Smoke Before Fire

We all know “where there’s smoke there’s fire,” and you must proceed with caution. The news is getting better on the outlook of our local real estate market every month, which is great but a slow process.

It’s a percolate up situation. The market is starting to repair, from the bottom up. If you look at the numbers we’ve accumulated so far this year, you’ll see a decline in the Months Supply of Inventory (MSI), which is a good thing; we ended 2007 with nearly 17 months of inventory, where five months is considered “normal,” now we’re down to approximately 11 months of inventory. In light of the number of listings sold going up, we are steadily catching up.

This is good news for sellers because it is bringing down buyer options to a healthier, more competitive level. Just after the housing bubble, when there was seemingly endless inventory, buyers were overwhelmed with options and had control of the prices. With supply so high, prices dropped (aided and abetted by the mortgage collapse yielding distressed properties) and if one seller wouldn’t accept a low offer, the buyer could just walk down the street and find someone who would.

Fortunately now, sellers have a little more strength in their corner as our market works its way through this adjustment. As a result, the real “deals’n’steals” are moving out of the market, making way for the owner-occupied homes that are in great condition, but still priced competitively with REO (bank-owned properties) and short sales. Not only are these homes well maintained, but now they’ll have even more reason and ability to fight for their price. With buyers’ options becoming more limited they will have to be prepared to pay Fair Market Value for these superior properties and accept that it won’t be an REO steal.

Even the Wall Street Journal is getting on board with the good news. “The Housing Crisis Is Over” was the title of an article on May 6th from WSJ.com. In spite of depressing headlines the article asserts “that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.”

If you also read our snail mail newsletter you’ll see the same opinion promoted but with the caution that the bottom does not mean housing bubble prices are on the horizon. Prices will continue their steady climb, but don’t expect to see those same outrageous numbers from 2005-2006 for another decade or so.

So, if you’re a buyer, get out there and buy! Don’t wait, or else the “bottom” you’ve been waiting so desperately for might just pass you by. If you’re a seller, hang in there, there is light at the end of the tunnel.