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Smart strategies for buyers and sellers
By Kenneth R. Harney
Seattle Times syndicated Columnist
What's the shape of a post-correction real-estate market? And more to the
point: What does that mean for you in the new year?
Those questions are becoming increasingly relevant as the latest sales
data show a small but unmistakable uptick in activity and declining
numbers of unsold homes. In late December, the National Association of
Realtors reported that existing home resales were up by a hair — in
November, the second straight month of modest increases from the cyclical
trough in September.
On Dec. 27, the Commerce Department reported that sales of new houses rose
3.4 percent from the previous month, while builders' unsold inventories
dropped to their lowest level since last February.
All of this suggests that the 18-month market correction that followed the
four-year housing boom has just about run its course. From a national
statistical perspective, we're somewhere near slack tide, but no one's
looking for another frothy high tide anytime soon.
Some local markets are moving contrary to the relatively flat national
trend. Three dozen metropolitan areas, primarily markets with moderate
prices and solid employment growth, still racked up low double-digit price
increases at the end of the third quarter of 2006, according to federal
data.
Dozens of others, primarily where unemployment has been a persistent and
increasing economic drag, showed continued signs of modest deflation in
home values, the same data show.
In general, however, the housing market appears to have weathered the
correction phase of the cycle without the blood running in the streets
that some bubble-bust bears had forecast.
Median prices of resale houses have fallen 3.6 percent nationally
year-over-year, and anecdotal reports of 10 to 20 percent reductions in
asking prices are common in formerly hyperinflated markets. But that's
what corrections — as opposed to outright busts — are all about.
Moderate price cuts eventually stimulate buyers who have been sitting on
the sidelines to get back in the shopping game. Nationally, that's where
we appear to be at the moment, and where we're headed in 2007, absent
unexpected economic jolts to the global capital markets that could send
mortgage rates up dramatically. In that event, all bets are off.
So what are smart strategies in a slowly recovering real-estate
environment for heads-up buyers and sellers?
One good rule: Think baby steps instead of big leaps. Sellers shouldn't
assume that with the trend line turning positive they can suddenly price
their house for what they might have commanded in early 2005. Forget about
it. In most places, buyers still have the upper hand. There's plenty of
inventory to choose from; shoppers are picky; and unrealistic pricing is a
guaranteed route to sitting dead in the water for months. Be real on
pricing, and be happy there are buyers out there again.
On the other hand, smart shoppers should recognize that the game is
changing, the spring buying season is just on the horizon, and that
lobbing lowball offers at marked-down properties isn't a winning strategy.
If you are seriously in the market, be prepared to pay a price that may
not be as low as you'd hoped but that just might be your last shot at a
particular house before it sells for closer to the asking price a few
weeks from now.
Shoppers also need to understand that today's prevailing mortgage rates —
a little above 6 percent for 30-year loans and the high-5-percent range
for 15-year loans — are less than a point above 40-year lows. They won't
be around indefinitely, so a fairly priced house combined with a
near-historic low-cost mortgage add up to a potentially great deal.
A second essential for the emerging market: Smart buyers and sellers need
to be well informed. They need to plug themselves into all the key local
data that shape pricing and deal-making — time on the market, inventory
declines and increases, the overall pace of sales, and the average gap
between asking prices and closing prices. Be in command of these numbers,
and you will be well equipped to play heads-up ball, whether as a buyer or
a seller.
Much of this data is available online and offline from real-estate Web
sites, regional or local multiple-listing services, Realtors groups, and
mortgage lenders and brokers. It's also available person-to-person from
the front-line experts on any given micro-market: agents who work specific
neighborhoods or market segments. They make their living, in up cycles and
down, by listing, selling and thoroughly knowing what's happening inside
their target areas.
Better yet: There are no commissions for information from these
specialists. All you need to do is show that you're serious and you can
compile a lot of valuable market intelligence for free.
Kenneth R. Harney
Copyright © 2007 The Seattle Times Company
Saturday, January 6, 2007
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