Waiting for the Bottom - You May Have Missed It
Posted by Ryan Ward on Wednesday, July 22nd, 2009 at 6:30am.
Waiting around and smelling the flowers? If you are one of the many buyers waiting for the bottom, it's quite possible that you have missed it. Waiting on a "bottom" is a terrible homebuying strategy anyway, but, now is really the time to get off the fence. We as real estate professionals are not capable of exactly calling the bottom and that means that you as consumers have no chance of doing so. Think I'm wrong? We now have had four consecutive months where the average price of homes for sale in Atlanta is higher than the previous month. In February it $172,860. Now it's $209,999 or over $37,000 higher than the low! Translated, this means since February, prices have gone up every month so many areas the "price bottom" may be behind us. The confluence of low prices, high inventory and low interest rates presents itself as a window subject to close much faster than it opens so if you are going to move, you should know - it looks like the window is closing.
It's time to change what we call this. It's no longer a bad market or a good market. It's the new normal. For the next year to a year and a half, inventories will still be high and we will go through periods that see modest price declines but it will be hyperlocal, market and price point specific. The main reason is that loan qualifying has been constricted to shrink the sales volume, but, it looks like the market may be reaching a tipping point with inventory as it relates to sales volume. Next month (July) we are more than likely going to see resale home sales surpass those sales of 2008 based on pending sales now compared with pending sales at this time last year. That means the supply of homes is going to be heading down. With no loans available to build any new homes and people still moving to Atlanta, we are heading in a direction where there is a scarcity of new construction and a lowering supply of resales.
The only things that remain as unknowns are what interest rates will look like and how many more foreclosures continue into the market. The condo market is still looks to be shot for at least 2 years as the inventory levels are so high it will be that long before they have a chance to stabilize, but, many parts of Atlanta no longer resemble a buyers market. Many of those areas are in the northern suburbs of Roswell, Alpharetta, Johns Creek, Milton and parts of south Forsyth.
In other words for the best deals in the most coveted areas, it's probably over or very close to it. Get down from the fence, buy if you are going to buy or watch as the savvy buyers around you get the rest of the best deals as you sit and wait for the perfect storm to happen. It's happening around you right now. There will always be a group who take advantage of the market and another group of people who look back and say to himself that they wished they had. It's part of life and we all know people in both of those groups.
Which group of people do you belong to?
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Ryan Ward, Principal
Premier Atlanta Real Estate
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Share20 Responses to "Waiting for the Bottom - You May Have Missed It"
Another thing to consider is that many economists are now predicting a double dip recessions. If that happens it will more then likely may have a negative affect on home prices.
Posted on Friday, July 24th, 2009 at 7:11 AM.
Some people want to know if the market is "still going down" and if it is they will wait. There are others who are coming into the market for many reasons - perhaps its a young couple recently married and and sick of their noisy stinky neighbors in an apartment complex with thin walls, or they want to grow a garden and have a couple of dogs, or family is growing need an extra bedroom. These groups are finding an unbelievable opportunity in the market right now. Buyers now have to be believers - in themselves and their earning power and in the community where they want to live. These people are getting on with their lives and picking up great bargains in the housing market. These are the folks I like to work with. They find me as often as not. We work in the Metro Detroit and Ann Arbor areas. You have heard about us on the news! But we are still finding and working with some great buyers who are setting up home and making things workout. Its a mindset thing I guess.
Posted on Saturday, July 25th, 2009 at 8:31 AM.
Oh if only I had a crystal ball hey! the truth is we dont know what is going to happen, and will always be impossible to predict. the fact is that only when we all get off the fence will we see the economy benefit from it, but the less we see this happen, the more inclined we all feel to sit on the fence!
Posted on Wednesday, July 29th, 2009 at 9:13 AM.
I have about 3 buyers that I have been trying to tell this too. =)
Posted on Saturday, August 1st, 2009 at 5:48 PM.
