Housing Prices Recovering in Many Markets Nationwide
October 9, 2007 By Matthew Paulson
It’s not a secret that many real estate markets are not doing so hot right now. Many homeowners who signed-up for sub-prime and exotic mortgages can no longer afford them and are facing foreclosure. The companies that offered these exotic mortgages, such as Countrywide, are now facing economic hardship as well. People who would otherwise buy park homes in such a market often decide to wait on their next home purchase further weakening the market. Despite all of these factors working against the real estate market, prices are beginning to stabilize and recover in many real estate markets.
Southern California, Houston, Denver, and Salt Lake City all had real estate markets which were major beneficiaries of the real estate boom we saw in the late nineties and earlier in this decade, which means they were also some of the real estate markets to fall the hardest when the real estate bubble finally popped. These markets all suffered through a major recession in their real estate markets, but they since have recovered. How did this comeback occur? It turns out there’s a major correlation between job growth and home purchases, and the employment market is doing quite well.
Currently the stock market is sitting close to an all-time high. This means that companies, such as park model homes, are profitable and investors are very happy with the rates of return companies are providing them. When companies are profitable, it’s far easier to provide additional compensation to their existing employees and expand and take upon new employees. With more employees making good money, they have the cash flow required to make a mortgage payment each month creating additional buyers in the market. When there are more buyers in the market for the same amount of houses, prices will naturally increase. Since the demand for housing is higher, people who need to sell their homes (including park models) to avoid foreclosure are better able to which will also improve the market.
While we face uncertain times in real estate, it is very important to remember that the mortgage market is a huge monolith and many segments of it are in great shape. If you have decent credit and plan on getting a traditional fixed rate loan over a period of 15, 20, or 30 years, it’s perfectly fine to go out and get a home right now as long as you plan on staying in your home for a few years. Although there are some fluctuations in the real estate market, it trends upward over the long haul. If you buy a home, chances are it’s going to be worth more 5 years from now than it is now. That’s just the way it works. If you’re in for the long haul and plan on being in your new home for a while, there’s no reason to wait on your next home purchase.
Real estate prices have faced significant drops in the last few years, but due to significant job growth many real estate markets are recovering and returning to healthy levels of growth.
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October 18th, 2007 at 8:40 pm
The baby boomers (who are second home buyers) are still doing well. They have treated their homes as saving accounts rather than checking accounts and they often are more conservative in their spending. They are used to making money in real estate and are not afraid to buy it. Boomers remember days of 15% interest rates and a 1/2 point increase doesn’t scare them away. They know interest rates are still low. Second home markets are still strong in many areas and the baby boomers are the reason for it. In fact, in my second home market in Colorado, 1/3 of our Buyers pay cash!