Is This What A Real Estate Recovery Should Look Like?

Options for home buyers just last year seemed limitless. Options for sellers were fewer. What a difference a year makes. Now sellers are holding all the cards and many buyers are frustrated in their attempts to buy. Homes selling for over asking price, multiple offers, buyers waiving appraisal contingencies… I can’t believe how quickly the market flipped from a strong buyer’s market to an even stronger seller’s market… and that is exactly what has me worried… if economic conditions change this market could flip back to a buyer’s market just as quick.

Many homeowners in the past found themselves trapped in their homes and unable to sell because they owned more on their mortgages than their home was worth.Many other homeowners wished they had sold at the top of the market and have put off selling their home and making the next move because it just didn’t make sense to sell in a down real estate market.

The good news is that prices are rising, interest rates are at near record lows and inventory has never been lower in Pleasant Hill. Today there are only eleven single family homes on the market in Pleasant Hill. To give you some perspective on that number, during the boom years there would be 8-10 times that number of homes on the market at this time of year.

The huge numbers of foreclosures and other housing problems caused by the real estate boom and bust have not been solved, only delayed. Interest rates are being held down and the real estate market is being propped up by the Federal Reserve’s latest “quantitative easing” strategy of purchasing $85 Billion in mortgage backed securities each and every month with no end in sight. The best we can hope for is a soft landing in real estate if/when the Fed stops propping up the market.

The real estate market hasn’t turned around because demand skyrocketed. Demand is still at the low end when compared to historical averages. Prices are on the rise largely because the supply of available homes for sale is so restricted. I don’t see the inventory of foreclosures increasing this year in any numbers sufficient to satisfy buyer demand but foreclosure starts have reversed the trend and are on the rise. I do believe that larger numbers of traditional home sellers and move up buyers will put their homes on the market as they decide to take advantage of the higher home values. This should help satisfy buyer demand.

What has really changed this time around  is the mix of buyers. Cash buyers are putting their money into hard assets like real estate as a hedge against a continuing weak economy driving out many traditional home buyers who just can’t compete.  The number of first time home buyers has risen but move up buyers are still sitting on the fence…for the time being. The question is how long can this market sustain itself. I do know one thing for sure, it is far better to be a seller than a buyer… for now.