I often find the real estate news in local papers to be overly general or sensationalized, lacking substance. In today’s CC Times, they’ve run a very well-written syndicated article by Matt Carter of the Inman News Service. The article is timely, rich with well-documented information, and worth a read. If only they had made it available via The Times online site, I would have provided a link.
Carter talks about the fact that both Sellers and agents usually look forward to the Spring for increased sales and spikes in housing prices, but that it will be harder to do so in 2010 within markets hard-hit by unemployment. To further exacerbate the issue, he points to 3 “destabilizing events” that are expected to occur this Spring. The first is an expected up-tick in interest rates by the Fed, something I mentioned in my previous post. Second, the FHA has announced that it will be tightening its underwriting standards as soon as April. Third, Congress is expected to let the new home buyer tax credit expire for those not under contract by April 30th.
Some would state that Lafayette real estate is not affected by the last two items, nor most surrounding areas. I would argue that the road to recovery in real estate begins with a solid and healthy market at prices well below those found within the Lafayette, Orinda, Alamo, or Walnut Creek real estate markets. This becomes the “foundation” for up-market properties. The “trickle-up” theory of economics has been found to apply to real estate.
Furthermore, the article underscores the fact that unemployment is expected to stay high through 2010, most likely in double-digits. I also touched on this fact in recent posts, and also mentioned the “under-employment” problem that we are now facing. It is an unfortunate byproduct of the recession, and we all know people who have been personally hit hard by this cold reality. In combination with tougher underwriting guidelines and increasing interest rates, there is a significant probability of dramatic slowing of any housing recovery by Spring to Summer.
We all want to believe that we are well along the road to recovery and that our economy is going to come bouncing back this year. I’m sure that there are many real estate agents out there talking about “the rebound”. While I am much more optimistic about this year than what we all saw happen in 2009, I prefer to temper my enthusiasm with a fact-based look at reality.
