Jim Valentine on Real Estate
The definition of market value is what a willing buyer will pay, and a willing seller will accept. If buyers still want to buy and sellers still want to sell what’s going on with the market? There are many variables that affect the market, few of which can be controlled by buyers and sellers.
Interest rate increases initiated the changing market. That was compounded by the resulting inflation and cost of living increases. Fuel prices doubled resulting in higher prices on just about everything we consume.
So, we have higher interest rates cutting into our buying power compounded by higher costs for almost everything we consume yet home prices haven’t fallen dramatically. In 2008 and ensuing years the market dropped 70 percent in Northern Nevada. Today it is off a bit, but not as much as the media hype would have you believe.
The median sold price per square foot is down 8 percent over April of last year. That was just a month before the interest rates started to adjust so a good comparison for our purposes. Our median sales price is down greater than that, but the sold per square foot price better reflects market changes.
Seattle had one of the most dynamic markets in the United States and they are only looking at a 12 percent decrease in pricing now. Demand is high and inventory is low. Why the scarce inventory? There is a normal ebb and flow in the market of supply and demand. People want to move up as their family grows and they get to be stronger buyers. Conversely, sellers reach the point where they want to downsize.
That market movement has paused for a bit as those with 2.5 to 3 percent loans on their homes don’t want to leave them and get into a 6 percent loan. They are waiting to see if rates will come down. This is contributing greatly to the severe lack of inventory. Where will loans go is anybody’s guess, but there is a new governmental policy that will throw another unnecessary stick in the spokes of the economic cycle.
The new government-backed loan policy is being protested, but it took effect this month. It provides for those with good credit and cash down payments to subsidize those without one or the other or both. If you have good credit, a good down payment, and are getting a conventional loan backed by Fannie Mae or Freddie Mac you will be charged higher fees. Borrowers with lower credit scores and lower down payments will be charged lower fees. It doesn’t really make sense to reward those that haven’t worked on their credit and savings while charging those that were diligent in their personal financial efforts, but that is a new program that went into effect May 1.
We think we have a good idea for this market that we’ve never heard anybody talk about. How about a loan program where the lender lets you take your loan with you to the next property? In other words, just like you move your furniture to your new house, you can move your loan to the new house on the same terms and conditions.
Of course, you’d need to have appraisals and there would be processing fees, but you can keep your rate and lender intact. Seems like that would loosen up the market without compromising anybody.
Market variables will always be a part of the real estate world. Learn how they affect you and your wants and needs as a buyer, or a seller and you will be able to plan your real estate investments better. If you are going to live in your home for 20-30 years, then you have one set of rules. If you are looking at a five year hold you have another set.
Real estate is a long-term endeavor for most people, not a turn and burn. Even if you aren’t active in today’s market be sure to pay attention. Things constantly change and many of those changes will affect you someday.
When it comes to choosing professionals to assist you with your Real Estate needs… Experience is Priceless! Jim Valentine, RE/MAX Realty Affiliates, 775-781-3704. dpwtigers@hotmail.com.