It’s beginning to look like our dark days in real estate are over. All the natural market forces permeating the housing market today are setting us all up for nice rebound in 2009. And once the buying begins again, watch out. It’s going to happen fast.
The reason I’m bullish on 2009 being our rebound year has to do with three irresistible market forces that are all coming together at once:
- Low Prices. Home prices in most major DMAs have dropped to the place where average middleclass couples with decent credit can now once again afford the payments on a $350,000 home. (See my previous blog entitled “Surviving and Thriving -Part II).
- Stimulated Economy. Thanks to Uncle Sam, average Americans in foreclosure are finding out that they may be able to stay in their existing home, with a refinance package that encourages responsible stewardship. Combined with other helps like GMAC lowering credit rating requirements for auto financing, Americans will in 2009 start to get back into the habit of buying things.
- Mortgage Rates. Mortgage rates are now at the lowest they’ve been in 37 years, which will make credit-worthy buyers and refinancers motivated to get that loan now, before rates go up again.
This third point is seminal. According to the Freddie Mac Primary Mortgage Market Survey announced Wednesday, rates on mortgage loans are the lowest in the 37-year history of, according to a weekly report released Wednesday. The average for a 15-year, fixed rate loan was just 4.83%. Historically, Americans just can’t resist getting home loans when the rate is below 5%. It’s like trying to stop water from flowing downhill. Never in the history of our country, or elsewhere in the world for that matter, has there not been a jump in loans when rates are this low.
The metaphors are abundant. Whether we call it swimming upstream against the current, fighting gravity, or sailing against the wind, most sports enthusiasts know that no matter how skilled, you can’t fight the forces of nature.
The same is true when it comes to business cycles. Every seasoned investor knows that businesses and industries are all cyclical—once the “gravity” of a market event takes hold, as the adage on Wall Street goes, “the trend is your friend.” Which simply means, “don’t fight the natural forces in place.”
I think the housing market and our entire real estate industry is going to find a Tsunami-like feeding frenzy in many markets in 2009, for these reasons. So get ready to get busy!
Bill Riss, C.E.O. of Coldwell Banker Bain, Seattle, said it this way last week:
“I clearly see that, by spring, we’re going to see a significant change in the marketplace. Prices and interest rates are about as low as they can go, people are continuing to move to Seattle and the economy will improve soon,” Riss said.
I love that point about people still “moving to Seattle.” America is all about moving-ever since Lewis and Clark and the gateway to the West was opened, Americans move like no other people in history. So homes will have to be purchased. Like gravity, you can’t stop it. You just have to go with it.
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About The Author: Tom Davidson is the acting Director of Sales & Operations for Express Schools, LLC. Since 1996 the companies under this banner have offered online real estate licensing and insurance licensing courses as well as online real estate exam prep and insurance exam prep.