Pending Sales Up Again. So What?

So, what does the continuing rise in Pending sales signal? Good question. I know almost everybody in the real estate profession hope it means that the good old days are right around the corner, that soon we will return to normalcy. Well, I’ve got news for them: the good old days are probably gone forever, just as they always have been. So what does the future hold?

For Buyers: In my humble opinion we probably have two more years before housing begins to appreciate again. I think that we probably are about 60% of the way through the foreclosure bubble so I’m guessing that we have one more year of falling values (maybe 5%) and then a year of plateau, before we head back up. These artificially low-interest rates can’t last forever (can they?). We’ve been saying that “interest rates are at historic lows” for what seems like three years. Sooner or later that has to end. All in all, it’s a great time to buy. Foreclosures and short sales are providing incredible opportunities for buyers in all price ranges and in the past six months are finally beginning to affect the sales prices of non-distressed homes. The one thing I would caution buyers about is that short sales and bank-owned properties are now listed fairly close to the amount that banks will approve, so the value is built-in to the price. I would guess that this is the case in about 75% of all “distressed” listings today. A good Realtor can help you determine if that is the case. The bottom line is that buyers who take advantage of these low rates/prices today will be very happy with their investment in 5-10 years.

For Sellers: If you read the above advice for buyers, you can extrapolate what that means to you. I have spoken to many folks who were willing to sell, but were horrified with “what their house is worth today”. “I’ll just wait awhile until prices come back,” they say. What I have begun tell sellers is that that’s fine, if they want to wait ten years. As a I detailed above, I believe we are two years away from appreciating house prices and when they start back up, they aren’t going to just snap back, it will take time. It’s important for sellers to understand what they want to accomplish and if that doesn’t include living in their current home for the next ten years, biting the bullet and doing what they need to do while they can buy their next home at a great price with a great rate may be the right move today. (A final thought for sellers: If you are behind on your payments whether you want to stay in your home or not, DO NOT suffer foreclosure. There are alternatives and foreclosure should be a last, last, last choice.  Contact a Realtor with distressed property experience. )

For Investors: If you have a longer horizon (say ten years) and don’t mind getting into the rental game, you can find very desirable property in great neighborhoods. The rental market is exploding at present and at the very least you can find properties which will be revenue neutral for the first couple of years, then give you some cash flow, and finally appreciate enough over the next ten years to really be a good investment.

The bottom line for next year is that the lower price ranges should continue to prosper while higher price properties (say over $300k) will sell if they are priced properly.  Out of adversity comes great things, for those that willing to move now.