We've all heard the rumors about the economy, the struggles American's face and the woe's of the lending institutes. But today's market faces other issues.
In just a short period of ten years I have seen three different styles of markets. I've seen the "buy when ready", "Buy before it list" and now the "I can buy it later" approach.
In today's market, clients have almost all the information available to them that we as real estate agents have. We are no longer the paved avenue for information. Our reach has to be farther than it's ever been to obtain any new clients. Our knowledge has to be deeper, more easily understood and better prepared than the client or the next agent they interview with.
While most seller's only think about the current "worth" or value of a property, both buyer's and seller's must look ahead to what their homes could be worth not only today, but 2, 5 & 10 years down the road. The most common (4) questions I get everyday that clients wanted answers to the day before are:
1. Why are the prices of homes in my area not dropping like they have in the rest of the country?
While some areas of the country have been hit hard by recession, depression, aggression, CNN, FOX and MSNBC, our area of the world has stayed modest. In all serious though, clients ask me this question each time I go to a listing appointment and tell them their home is worth more than they paid for it 2-3 years ago. Each time they are surprised.
Johnson City, TN earned a Real Estate Safe Haven because of it's steady growth, stable econony and reasonable prices. Eastman Chemical Company, ETSU, Wellmont Hospital and several other areas businesses have all kept Johnson City safe on the real estate market front. http://www.kiplinger.com/tools/slideshows/RealEstateCities/7.htm
Our area in my opinion was just "raised right" by our parents and grandparents who taught us the true value of hard work and the value of one's hard earned dollar from that work. That instinct has been installed into each of us in this area and has lead us not to go out and buy more than we can afford, it has allowed us to miss most of the foreclosure crisis because our banks still lended on those premises even when they weren't making as much as the other banks who are now extinct or facing major financial obstacles.
Our area is strong because of the people in our area know how to spend their money. Because of this, our homes value's have increased rather than decreased even in the tough economic times.
2. How do I determine the direction of prices in my market, have we hit rock bottom?
A two fold question, but basically has to be asked together. Buyers want to know if we've hit rock bottom just as much as sellers.
So while there are no steadfast rules to determine future pricing, the month's supply of inventory (or total inventory divided by the number of houses sold per month) is a great guideline.
Normal markets should have 5-7 months of inventory available to the public. So if 50 houses sale in a month, then there should be 250-350 available on the market for a "balanced market".
Based on this figure, if you have 100 homes sale in a month and only 200 homes on the market when there should be 500-700 homes, then you are in a seller's market and should expect appreciation, perhaps in the double-digit range even.
However, on the polar opposite side of things, if you have 50 sales in a month and over 1,000 listings, that would represent almost a full 11-13 months of inventory (double that of a balanced market) and sellers should anticipate a "buyer's market".
The Johnson City, TN market including zip codes (37601 & 37604) have 518 current active listings and 66 sold houses from May 1, 2009 - June 20, 2009. There are another 28 homes in Pending status (under contract and cleared for closing). So with those numbers, we are actually still in a seller's market based on the national "balanced market" numbers set forth by the NAR (National Association of Realtors). However, we are very close to a "balanced market".
3. Why should I buy now?
Because if you are a first time home buyer you receive an $8,000 tax credit (please check out my blog on the 8k tax credit if you are unfamiliar). In addition to this, if you are buying new construction you are buying in a market in which contractors want to move products quickly, thus meaning better deals.
Likewise, Sellers are reading into the negative astigmatism of the real estate market from AP media, CNN, FOX & other news outlets and not realizing the picture available within their own backyard of the current market here. So seller's are nervous to sale and are allowing their properties to slip away at below market prices at times.
Any buyer is eligible for the record low interest rates that we've been having. So whether it be your first or your tenth home, there has never been a better time in terms of market rates, government assistance and seller impatience as now.
4. Is homeownership really a good way to build wealth in today's market?
The answer is YES. Whether or not your home appreciates or depreciates in the next 30 years, you control where your money is going. Your home will always be worth something to someone. Your rental apartment though is not worth a dime to you when you move out.
According to the NAR, home values appreciate at 4.5% annually on average. Our area is closer to 3.3%. That's a great return; however, very few buyer's pay in cash. Most buyers try to finance as much as possible to keep money in their pockets.
So the amount of cash buyers put into their homes determines their return on their equity. So it's easy to see that real estate isnt just a good investment; it's a great investment even in today's market.
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Additional Notes on Appreciation .vs Depreciation
Inventory of:
1-2 Months: Double Digit Appreciation
3-4 Months: Single Digit Appreciation
5-6 Months: Balanced Market
7-8 Months: Single Digit Depreciation
9-12 Months: Double Digit Depreciation
I hope that this information has been useful to you, please feel free to use the post a comment box at the bottom of this blog or contact me at (423) 773-5569 or josh_jwoodsrealty@yahoo.com if you have any questions concerning Real Estate in this area.
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