Last week I received a Wall Street Journal article via email from one of my mortgage broker contacts titled "The Housing Crisis is Over." In this May 6, 2008 article, a case is made that as of April 2008, home prices across the country have likely hit their lowest in the cycle. There are two reasons for that: the mortgage industry is starting to unfreeze, and the drop in prices have finally made homeownership affordable again.
That said, it's highly unlikely that the markets will race back to resume their levels achieved in 2005-2006. But, it does mean that the real estate markets across the nation are going to become more liquid, homes will start moving again and people will be able to get on with their lives.
In New York, we never really had it so bad, thank goodness. Prices remained about level, barely inching up, but at least units were moving. We were able to credit that to our high homeownership in co-ops; as difficult as they are to get into, the high down payment requirements and stringent financial requirements may be what saved us in the end.
On the other hand, we have not been immune, particularly since the Bear Stearns fiasco. When that happened, banks put a number of loans that were in underwriting on hold, as well as home equity lines of credit. As of April 2008, the average time on the market (from putting the property on the market to contract signing) is four to six months. So we are feeling some fallout at this point. Still, people are out shopping. They're taking longer to do it and waiting to pull the trigger.
Yet the market is not completely dead. Housing starts across the country were up 8.2% in April, when economists expected a further drop of 1.4%. (Wall Street Journal, May 16, 2008). So homebuilders are starting to decide to build homes again. They are still down from two years ago, but this is still positive news.
I think New York's velocity will pick up soon. It's true that Bear Stearns made 20,000 people lose their jobs, but over 12 million people are employed in New York City, so that's not a huge dent. Those people will be reabsorbed into the marketplace. Other Wall Street workers may have received smaller bonuses, but they still got bonuses this year. So, maybe not this spring, not this summer, not even this fall or winter, but eventually the market will pick up and go on as it has before.
For the home buyer or home owner wondering what all this means - I say, look at the little picture for now. Don't worry about whether the national market has hit bottom or not; worry about whether it makes sense for you to buy or sell your property. If you are thinking of buying and are planning to live in your home for at least 4-5 years, then you are likely to be safe from the current market doldrums, and in fact will have advantages of more choice, more time to make a choice, more negotiability and amazingly low interest rates. If you need to sell, then with proper planning, correct pricing of your property, good choice of a real estate agent, and possibly by being more flexible about fixing up the property, you will get your property sold.