Thanks for this. I've emailed it to a friend.
Posted on Monday, August 3rd, 2009 at 11:50 AM.
Ryan, Buyer's should ready more so to buy a home now than ever. Supply is remaining steady in WI, but homes have not seen as huge amount of depreciation and upswing as the Atlanta market.
Posted on Wednesday, August 5th, 2009 at 6:39 PM.
Are those sales figures aggregate numbers? What about sales for foreclosures, auctions, etc.? I still see a mountain of foreclosure activity out here that is destroying equity (old fashion kind and the new "fake" stuff). What about the banks? Are they holding on to pending foreclosures, releasing them slowly into the market? Help us out?
Posted on Wednesday, August 5th, 2009 at 7:22 PM.
Alec, you are welcome. Glad to help.
John, where is the mountain of foreclosures you see? Let me see if I can get to the point about this. All of the really coveted areas never had extremely high foreclosures to begin with, still don't and won't ever. That's why the price of homes in Alpharetta and Milton between $500,000 and $1,000,000 is up compared with the same second quarter of 2008. That's why the entire North Fulton area west of GA 400 and north of Holcomb Bridge has seen no price decline since this time last year and it's why volume is only off a few percent and inventory is declining. East of 400 and north of Holcomb Bridge, sales prices are only down .6% (point six) even though volume is off 25%. The number of foreclosures in these areas is about 15% of the homes for sale and has been very constant for the last couple of years. It boils down to this - the best areas are at the bottom and in some cases past the bottom and heading back in the positive direction. Other areas - like the condo market are in terrible shape due to inventory levels and and low demand. The most expensive zip in Atlanta, 30327, is still in bad shape for million dollar plus homes, but, improving at the lower price points. all of the homes below $200,000 are up from last year in price and in volume. The south side is still full of foreclosures. That will drive down prices. If this doesn't help, please be more specific with your question and I will try to be more specific in my answer.
Posted on Wednesday, August 5th, 2009 at 7:43 PM.
Lets be realistic, it is likely that we have not passed the bottom of the market. It is also very unlikely that real estate prices are going to now sky rocket, however, with that said the newest Case-Shiller report showed the first month in three years where their index showed a national increase in home prices. Please remember that this is the very index that has been the most gloomy of all indicators. There is no way one can simple brush it off. @Ryan - Not trying to link bomb the link below is only to the photo loaded on my server http://houstonhomesforsale.tv/wp-content/uploads/2009/08/caseshillerjune2009.jpg that link is a graph plot of the Case-Shiller index since 1988. In it you should notice that we saw what I believe to be what people in the finance business call a "dead cat bounce." It is where a market hits bottom but is unlikely to see appreciable gains in the near future. ."Dead cat bounce" is a term that became popular because the idea is if you drop a dead cat from high enough you will see a bounce once it hits bottom (sharp intial turn up in the market), but the cat is still dead and will just sit there. It is my opinion with as high as unemployment has reached we will likely not see a strong recovery unless it is fueled by inflation. It is my opinion that we have now bounced off the bottom and will begin to scrape along for sometime. Now this does not mean you have plenty of time to go and get the best possible deal for yourself. Interest rates will start to return to market place averages at minimum and could get higher than average when inflation kicks in from all the federal bank stimulus. Interest rates are currently bouncing around between 4.9-5.5%. The average interest rates for a home loan over the last 30 years is approx. 8.5%. For every 0.5% interest rates increase your purchase power drops 2.5%. With rates sitting at 3% less than the market average if the interest rates only return to the average you will lose 6X2.5%=15% in your purchasing power. What this boils down to is that unless you think real estate prices are going to fall another 15% you need to get into the market and make a purchase. I believe from this time out those who make a home purchase will look very wise 5 years from now. Not to mention they will get an excellent selection in many cases to choose from.
Posted on Thursday, August 6th, 2009 at 2:23 AM.
