When Will The Real Estate Market Recover?
One of the questions sellers often ask is, "When will the real estate market recover?"
My first response to this question is usually something like, "define recovery". For many people, "recovery" means getting back to prices like we had in 2005 or 2006.
My reaction to a 2005 or 2006-type market is that such a recovery may be years into the future. If you bought a house or condo in that time period, it may be a long, long time before you see the value for your investment back to that level. After all, those prices were being artificially inflated by a red-hot investor market that clearly could not be sustained.
Steve Murray of Realtrends.com, a well respected real estate information, research and data service, has a theory on when the recovery will take place.
Murray and his people have done considerable research on this matter. To get to their answer, you must first accept the fact that there is a relationship between the number of households and the number of houses sold in the United States each year.
Essentially, 5-percent of households buy a new home annually. If you apply that 5-percent factor to the number of households in the country, you get about 5.5-million annual sales. This is exactly where real estate was tracking before the Wall Street problems of October. Along with this fact, you have to accept the fact that there is a 2-percent growth in households annually.
So, Murray and his crew put all this data into a computer someplace -- probably at NASA, if you ask me -- and have determined that it will take from now until 2018 before we see prices come back to the 2005 level. That's because the recovery curve is not going to be V-shaped as some guru's predicted. It's not going to be U-shaped as some others have prognosticated. It's going to be more of an L-shaped recovery curve which means very slow, very controlled increases in value over a long period of time. For those of you who read this blog regularly, you might remember that I have been predicting an L-shaped recovery curve for almost two years. Looks like Murray agrees with me, so that's two of us on board.
If you would like to listen to Murray's talk on this matter, you can get it on-line at http://www.realtrends.com/. Go to "Real Trends Live" and then go to "The Recovery". It's a very enlightening little talk that only lasts a few minutes.
For sellers, I guess Murray's info is bad news -- about as bad as it gets. But look, if you bought in 2005 or 2006, you bought at the top of a super-heated market. That market had to cool down, stabilize, and then it will slowly start to warm up again. This is going to take time. Most likely, we have not even reached price bottom in many markets, and the recent bad economic news is not going to improve the outlook for selling real estate.
For sellers who bought before 2005, you have to start forgetting about those huge numbers that you might have gotten for your property in 2005 or 2006 and start looking at much lower numbers for the value of your property today. To ask a 2006 price in 2008 means your property is simply going to sit unsold because buyer's are not going to pay it. It's time to get realistic.
For buyers, gosh, what are you waiting for? Prices are down, the selection is huge, many sellers are desperate. Now really is the time to buy.
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
My first response to this question is usually something like, "define recovery". For many people, "recovery" means getting back to prices like we had in 2005 or 2006.
My reaction to a 2005 or 2006-type market is that such a recovery may be years into the future. If you bought a house or condo in that time period, it may be a long, long time before you see the value for your investment back to that level. After all, those prices were being artificially inflated by a red-hot investor market that clearly could not be sustained.
Steve Murray of Realtrends.com, a well respected real estate information, research and data service, has a theory on when the recovery will take place.
Murray and his people have done considerable research on this matter. To get to their answer, you must first accept the fact that there is a relationship between the number of households and the number of houses sold in the United States each year.
Essentially, 5-percent of households buy a new home annually. If you apply that 5-percent factor to the number of households in the country, you get about 5.5-million annual sales. This is exactly where real estate was tracking before the Wall Street problems of October. Along with this fact, you have to accept the fact that there is a 2-percent growth in households annually.
So, Murray and his crew put all this data into a computer someplace -- probably at NASA, if you ask me -- and have determined that it will take from now until 2018 before we see prices come back to the 2005 level. That's because the recovery curve is not going to be V-shaped as some guru's predicted. It's not going to be U-shaped as some others have prognosticated. It's going to be more of an L-shaped recovery curve which means very slow, very controlled increases in value over a long period of time. For those of you who read this blog regularly, you might remember that I have been predicting an L-shaped recovery curve for almost two years. Looks like Murray agrees with me, so that's two of us on board.
If you would like to listen to Murray's talk on this matter, you can get it on-line at http://www.realtrends.com/. Go to "Real Trends Live" and then go to "The Recovery". It's a very enlightening little talk that only lasts a few minutes.
For sellers, I guess Murray's info is bad news -- about as bad as it gets. But look, if you bought in 2005 or 2006, you bought at the top of a super-heated market. That market had to cool down, stabilize, and then it will slowly start to warm up again. This is going to take time. Most likely, we have not even reached price bottom in many markets, and the recent bad economic news is not going to improve the outlook for selling real estate.
For sellers who bought before 2005, you have to start forgetting about those huge numbers that you might have gotten for your property in 2005 or 2006 and start looking at much lower numbers for the value of your property today. To ask a 2006 price in 2008 means your property is simply going to sit unsold because buyer's are not going to pay it. It's time to get realistic.
For buyers, gosh, what are you waiting for? Prices are down, the selection is huge, many sellers are desperate. Now really is the time to buy.
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 9:51 AM
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