I think it has finally happened. We’ve hit bottom. All the top analysts have been predicting it for quite some time. I remember in 2006, they said we would see a recovery in 2008….then 2009….then 2010. I don’t know what criteria they use for making their predictions, but here is what I base mine on, well, at least for Lexington:
- Remember the glory days of real estate when everybody was wanting to flip houses? Heck, several of my friends who know nothing about real estate were wanting to do it back then. It was just on everybody’s mind. Rapid appreciation was the motivation. I am sure they are glad they didn’t! Well, now everybody is talking about wanting to buy real estate as rental property. It is on everybody’s mind, and low prices are the motivation. Just as the average Joe or Jane wanting to flip houses was an indication of the frenzied peak, I think the same people wanting to buy now shows we have hit the bottom.
- Buyer’s these days still want a bargain, but there isn’t the fear of buying like there was even last year at this time. I think part of this is the change in attitude about real estate. Nobody is viewing it as a quick money-making investment anymore. People seem to view their home as just their home and a way to build equity by paying down principle over time.
- The market doesn’t have anything artificially stimulating it. The tax credits are over. We all know now what the market is like without any lipstick or botox.
- I’ve seen a couple of houses sell for waaaaaaay more than they were worth. I just had a deal where another buyer paid my client $5000 to walk-away from their contract…..on top of that, the buyer’s back up contact was for just over $20k MORE than my buyer was paying!
Despite all this, I don’t think we’ll start seeing appreciation or a return to a high volume of sales. I think we’ll stay near the bottom for a while. I’ll even go as far as saying that some newer neighborhoods may see a little more depreciation as the dust settles. In the past, appreciation across the board made up for things like aging systems and the normal cycles of decline that a neighborhood goes through. A flat market means that a seller isn’t going to be able to put 5-6 years of wear and tear on a house and get exactly what he paid for it. I think it is more like mileage on a car-the less usable life you pass on to the next guy the lower the value.
It’s over, but you still need to make wise decisions!