This past month has felt like a complete turn around compared to market conditions in early 2010. Buyers are active, inventory levels are dropping and some sellers are becoming more realistic and understanding of current fair market value.
It took some time, and will of course take some more - but I feel we are close. I have actually starting seeing some appreciation in certain communities here in South Florida. I NEVER thought I would use that word again!! "Appreciation" - it has a nice ring to it, doesn't it?
So what factors are playing into this rebound?
Short Sales and the understanding of them
In my opinion, the full understanding of short sales by a larger percentage of agents and buyers has had a significant increase. What was, just a short time ago, an often misunderstood process is now almost decipherable to most people. Buyers realize that sometimes it's just not worth the wait and that the fact of the matter is that you may NEVER close on a short sale home. This has had a direct effect on home buyers simply skipping over non approved short sales in favor of standard, or approved short sales that can actually close within their lock time frame. Agents in general have also become better versed in the short sale process and most can navigate the process with ease at this point. What this has done has moved what was once a "waiting on short sale" buyer to other homes - thus increasing sales levels and lowering inventory levels.
Seller Acceptance
For quite some time now many sellers have not been able to accept that the bubble actually burst. Still focused on drastically overvalued sales in their communities they still feel their home is worth 30-40% more then it actually is. While this belief is still held strongly in some sellers it is starting to dissipate for many others. This acceptance has and will help the market tremendously. By acknowledging that things simply are no longer what they were and coming to terms with what true Fair Market Value is sellers who want to sell will sell, and those who are or were testing the market - won't. By removing these market "testers" we drop inventory levels even further. This in turn allows buyers to focus only on inventory that is actually obtainable. Because the buyer is no longer wasting time trying to purchase homes from unreal sellers, this speeds up the buyers process - in turn helping the market to rebound.
Days on Market
With seller acceptance factoring into the rebound we can only assume that this also plays a large part in the decline of days on market for properly priced homes. Its not so much the fact of homes selling quicker, but the direct effect that has on buyer perception and in turn reaction time. There is simply nothing more motivating than losing a home that you had your heart set on only because you thought you could take your time - "it's not going anywhere in this market" - famous....last.....words. Once a buyer loses a home to another the reaction time gets cut in half, when they find a home they like again - they ACT. Again - this plays a critical part in any market rebound.
100% Financing
Ok Ok - the days of 100% financing are gone....aren't they? Actually no, they're not. FHA financing is in essence the same thing as that dirty phrase "One Hundred Percent Financing" oh man, I can almost picture the devil himself curling his index finger invitingly me to sign here for my dream house for NO MONEY DOWN.... Whoa - (slap in face) got a bit off track -
FHA financing does allow a buyer to buy a home with only 3% down AND they allow for a 6% credit from the seller at close. SO...if you put down 3% and get back 6% - how much did you actually put down? And in essence that would be what? Yes, 100% financing.
This is NOT a bad thing though people!! FHA financing is saving the market one closing at a time!! While interest rates may be extremely low at this time, loans are harder then ever to obtain. You need stellar credit, at least 20% down and STRONG income verification. Due to the economic times we are in (depression) not many Americans can qualify for these conventional loans - but you know what they can qualify for? DING DING DING!! That's right....an FHA loan!! So now we have buyers that can actually buy - all due to our wonderful country, let's keep that in mind sellers when we see these FHA buyers - ok?
This market WILL turn around - we all know that, the question is when. The good news in my eyes is that it seems it will be sooner then later, what I once estimated to be 5-7 years I now estimate at 3 to 5. Hang in their homeowners!!
Rick Rapp
"Real Estate Done Right"
www.RickRapp.com
