Thursday, September 8, 2011

A Glimmer of Hope in Housing Market

Some good news in our local real-estate market: sales are expected to outpace last year, even though last year there were federally assisted incentives. Values remain stagnant however.

Given the current state of unemployment in Washington State and across the nation (9.3% and 9.1% respectively), I am not holding my breath this is the beginning of the long slog out of the housing recession. Oh, is the recession over? Well, I think you should ask the 25 million folks who are either unemployed or under-employed whether they thing the recession is over.

It is possible that home values have more of less reached a point where they really can’t drop any further unless the economy takes an even more dramatic turn for the worse. We might have reached the point where those that can afford to purchase a house have finally decided the bottom has been achieved or is in sight.


It is going to be a while before we see home values increase because the inventory of foreclosed homes is so large. Currently, there are over 6.5 million that are in some form of foreclosure. When those units do hit the market, the value of existing homes will not improve. Like any free market-based product, home values are based on the law of supply and demand. Until unemployment improves and people feel more confident in the direction of the economy, home sales are going to remain slow. If the inventory of foreclosed homes hits the streets with little to no grow in the economy, it could have a significant impact on the value of homes.

Could it be possible that the banks write off many of these homes as complete loses, helping to reduce the inventory? I can see that happening as it already has in some places. But I don’t see this as a widespread trend. Banks are businesses and they need to make a profit to remain solvent. Even if a bank sold a home for pennies on the dollar, that is still better, at least for the bank, than no money at all.

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