Ryan, "John, where is the mountain of foreclosures you see?" You answered your own question. Thank you. If we're talking about the metro market, foreclosures are almost everywhere and heavily saturate some neighborhoods. Agree? Employment is now having a major impact on foreclosures. Unless the "jobs" situation turns around in a positive way by Christmas, we are going to see many more, not fewer foreclosures coming into the market. In most metro Atlanta neighborhoods, we haven't even reached the bottom yet. Ryan, you can't stop reality from being real. I know you want to put a positive spin on this to keep your motivation high and generate sales. If so, stick to the neighborhoods with strong traditional equity. The problem we're all facing, is that this epic, criminal housing disaster is a multi-headed disaster that has yet to be contained.
Posted on Friday, August 7th, 2009 at 7:45 AM.
Foreclosures and short sales make up a larger segment of the market than in years past, but, that number is lower now than last year and predicted to be lower next year than this year. The unemployment numbers in Metro Atlanta are bleak, but, you presume that these are all homeowners which most certainly is not the case and even if it was, many will get new jobs, have spouses with jobs or have enough money to keep from being foreclosed on. Besides, the foreclosure process will take longer than that to happen anyway. Many of those jobs lost are in the real estate industry somehow and if the market improves, so will job prospects. You make a claim that neglects to see what is in front of us. That is a lowering numbers of foreclosures not rising, 4 consecutive months of price increases in Metro Atlanta and year over year sales increases in the most popular areas. I suppose I have more data than you to see this to be the case and I'll try to post some of it for you in the form of some charts at some point next week so you can see it.
You may be missing the greater picture of this post though. It's time we begin to realize that you can only see the bottom once it's past. Smart people don't try to predict the exact bottom, but, instead use a more pragmatic approach to homebuying. They recognize general trends of lower prices and buy now rather than when the market is at the top. No one can predict the future, but, it's simple to follow trends. We are trending away from the worst and have been for several months. Unfortunately, as is usually the case, the general public will be the last to figure it out. We now have areas for the first time in years with price in creases in some areas and it has been trending this way for months. It's just now that it is finally happening. North Fulton is flat or up with only about 15% of foreclosures making up sales. Cumming near the lake is up compared to last year as are some areas of Cobb County. These are the leading areas of Atlanta and they have already seen increases. The rest will follow. The question is not if, but, when. This breaks down to supply and demand and what happens to change the role. Inventories have dropped for 6 straight months, prices WERE at levels not seen since the late '90's. They ar enow increases. This created a set circumstances that made resale homes more compelling and people are buying in the areas with better schools, lower crime, etc...
At the national level the Case Schiller index shows home prices up as well. You are welcome to continue to predict the doom and gloom and many people like to for reasons of there own, but, to turn your head to a groing body of evidence that suggests we will begin the long and slow uphill climb to an improoving market and that it has already begun is probably not the wisest approach. I don't have a crystal ball and inflation could skyrocket (which could increase homerices again) causing interest rates to rise making homes less affordable and of course there could be other unforseen issues that arise, but, with the current set of problems, I;m confident that we are at the beginning of the slow turn. It is still going to get worse in some areas and it is already getting better in others. This is the first time in years that we can say this. It is not only worth noting, but, also marks a distinct change in the market.
Posted on Friday, August 7th, 2009 at 8:43 AM.
Ryan, I am glad to hear that the Atlanta area is showing signs of improvement. I have some of family members there that have been impacted by the market so I will be keeping my eye on your site to observe how Atlanta is trending. In my market Phoenix homes and condos have also bottomed out, at least in the sub $200,000 category. We have seen inventory drop in that price point from a 14 month supply just 7 months ago to a 3 month supply now with many listings getting multiple offers. The supply of bank owned is way down forcing us to look at more short sales these days. One thing that buyers need to recognize is that there is an absolute bottom to the market which would only be affected if we enter a full on depression. When buyers can buy single family homes in an area with payments lower than renting then prices will settle out. I do not know about Atlanta, but here in Phoenix there are areas where that is the situation we are in. There are two things that I am cautious about though. The first is the supply of bank owned homes that have not been released into the market. There has been speculation that some lenders have been controlling the release of their REO properties. Should there be another wave of lender owned properties released we could see the rise in prices stall. The second thing that could stall the lower price point is the end of the first time buyer tax credit come Dec 1st. Of course, holding off because of the latter would be foolish for the first time home buyer because they would be just shooting themselves in the foot. I hope your market continues to pick up
Posted on Friday, August 14th, 2009 at 2:56 PM.
