A Wondrous Enigma for You!

Ask anyone and they'll tell you the biggest problem with the real estate market today is that there just aren't enough qualifiedbuyers! Banks aren't lendingcredit requirements are too tougheveryone is scared! Well, all of this has some truth, but the real problem isn't that there aren't enough buyersthe real problem is, we don't have enough houses!

Okso now you've called me a few uncomplimentary names, maybe had a good laugh and are ready to hit the "next" buttonbut let me explain. Of course every market is different, so not everyone will be seeing the same thing. Here on Long Island, NY, the local markets are showing a drop in both homeprices and volume. At the same time though, we're seeing well priced homes being sold in the first week!sometimes with multiple offers or buyers calling back again and again to see if the sale is really going through. What's this all about?

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Recently, I read a book about the depression mentality and how that applies today to the great recession. People ARE scaredthey're concerned about the economy, about their jobs, about the future in generalbut they're still buying homes. So it seemsstrange that we should have bidding wars on properties in a market that's so terrible. Andin our market, we have anumber of professional investors doing quite well flipping homes. Again, this seems to be acontradiction to common perceptions of the market and seems to be truly shocking to someagents.

And I think the answer is a bit shocking too. We just don't have enough homes to sell. Now, how can I say that when inventories are creeping back up to recent historic highs? So to clarify, let me say,we don't have enough well priced homeshomes that a buyer sees the value in and is willing to purchase.

Current prices in this area have fallen back to around2002/2003 levels. Higher than they we're at the start of the housing "boom". The problem is that anyone who bought a home in the last 8 or 9 years sees an asset that is likely worth less than what they bought it for. So unless they have to, most people are choosing to stay put instead of making that trade-up move after a few years. Sometimes they have to postpone retirement or even a job related move because they can't afford to do it.

In effect, we've taken potentially1,000s of homes out of the real estate market. Instead we have a glut of homes that buyers feel are over-priced andlikely becoming very stale (ask any real estate agent about that!). So what we have now is a very active investment market, with cash buyers taking advantage of low prices to buy up the foreclosures. Until the real estate market stabilizes, in terms of prices, we're going to continue tosee a drop in home purchases. The buyers are out therethey just need to see more homes they feel are worth buying!

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Posted in Business Post Date 06/07/2018


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