Last month felt like a complete turnaround from market conditions in early 2010. Buyers are active, inventory levels are falling, and some sellers are becoming more realistic and understanding of current fair market value.
It took some time and of course it will take more, but I feel like we are close. In fact, I’ve started to see some appreciation in certain communities here in South Florida. I NEVER thought I would use that word again!! “I appreciate” – sounds good, doesn’t it?
So what factors are playing into this rebound?
Short Sales and Understanding Them
In my opinion, there has been a significant increase in the complete understanding of short sales by a greater percentage of agents and buyers. What was, a short time ago, an often misunderstood process is now almost unravelable for most people. Buyers realize that sometimes it just isn’t worth the wait and the fact is you can NEVER close a short sale on a home. This has had a direct effect on homebuyers by simply skipping unapproved short sales in favor of standard or approved short sales that can actually close within your lock-in window. Agents in general have also become more well versed in the short sale process and most can navigate the process with ease at this point. What this has done has moved what was once a “waiting for a short sale” buyer to other homes, thereby increasing sales levels and reducing inventory levels.
Seller Acceptance
For quite some time now, many sellers have been unable to accept that the bubble actually burst. Still focused on drastically overvalued sales in their communities, they still feel like their home is worth 30-40% more than it is. While this belief still holds strong for some vendors, it is starting to fade for many others. This acceptance has helped and will help the market tremendously. By recognizing that things are simply not what they used to be and coming to terms with what is true fair market value, sellers who want to sell will sell, and those who are or were testing the market will not. By removing these “testers” from the market, we lower inventory levels even further. This, in turn, allows buyers to focus only on inventory that is actually obtainable. Since the buyer is no longer wasting time trying to buy homes from unreal sellers, this speeds up the buying process and in turn helps the market recover.
days on the market
With seller acceptance factoring in the uptick, we can only assume that this also plays a role in decreasing days on market for affordable homes. It’s not so much the fact that houses sell faster, but the direct effect it has on buyer perception and, in turn, reaction time. There is simply nothing more motivating than losing a home you had your heart set on just because you thought you could take your time – “it’s not going anywhere in this market” – famous…last…words. Once a buyer loses a house to another, reaction time is cut in half, when they find a house they like again, they ACT. Once again, this plays a critical role in any market recovery.
100% Financing
Ok Ok – the days of 100% financing are gone… aren’t they? Actually no, they are not. FHA financing is essentially the same thing as that dirty phrase “100 Percent Financing” oh man, I can almost imagine the devil himself curling his index finger inviting me to sign on my dream home here with NO DOWN MONEY. .. Oops – (slap in the face) strayed a bit –
FHA financing allows a buyer to purchase a home with only a 3% down payment AND allows a 6% credit from the seller at closing. So… if you put in 3% and get 6% back, how much have you actually put in? And essentially that would be what? Yes, 100% financing.
This is NOT a bad thing, people! FHA financing is saving the market one closing at a time! While interest rates may be extremely low right now, loans are harder than ever to get. You need stellar credit, at least a 20% down payment, and STRONG income verification. Due to the economic times we are in (depression), not many Americans can qualify for these conventional loans, but do you know what they can qualify for? DING DING DING!! That’s right…an FHA loan! So now we have buyers who can actually buy, all because of our wonderful country, let’s keep that in mind when we look at these FHA buyers, okay?
This market WILL CHANGE, we all know that, the question is when. The good news in my eyes is that it looks like it will be sooner rather than later, what I once estimated at 5-7 years, I now estimate at 3-5. Hang your owners!