Signs That The Market Is Starting To Stabilize
2007 and 2008 have been stressful years for many homeowners, particularly those who bought their homes within the last couple of years. The vast majority of these are doing fine, even though they have seen the equity in their homes decreasing but the people who bought homes with little or no down payment and those who borrowed money on the basis of “stated income” just because they could not otherwise qualify are those that got into trouble.
Many of these people have been forced into “short sales” and others have been foreclosed on. The reaction of lenders, who many believe are largely responsible for this mess any way, was to suddenly decide that they didn’t really want to lend to anybody with less than 30% down so loans became hard to get.
The Good News
Now there are signs that things are getting better. From June 1st, Fanny Mae scrapped its “Declining Markets” policy which effectively meant that the largest available loans to most people was 90%. Now with 95% loans available again, first-time buyers can qualify for a loan, thus stimulating the market from the bottom.
The increase in conforming loan limits in March is also just starting to have an effect. $417,000 was the previous limit for lower cost conforming loans but now, with the limit at $729,750, buyers can get a first loan up to that figure at a low interest rate, topping it up with a second loan for the balance of financing needed, rather than take out a large, expensive, jumbo loan.
Higher limits for FHA loans are also starting to have an impact. With just 3% down a home buyer, even with less than stellar credit, can qualify to buy with a loan up to $729,750.
The Market Will Recover
All of this is helping to move the real estate market towards recovery. And it will recover. Fully. A new study from the Joint Center For Housing Studies of Harvard University finds the country poised to see an increase in housing demand over the next decade. The reason? Our population is growing.
From 2010 to 2020 the population will grow by an average of more than 1.4 million people per year. That is a lot of growth.
And note that this is a nationwide study. If you look at Danville or San Ramon for example, you will see that we almost always have a buoyant housing market.
Our Market Is Resilient
Even now, with all the talk of doom and gloom, there is less than a 6 month supply of homes for sale based on the latest figures. 3-6 months supply is generally considered a neutral market. Less than 3 months is a sellers’ market and over 6 months is a buyers’ market. You can find a buyers market in Brentwood or Pittsburg or Antioch or even Concord but you won’t find it here. That’s why our prices have stopped plummeting. Sure there are some low priced homes to be found but they are mostly bank owned foreclosures, many of which are in pretty bad shape. An increasing number of the rest are selling above list price and with multiple offers.
All of the above has to be good news for the real estate market and home owners as a whole.
Soon, things will get back to normal with moderate 2-4% annual increases in value backed by sensible lending policies.