Monday, September 22, 2008

What's Next For Real Estate?

There is a lot of speculation regarding where the market is, where it's going and what the effect of the fed takeover of Fannie Mae & Freddie Mac will be. The general consensus is positive but that it may take some time before we see the full effect on the marketplace.

While we don't yet know all the details of how the new fed entity will work, some general assumptions can be made. Short term, it will free up money for banks so that they will be able to be more active in granting loans. This makes more money available for buyers & should result in a slight pickup of sales in the near term. As time goes on & more money becomes available this trend should build momentum. Longer term, it should have an impact on buyer & seller confidence producing more market stability.

The fed will pick up bad loans from participating lenders and, though they will be discounted, banks will be able to recoup cash more quickly than by doing short sales or foreclosures, adding more overall capital to mortgage markets. This means that there will be far fewer short sales - only non-participating lenders will still be doing them.

Opportunities for below market value purchases will still exist. Since the fed will be buying loans at a discount they will be able to sell them at a discount to investors and home buyers. Though this should contribute to market activity, it will have a negative impact on prices, though probably not any more than currently exists from short sales. It isn't yet clear how much the fed will discount the properties it acquires.

Independent of the fed actions, Denver home sales are up by 49% over 2007 and we are seeing more competition for properties in lower price points, often with multiple offers, resulting in bidding up the sale price. Though other local markets have not yet seen this trend, it seems pretty safe to say that the end of the buyer's market is already occurring in Denver and it is reasonable to expect that the fed's actions will result in this trend expanding to other markets over the next year.

While it is still possible for buyers to find properties priced below market value, expect the pool to shrink fairly rapidly in the coming months. Buyers who have been sitting on the fence waiting for the real estate market to bottom out may soon find that they've missed their opportunity.

While there's no way to be sure how long the market turnaround will take, things are expected to pick up considerably once the uncertainty of the national elections are behind us, regardless of which party wins.

Sellers who have not had success should ask themselves whether they want to sell quickly, in which case they should be considering price reductions. If you've had showings but no offers, buyers are telling you that you're priced too high. The alternative is to wait for the buyers market to subside.

Sellers, call me now to discuss your best strategy for selling your home in the shortest possible time and for your best possible net.

Buyers, call me now if you would like to take advantage of this rare opportunity to purchase built-in equity properties.

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