High inventory levels. An uncertain election. The seasonal slowdown. Our financial market. One thing is clear: the real estate shift is here.

But what does this mean? What are real estate professionals actually witnessing out there?

In general, we see selling prices in Wilmington resetting back to the levels they were at 2-3 years ago. Based on trends and activity, we expect them to reset even further- perhaps back to 2002/2003 levels. This presents an incredible opportunity to purchase a home (primary, second or otherwise) at a deep discount. While many buyers are balking at purchasing and taking a position in this market, it is in their best interest to do so for the following reasons:

1) If you wait until you know that the market has “hit bottom” before buying, the market will already have done so and be on its way to recovery. You will have missed out on the best deals available.

2) Interest rates (that have been at all-time historic lows for nearly 8 years now) are destined to rise. A year ago, it was feasible to get a 30 year, conventional mortgage for approximately 5.75%. This has now risen to approximately 6.5% at least. Any potential “savings” in lower sales prices will be eroded by a higher monthly payment due to increased rates.

The truth is this real estate market is most likely here to stay for 10-30 years. The main problem the we face right now is the average American family can no longer afford the average American home- illustrated in the graph below:

This happened when lending guidelines were loosened (in response to the idea that “every American should own a home,” ultimately creating an excess of buyers for which the market wasn’t prepared). When you increase demand, supply goes down and prices go up, resulting in the seller’s market of 2001-2005. Of course what goes up must come down, so we’re in the process of moving back towards equilibrium.

Obviously, this affordability issue effects the entire housing market as it limits the supply of buyers. The biggest problem with the local market is that the normal “buyers” can’t sell their homes in other areas and thus purchase homes here in Wilmington. Ultimately it’s a large chain reaction.

Between the lending institutions reaction to the market conditions (making qualification more difficult), the pricing and affordability issues, and the lack of real understanding about the market (many agents/sellers think that this problem will be corrected by next spring), the market is a bit mired.

It remains a great time to buy a home. The irony of this situation is that all the people in pain are now saying “this too shall pass.” Why weren’t they saying it when times were good? All time passes, whether good or bad. A great lesson for the future is to store up in times of plenty knowing that “this too shall pass.”

If you’re looking to take advantage of this crazy market, or if you’d like a consultation on how to sell during these times, please give us a call at 910-442-2030.

All thoughts and comments welcome.

This entry was posted on Thursday, October 23rd, 2008 at 1:56 pm and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.