The national news is full of bad news about our economy – rising unemployment, stocks hitting ten-year lows, and the value of our homes falling. We wanted to get an inside perspective so we turned to the experts – the National Association of Realtors. We were fortunate to be joined by Jed Smith, their Senior Economist, on The Bigg Success Show today. Here’s a recap of our conversation:
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Hear Jed talk with George & Mary-Lynn on The Bigg Success Show! Click the purple player: Play Now | Play in Popup | Download
Hear Jed talk with George & Mary-Lynn on The Bigg Success Show! Click the purple player: Play Now | Play in Popup | Download___
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We’re hoping for some rainbows and butterflies from you, Jed. Are there markets where home prices are actually rising?
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There are a few. Right now, the market is in a process of stabilizing, which means that prices are down but sales activity is up in quite a few markets. Just to give you a few examples, prices are actually rising a little in Minneapolis, Minnesota; Mobile, Alabama, Stamford, Connecticut; and Amarillo, Texas. It varies around the country depending on a lot of local conditions. However, right now, we’re particularly interested in the level of sales. Obviously, a good level of sales can lead to an overall price rise in the future and, as your listeners probably know, both sales and prices have been declining for awhile. We’d sure like to see those level out and there’s some reason to believe that we’re getting to the bottom of the market.
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Real estate is still a local game, right?
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Yes. Every market is local. To give you an example, prices are way down in Prince William County, Virginia. That’s a suburb of Washington. Just across the way, up the street in Washington, D.C., prices are stable; and in Arlington, Virginia, prices are actually starting to rise a bit. So it varies from region to region.
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So, while we may be hearing doom-and-gloom about national real estate prices, it’s possible – depending on your local market – that the dream house you want to buy is getting more expensive.
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Well, prices right now are down. As I said, they are starting to turn a little bit in a few markets. Most markets are either declining a little or holding steady while they’re getting ready to turn. But I think if you’re thinking about a house right now, I don’t think you want to think about a short-term flip. There was a lot of flipping a few years ago during the rapid run-up in prices in 2006 and 2007. Right now, as measured in terms of affordability, taking into account interest rates which are at an all-time low coupled with reasonable prices, housing is actually a very good buy. If you’re not buying it to flip it, but rather to hold it for five or six years, I think you’ll be very pleased with the ultimate result.
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On average, Jed, how much have house prices fallen back nationally from their peak?
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Well, that will vary from area to area. I think we want to talk in terms of the last year. They’re down about 15 percent in the last year, probably down about another 10 percent above that from the peak. That’s not true everywhere. That’s just a national average, like my head’s in the furnace and my feet are in the Artic, so I’m comfortable on average.
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I like the way you explained that!
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We think that with the forthcoming recovery – there’s a lot of spending going on, a lot of economic stimulus, and a lot of effort to stop foreclosures – we project that prices will start to level out, certainly, by the fourth quarter of this year. That’s why, when prices are in good shape and you can get that $8,000 tax credit, right now is a good time to consider buying a house if you don’t own one.
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We’ve been hearing that prices in areas like Detroit are just astoundingly low. Is it wise to go into an area that has been beaten up and buy some property there?
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That depends on the long-term outlook for the area. Let’s put this into a little broader perspective than Detroit. Much of California, Arizona and Nevada have had prices that have been beaten up pretty thoroughly. Yet we all know that those areas are going to have vibrant job growth over the next four or five years and, right now, we see buyers flocking out to purchase property in that area. The prices are low, but the number of buyers showing up is substantial. I think for the longer term, these folks are getting a good buy.
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For people who are thinking about buying in some of those areas, do you have any recommendations for finding an area that is beat up but has long-term growth potential? How do people get that information?
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This is the type of information – specific market characteristics – that a Realtor would know. A Realtor could give you an idea of the outlook for jobs, income, population in a specific area, and how prices compare to the overall market for that area. That’s why we would recommend working with an expert – a Realtor – to understand the market because there are some good buys out there.
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And you probably know a Realtor or two, don’t you Jed?
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I probably do.
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I think you’re absolutely right. I have found in my life that it pays to turn to the professionals and let them help guide you through the process. With a Realtor, you know it’s win – win all the way through.
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We think that Realtors bring a real value-added to the market because they live in the community, they know the community, and they’re part of the community. They’ve been there for a long time and they’ve done a lot of transactions. They can guide you – just like a doctor or a lawyer does with their professional services – in making your largest purchase.
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Thanks Jed so much for sharing your time and wisdom with all of us! And a special thanks to Hilary Marsh and Sara Weis, Jed’s co-workers at the National Association of Realtors, for helping us arrange our conversation with him.
If you’re in the market to buy or sell your house, the National Association of Realtors is a great resource. Check out their tips for home buyers and sellers.
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