It time for me to make my prognostications for the coming market, while recapping that which has happened. Please keep in mind that even on the 18th of September, the numbers for August WILL change. I will come back and correct them before posting the October results. I originally posted the June number on July 10th, and they had changed pretty significantly by August 6th when I reviewed and corrected them.
The numbers for August, even this late in the month don’t look like they can be complete. If the numbers hold up, the market took a dramatic down-turn in August. I think that as we approach the end of the month, the numbers will correct (I have seen this for a while now).
Prices are pointing up, but I don’t think that will continue. I think we need to see a drop in prices to spur buyers into action. I don’t expect that to be much, but a modest decrease of maybe 2%. Currently we are up 5% vs. last year. June was up 5%, and July up 2%. This might also be partly a function of some of the new home sales on the higher end of the market. I would really like to see this flatten a little, as I think it would spur a little more buying.
Time on the market is also trending up vs. last year. We are up to 95 days. That is almost 4 weeks (25 days) more than this time last year. Last month was 80 days on market, but that was also 10 days more than July 2006. May sales were the lowest this year at 76 days on the market. In fact, May was the lowest since last October (2006) when the DoM was 72 days.
By now, I think anyone in the housing market has heard of the Sub-prime Mortgage Meltdown. It is still a big player on the market. Buyers that were marginal even six months ago are out of the market now. Buyers that are solid are still solid. If anything, those buyers are in a stronger position. Since there are fewer buyers, they have increased strength with sellers. Furthermore, I’m starting to see lenders trying to court those strong buyers. Face it, mortgage lenders make money by loaning money. They can only stop writing for so long before they need to look at making money again. Obviously the marginal buyers aren’t popular with the secondary market, so getting “A paper” mortgages back into the stream will become more of an imperative… and so I expect to see rates slide a little for the best buyers.
The current mortgage climate is tough. For buyers with weak credit history, the market is almost closed. Alt A loans (stated income, no documentation) will be away from the market for the foreseeable future, except for the rarest of good credit buyers. And expect that 0% down and even 3% down loans will be reserved for those with better credit.
I think it is getting to be time to say that smart investors need to get back in the market. Buy & Hold strategies will be heavily rewarded in the long run. Prices are good, rates are kicking for those with good credit. There might be a slight easing of prices in the coming months, but I wouldn’t count on it, and we won’t know that we’ve hit bottom until we are off of it.
Finally, remember that we can only get an accurate look in the rear-view mirror. We will only KNOW there has been a change in the market when we see it has already changed. We’ll know that change has taken place when we see all of the best deals are already gone.
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