest rates probably will stay at historic lows, don’t be surprised if rates go higher after the first of the year.
The best advice I have read lately recommends that investors and buyers pay attention to local market fundamentals AND to continue looking for ‘real value’ not ‘perceived value’ or hype. And as always, real estate is all about location, location, location and price. So if you or someone you know is considering buying or selling real estate in the next 30-60-90 days, please contact me at jim@peys.net or just visit us at http://www.coastalcommunityhomes.com. I would love to be of service to you!! Jim Peys
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