Welcome to 2008, the year of the turnaround in the housing market. Here’s your local situation report:
Local Job Market - is healthy and growing. Unlike past housing downturns, which were accompanied with severe job cuts, the local economy continues to add jobs. Since the peak of the housing market two years ago, 98,000 new jobs (net) have been added. Last year, there were 51,300 new jobs added, an increase of 13.8% vs. 5.0% national average.
Inflation – is contained. The Consumer Price Index (CPI) is currently around 2.1%. Compare this to a rate of 3.5% in 2000, dropping to around 1% in 2002, and increasing to nearly 4% in late 2006.
Mortgage Rates – near historic lows. Although not (yet) producing buyers due to continuing uncertainly and lack of confidence, this will change as uncertainly lessens, confidence returns and pent up demand is released. The recent subprime mess will “cycle through” and actually be good for the housing market long term as bad mortgage lending practices are eliminated.
Housing Inventory – an area of weakness is the short-term oversupply of existing homes, making this truly a “buyers market”. During the market “boom”, as speculators entered the market hoping to turn a quick profit, there was a period where “demand exceeded supply“, which contributed to “artificially” inflated prices. We are now seeing this turn around as price moderation combined with mortgage and carrying costs is pressuring speculators to “sell into” a declining market. If we “learn” anything at all from this, hopefully it will be that buying a house purely as a short-term investment is risky. On the other hand, buying a home for all the right reasons is still a smart, long term, wealth-building strategy. Bottom line…if you are a “buyer” in this market, there may never be a better time than right now. Like all “buyers markets”, this too will cycle through. If you have been thinking about “trading up”, this is a great time to do that as well. There is a great selection of homes to choose from and the risk of being exposed to a sudden market downturn (during that time period between buying and selling) is no longer a significant risk.
Larry Hansen, e-PRO REALTOR