Ryan I also recently wrote a blogpost about whether or not we are reaching the bottom in our market of Boca Raton and South Florida real estate... I tracked the numbers extensively and it is clear that we did see an uptick in June and July of both median price and number of transactions. Especially in the under $300,000 lower end there are some great buys and with the first time homebuyers credit which is expiring soon, and the low interest rates, I expect August and September to be great months as well. My buyers agents are very busy writing contracts, although the number of short sales in our marketplace is staggering.
Posted on Monday, August 17th, 2009 at 8:44 PM.
Rich J ~ great Mark Twain statement and oh so true...kindof like 'hind sight'. You never know what is going to happen and wouldn't a crystal ball be nice or to be chummy with the 'Amazing Kreskin'. In the end you must make an educated decision and it does appear to be an ideal time to purchase ... IMO a no brainer if you're first-time buyer and/or renter. Its also nice to have many choices and be in the driver's seat.
Posted on Tuesday, August 18th, 2009 at 6:02 PM.
So true, so true. Even though the market isn't the same as it was 2 years ago, I am happy to see that first time home buyers here in Dallas are taking advantage of this "buyers" market and $8000 tax credit ;-)
Posted on Thursday, August 20th, 2009 at 11:26 AM.
As an owner of a nationwide network of real estate licensing schools I am in a unique position to gauge what I call "the hope index". That's really just my way of saying "consumer confidence" but with a little twist. Here's how it works and it's very simple... When our schools see a decrease in course registrations that tells us that career seekers have declining confidence in what they see happening in the real estate market. When registrations go up it means the opposite. Obviously our students (just like home buyers) are trying anticipate where the market will go and where they want to be in relation to that market. Who wants to be "in" a real estate career when the market is in a free-fall? Career seekers are looking for a growing or at least stable market to work in. The smart ones (and there are a lot of them) have identified the "bottom" of the market early and are preparing to enter that market as it begins to recover. Right now the "hope index" is very high. In fact, it's as high as we've ever seen it. Yes, this means more students are enrolling in pre-license real estate courses than ever before. It means that people seeking new careers are identifying real estate sales as having great potential for them. This hope index recovery started last October and it's consistently improved every month since then. So, for what it's worth, based on this line of thinking... the bottom has or is being established right now.
Posted on Sunday, August 23rd, 2009 at 10:06 AM.
I find the picture of the dutch boy and tulips quite ironic, or maybe a clever pun by one. Are we at the bottom? Does it matter? There is always opportunity to make a profit, just don't be the boob that gets caught up in mindless speculation.
Posted on Friday, August 28th, 2009 at 3:30 PM.
I do not understand why anyone would wait. If you have good credit then you should buy a new home now! Interest rates hovering around 5% and the best pricing that we have seen on new home construction in 10 years! Activity is picking up in the Texas real estate market!
Posted on Friday, November 13th, 2009 at 1:05 PM.
John- I couldn't agree more! Why are so many people still waiting? The time is now to jump on these good deals. They'll pass you right up if you "wait for the right time"
Posted on Monday, January 4th, 2010 at 12:16 AM.
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One of my favorite quotes is this: “I was seldom able to see an opportunity until it had ceased to be one” Mark Twain It would seem to apply in our current real estate market. Rich J.
Posted on Thursday, July 23rd, 2009 at 10:19 AM.