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Market News and Trends, The Business of Real Estate

Avoiding recovery?


Hypothetical #1:  You have decided it’s time to move.  You have been in your house for a few years, but it’s now too small, or too large, or in the wrong location.  We meet to discuss the process of selling your home.  I’ll go through a detailed market analysis with you and discuss preparation and staging and marketing, but before we get to the “meat” of the conversation I say, “I would love to list your home and get it sold, but before we begin you need to know that we’re in the worst housing market in 80 years ….”

Hypothetical #2:  You have reached the point in your life where you want to own a house.  We meet to discuss the process of finding and buying your first home, but before we get to that part of the conversation I say, “I really appreciate the opportunity to help you, and I am sure we can find what you’re looking for.  But you should know that property values are still going down and you will probably lose the money you put into a house at this point.”

My guess is that I wouldn’t list that house or represent that buyer.  The odds are pretty high that both of those prospective clients will at least become more tentative about getting into the market.  They might even pull out completely and decide to “wait and see.”

The problem is that my hypothetical statements to those folks were simply not true.  In the Austin/Central Texas real estate market home values continue to rise, and housing supply and demand are very nearly balanced.  We continue to add jobs and population, so there is no reason for long-term pessimism.  You can see in my Austin Market Dashboard that over any five year period since 1990 residential property values here have increased.  (You can actually go back even farther, to the 1970s, and find the same is true.  I just don’t have that additional data on my dashboard.)

Now consider this headline from yesterday:

Study: Housing Collapse Steeper Than During Great Depression

Just like my hypothetical situations above, the problem is that the headline and the article are simply not true for most of the United States.  The bigger problem is that the continuing flood of news like that about the housing market is actively interfering with the recovery of the housing market by keeping buyers and sellers out of the market. 

Over half of all foreclosures in the entire country are in five states.  That’s where the steepest declines in home values have happened.  The most-studied and most-quoted measure of changes in home values is Standard & Poor’s Case-Shiller Price Index.  As it happens, that 10- and 20-City Case-Shiller indices are dominated by metro areas that experienced very significant housing bubbles leading up to the downturn, and therefore have suffered the steepest declines in home values.  Even there, though, if you have owned your home for 8 to 10 years or more your property has not lost value:

The linked article above suggests that home prices may decline another 3% this year before stabilizing.  Again, that may be true as an overall national average, but larger declines in a few states will mask healthy market behavior in many other places.  Even in the Case-Shiller cities, index values at the end of 1st Quarter 2011 were about 20% higher than ten years earlier, so 3% to 5% additional loss of value will still leave long-term property owners in fine shape.  (Of course, if they borrowed twice the current value of the home during the boom, then that’s a real problem.  It is not one that describes most property owners nationwide, however.)

So … residential real estate values in most places are stable or appreciating.  Inventories in most places are not overwhelming.  Mortgage interest rates remain at historically low levels.  And despite what you read and hear in the media, there are plenty of mortgage loans still being originated. 

Where is that perspective in the news?  Why do economists and journalists insist on extending and deepening the problems in the housing sector?  Maybe it just that “doom and gloom” sells.  Maybe it’s something else.  The “why” really doesn’t matter.

What does matter is that Americans who would love to get back into the real estate market are being told almost daily that “it’s the worst market in 80 years,” or “you’ll probably lose the money you put into a house.”  The folks propagating that viewpoint are actually creating the reality.  It’s time to move on.

You can read more on this topic at Are home prices falling?  Or let me know if you have questions about the Austin/Central Texas market or specific properties or neighborhoods.

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About Bill Morris, Realtor

More than thirty years of business experience (high tech, client service, business organization and start-up, including many years in real estate) tell me that service is the key to success and I look forward to serving you. I represent both buyers and sellers throughout the Austin metropolitan area, which means first-hand market knowledge is brought to bear on serving your needs: -- Seller Representation is a comprehensive process that begins with thorough market analysis and consultation, continues with properly staging the home to achieve the highest price possible in a reasonable time on market, a complete program of marketing and promotion, ongoing updates and communication, closing coordination, and follow-up throughout (and after) the sale. -- Buyer Representation is also full service: shopping, previewing, price and market consultation, contracting, negotiating, coordination of inspections, appraisals, repairs, and closing details, and follow-up beyond the closing of your purchase to ensure your lasting satisfaction. Because the real estate industry is becoming more sophisticated and challenging every day, you need a professional that understands the industry and is positioned to stay ahead of the game. I go the extra mile to help you achieve your goals. That's why I constantly research the market and property values so your home is priced effectively from day one. I also make sure the public knows your home is for sale by using innovative advertising and marketing techniques to attract potential buyers.

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