Looking both ways – 2008 and 2009

It is easy to look back and understand what happened and how we got where we are with regards to the local real estate market and the economy in general.  I will not dig too deep into the macroeconomics, other than to offer this informative speech by the President and CEO of the Federal Reserve Bank of  Boston, Eric Rosengren, but I will reflect on some local housing statistics before taking a stab at the year’s forecast.

Using single family home sales as a market barometer… (source MLSPIN)

• Marblehead had 204 sales in 2006, 205 in 2007 and 139 in 2008.  There was a 32% decline in unit sales from 2007 to 2008.

• In 2008, 72% of those sales were between $250,000 and $600,000

• In the 2008 market with 139 sales, there were 340 price reductions
• There was about 153 million in sales in 2007 versus about $93 million in sales in 2008

In summary, 2008 was a tough time to have your house on the market, especially if the value was over $600,000.  Our advice during this time was to not list unless you had to or, if you could take advantage of equity for the purpose of reinvesting in a declining market with attractive interest rates.  (Yes, there is plenty of home equity still out there and rates have been falling)  This approach has saved our clients considerable equity as each day a property is on the market, when the market is next to stagnant, a property looses value.  If you were in the market, and there were buyers out there for your house, you had to  focus solely on proper pricing and maximizing condition.  Clearly a Buyer’s Market with a jittery pool of buyers.

Here is the tough part… Forecasting the local real estate market for 2009 comes with the type of anxiety that I think we all have felt recently.  A new President, significant world financial economic turmoil and a hint of optimism for the above and the Economic Recovery Plans form our government.  A total mixed bag with some strong indications that we will be emerging from the worst with new opportunities and promise.  I feel that the swing of the pendulum is passing the bottom but will rise much slower from it’s bottom than the speed of it’s fall.  The market will continue to be concerned with jobs and the financial recovery.  Were certainly seeing the beginnings of an emerging market with a considerable increase in buyer showing activity since the first of the year.

Financing has drastically changed. The best opportunities for any type of financing will come to those that have great credit, strong assets and those looking for Conforming or FHA financing.  The Conforming Loan Limit for Essex County is $465,750, anything above this number is considered Jumbo Financing.  FHA financing is insured by the government and most conventional financing is done through Fannie Mae.  Jumbo financing is still financed primarily by investors…, investors that are very cautious and stringent with their qualifying requirements.  A 30 year Conforming Loan can be had for about 4.875% while a 30 year Jumbo Loan is at 6% or… $529.20 for the Conforming and $599.55 for the Jumbo Loan per $100,000.  This new structure will lead toward spurring the first time home buyer but will be a departure from lending to anyone with a pulse.  Understanding your finances, the tax benefits and financing options are the first step towards responsible financing whether you are looking to refinance or borrow to buy.  Let us know if you need a referral for financing.

30 year weekly rates

Pricing and condition are key. The perspective from the rapid economic shift, where that Dow Jones fell from over 12,000 in June to 7,392 in November, has given home sellers a better understanding of how critical pricing is.  Most Sellers are also Buyers and each perspective needs to be carefully considered throughout the process.  If you are a Seller, put yourself in the Buyer’s shoes and visa-verse.  We are at a very pivotal moment in time in this market where there will be significant, long-term, equity building opportunities.  Even taking a break even or small loss now will position you in your next home with historically low interest rates and prices for the long run.  Realistic expectations will pave the way for a smooth transaction. In a market with plenty to choose from, you want to do everything possible to make your home stand out.  Condition impacts price and price adjusts to condition.  We advise consistently on changes that can be made to enhance saleability.

Where does it start?  I believe the market will emerge at the beginning of this year on the backs of the first time home buyer.  First time Buyers will be unencumbered and without property to sell, and financing will be more attractive now than ever.  Add to this a $7,500 existing tax credit for those who qualify and the prospect of additional stimulus and the market could not be better. There is also a considerable benefit in the standard mortgage interest deduction when you compare renting versus buying.  After some absorption of the existing inventory, each sale will free up an existing home Seller to become a home Buyer.  Housing supply is great but we need to have a little concern over a dramatic increase in inventory.  A balanced growth of supply and demand will pave the easiest road to a housing recovery.

Why Allmarblehead? The rapid change in how real estate services are delivered has been accelerated by the recent market shift.  Brokerage Companies are no longer spending big bucks in news print advertising as the customer isn’t there anymore.  This is clearly evident in stories like this. True market and community knowledge is the new pinnacle of service.  Experience is now more important than ever before as each sale seems to get tougher and tougher.  It is not if you are online but where and how you are online.  Our online presence and level of Internet Marketing combined with experience and personal service is second to none in our local markets.  The adoption of our new Business Plan and Allmarblehead Group approach has provided us with cutting edge tools and customer service systems structured to provide the best in Buyer and Seller Representation.  Your business and referrals are the best compliment that we can receive and is greatly appreciated.