Many of my active buyers and sellers took a pause back in mid-March. Several of them are questioning whether they should re-enter the market now or wait and see how things pan-out over the next 6 – 12 months. As a seasoned broker these can be difficult conversations. I recall advising buyers that they may have to “bid-up” to get the right house back in 2004 then returning to discuss a short sale on that same house in 2009. While I certainly don’t want to re-live that scenario, I do see some compelling reasons for jumping into the market now. Here are a few.
· It may take several years for this to actually “pan-out”: Some very price conscious buyers, mostly investors, are anticipating a steep drop in prices. They may have a long wait if they’re in the market for cheap foreclosures. In their recent reports, both Core Logic and FannieMae predict a 3%-5% upswing in prices through the end of this year. The market’s bound to hit some headwinds should unemployment remain in double digits for an extended period, but most local homeowners are sitting on solid equity right now. If at all, I think it will be some time before we see widespread foreclosure activity.
· This could be a great opportunity for local down-sizers: Surprisingly, the demand for large, luxury homes has remained strong through the shut-down. As a fellow broker said, “The Californians that were attracted to our luxury home market before March may be even more motivated to relocate now.” Meanwhile, we are seeing a slight increase in the inventory of smaller, single level homes with upscale locations.
· Home starts have hit a Five year low: MSNBC recently reported a 30% drop in new home starts year-over-year. Northern Nevada spent the past several years in a housing shortage, this will not help and may drive prices above the 3%-5% prediction. By the way, virtually no one is building houses under $350,000 in our area which brings me to my next point.
· They just don’t build them like that anymore: It’s no longer realistic for a “new” home buyer to find a traditional single-family home for less than $300,000 in Reno & Sparks. In fact, it is becoming increasingly difficult to find new construction priced under $400,000. Compare that to several desirable neighborhoods within the city limits in which one can still purchase the traditional 3x2x2 home for less than $350,000. It is at least feasible that the demand for these homes will increase rather then decrease as we slog our way through this calamity.
Although our local real estate market is very brisk now, I feel it’s almost inevitable that we’ll see a slow-down which will influence prices at some point. The big questions are how much and when? Nobody knows for sure of course but unlike the great recession the real estate industry has a firm footing, at least for the moment. That crisis was driven by zero down, stated income, no credit check home loans. The folks that are in their own home now had to jump through many financial hoops to get there. So, my short answer is YES. If you are feeling financially secure or if you have an investment that has run its’ course, this could be the right time for you. Everyone has got to live somewhere right?