NAAAM Real Estate

On September 18, 2006, Thomas M. Stevens, president of NAR (National Association of Realtors), stated to following to the Senate Subcommittee on Housing and Transportation and the Senate Subcommittee:  “For the past five years, the housing market has been a steadfast leader in the U.S. economy.” He continued to say that “After five years of outstanding growth, the housing market is undergoing a period of adjustment and becoming more and more of a balanced market between buyers and sellers.”

In addition, Steven also believes that nationally, due to increased inventory and decreased demand, properties appreciation will be less then 1%.  This percentage has decreased from double digit percentages in the last few years.  It is important to note, however, that real estate is determined not on a national basis but at the local level, as specific variables such as jobs, neighborhood crime, and quality of public school education determine the pricing of homes.

At the current time, one third of the country is experiencing an increase in price of homes – Alaska, New Mexico, Vermont, and other states in the south, except Florida.  It is important to note, however, that the states that usually experience increasing prices are experiencing a decline in their home values.  These states are Arizona, California, Florida, Nevada and Virginia.

The NAR strongly believes that this shift is simply an adjustment to a more normal market.  They believe it is moving from what was a seller’s market to a buyer’s market.  They did, however, state that currently, the cost-to-income ratios is very high.  This situation is due to the increased interest rate and decreased flexible spending.

The forecast from NAR is a drop of 8% during the rest of 2006 and an additional 2% in 2007.  This forecast was based on predicted mortgage interest rates and the overall economy.  They also predict that there will only be a 3% increase of home price growth.  This situation will shift with interest rates and other variables that affect the prices and buying power.

In this specific meeting, NAR asked Congress to adopt polices to allow more individuals to purchase.  This step would help ensure that not only the real estate economy will get stronger, but also the overall economy of the United States.  The NAR cited information that in 2005, the housing sector alone provided 2 trillion dollars towards the overall economy — 16.2% of the overall economy.

So, what do these trends mean for those individuals who are selling at this time?  It is the same information that we have previously been stating in this newsletter.  First, price the property appropriately based on the comparable properties.  If the property is not properly priced, it will not only take more time to sell, but it will also sell for considerably more because as the days on the market (DOM) continue to rise, individuals believe that the house is less desirable.  Consequently, individuals will receive offers which are below the asking price.  Second, it is very important to make the property aesthetically pleasing.  Buyers do not want to buy a property and then spend time and money to make repairs to make the house look nice, inside and out.  This is especially true when there are numbers of homes on the market, and those properties are ready to move in.