Real Estate's Fifth Best Year

From Eureka Times-Standard, by Richard Dorn
Article Launched: 03/27/2008 01:27:28 AM PDT

The fifth best year in the last 50 years ... not bad. I am referring to our real estate market. Although there has been a great deal of media attention lately about the real estate market, let's take a look at a few facts, presented in plain English, without the addition of sensationalized headlines.

The bottom line? We sold 5.67 million homes in the U.S. in 2007 compared to 6.48 million in 2006. Over the years we have seen a 50 percent increase in home values nationally compared with a 1.5 percent decrease in home values nationally over the past 18 months.

Homes sales actually peaked in the summer of 2005, and 2007 was the first time home prices have dropped since the 1930s. Many believe that the slight drop in home sales in 2007 was the balancing of our free market economy

Further research indicates that not all real estate markets in the U.S. are experiencing a slowdown. Salt Lake City, for example, is still rapidly appreciating, as are Salem, Seattle, San Antonio, Buffalo, Raleigh and many other cities.

When considering the current condition of the real estate market, it is important to consider the impact that all the recent press regarding home loans has had on the market.

Let's look at the real numbers: 35 percent of the homes in the United States are owned free and clear. Prime loans are still a great product for the investor and continue to be solid, with very few foreclosures.

Only 9 percent of the homes in this country have a subprime loan, less than one in 10. However, if you have a poorly created subprime loan, you are in a less than desirable position. I was just speaking with someone who, unfortunately, refinanced with a subprime loan and can no longer make the payments. After asking many questions, it was quite clear that the loan should never have been made in the first place.

What does 2008 have in store for us? A return to a rational and reasonable real estate market. There will be a great deal of pent up buyer demand.

The proof of this begins with the fact that the number of homes for sale is shrinking (remember the balancing of our free market economy). We have seen this in our local market in the last quarter, with the total number of homes for sale dropping approximately 15 percent. First-time home buyers will also re-enter the market, as they have been waiting in the wings for the market to equalize.

Furthermore, home loans will be revamped and restructured. In turn, buyers can feel more secure in purchasing a home without so much worry of foreclosure. One big benefit of the recent mortgage crisis is that the consumer is more aware of the pitfalls of some loans.

One of the largest groups of buyers actively purchasing and projected to continue to purchase in greater numbers is the international buyer. With the dollar continuing to fall against the euro dollar and the pound, it makes sense that international investors would be looking at our market.
The top markets that the international buyer is looking at are Florida, California and Texas. The top three countries which these buyers are from are Mexico, the United Kingdom and Canada.

The current market, and the market in the foreseeable future, offers an outstanding opportunity for home sellers who are moving up to a larger or more expensive home to potentially save tens of thousands of dollars. All in all, we are forecast to sell 5.69 million homes in the U.S. in 2008, and prices should stabilize.

As I mentioned earlier, this is the first year home prices have dropped since the 1930s. If past history is any indication of the future, right now is a great time to get back into the real estate market. Whether buying your first home, or expanding your real estate portfolio, 2008 will be a solid year for real estate and one of the best opportunity years in recent times.

Richard Dorn is a local Realtor and a member of the College of the Redwoods Board of Trustees. He resides in Eureka.