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This will be one of those "we already hit the bottom months ago" articles so beware!
I think most real estate professionals really don't know any better than the most proficient economist exactly when the market will turn. Watching key indicators such as standing inventory levels, the number of foreclosure filings, the bond markets, and unemployment numbers can give some guidance. We can expound, predict and advise our customers but at the end of the day, the market will do what the market will do. Alot of folks certainly weren't prepared for the drastic downturn!!
I believe that the consumers' impressions of the market are a very important part of it's activity. Some areas of the country or your city and some segments of the real estate market are hot right now while others are still lagging. Many buyers are still watching for the foreclosures and short sales as they come on the market - in other words, a whole lot of bargain hunting is still going on. People who haven't yet purchased may not realize that frequently these homes are not the best deal when so much has to be repaired or replaced. The other intriguing thing is that folks will buy a foreclosure in a neighborhood that has had several foreclosures sold already. At that point it's strictly the most square footage possible for the money because how can there be equity or value to buying low in a neighborhood that's already been brought "low"?
I also believe there was a bottom from a builder's standpoint and that we passed it long ago. Material, land, and labor costs are what they are. Materials have actually started to go up with shortages in lumber as well as trim. Companies have to make a certain amount of profit in order to stay in business. Beware the builder that is priced severely below the rest of the market; it could mean the company is in serious financial difficulty. What corners are being cut to get those prices where they are and where will you turn if you have issues with the home after closing? A quality home with a decent level of included features will be priced right now at the lowest level that a good builder can accept and still deliver a product they can stand behind.
As a buyer it is very hard to decide when the right time is to purchase. Buyers have heard that "now is the time to buy" for almost two years now! That being said, two years is a long time for a market to stay at the bottom. Inventories HAVE come down. Interest rates WILL eventually have to go up. FHA really IS making changes that will mean considerable increases in costs to borrowers after April of this year. Foreclosure activity WILL slow.
There is so much pent-up demand out there....sellers who will finally be able to sell, buyers who had issues in 2007 and 2008 will be able to buy again soon, all other consumers who have been unable to afford a home for so many reasons. Once this demand is unleashed, the upturn will come and prices will go up with it. Everyone who bought in the first half of 2010 will be Oh So Glad that they did.
(See, there I go being one of those real estate professionals making predictions........)
