There are quite a few local and national changes occurring right now that greatly affect buyers and sellers. Let's contemplate how we must prepare and adjust.
Slower Home Sales . . .
Aside from October and November of 2007, home sales have been lower each of the last 18 months than the same month a year prior. (see this graph) The lower number of home sales wouldn't be a problem if there were also a lower number of homeowners trying to sell their homes. This, however, is not the case --- not by a long shot.
In the first quarter of 2008, a total of 192 homes sold, and 523 came on the market. In other words, for every home that is sold, 2.7 homes are coming on the market. Wow! Last year wasn't quite as bad, as 255 homes sold in the first quarter, and 329 came on the market. During that time period, for every home that was sold, 1.3 homes came on the market.
As a seller, you must be realistic about the potential pace of your home selling. As a buyer, realize that homes that have been on the market for many months aren't necessarily bad homes --- with more and more inventory, and fewer sales, "days on the market" is bound to increase.
Fewer Mortgage Options . . .
Over the past 6-12 months, the mortgage industry has drastically changed, eliminating loan programs and increasing requirements. This has created a lending climate that makes it more difficult for a buyer to obtain financing, and yet, if they do obtain financing --- it will be at historically low interest rates!
As a seller, you ought to require a recently dated pre-approval letter with any offers. As a buyer, you need to devote plenty of time to researching your options for lenders and for loan programs.
Appreciation Remains, But . . .
Median sales price increased 8% between March 2007 and March 2008. And when analyzing year-to-date home sales (Jan-Mar 2007 vs Jan-Mar 2008), the median sale price increased 5%. It is great to see that home values are continuing to rise, despite fewer sales --- but there are certainly homes that have appreciated less than 5% in the past year.
Over the past five years, many homeowners became convinced that buying even if you might have to sell 12-24 months later was still a great idea. We likely need to revert back to prior thinking --- that you only ought to buy if you will be in the home for 3-5 years. With lower appreciation rates (5-8%, compared to 10-15% in recent years past), some homeowners have found themselves unable to sell their homes without losing money when purchasing and selling closing costs are considered.
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