Saturday, December 29, 2007

2008 A Normal Market - Steadying Picture

Economists agree that home sales (new and existing) will bottom out in 2008, somewhere in the second or third quarter. While we've kind of been in that scenario already, it is quite a different thing for forecasters to go on the record stating a clear demarcation for appreciation again. So, local markets may vary, but nationally, because of underlying health issues involving the U.S. economy, there is a projected 'line in the sand' coming, stemming an unprecedented historical decline in housing prices.

In certain areas where there has been fantastic appreciation in the past, causing more of a bubble bursting situation, one can relatively project before old pre-appreciative spiked sales prices, given a homes average typical appreciation of 4 to 5% a year, where things ought to be now. It mostly lines up with a bit of slowing still projected through 2008.

Some variance of predictions exists between Chief economist Yun with the National Association of Realtors (NAR) and economist Douglas Duncan with the Mortgage Bankers Association (MBA). Yun asserts that while lending is more stringent in their requirements, he still believes that the pool of qualifying buyers is larger than believed saying, "This slowdown has never been about the underlying fundamentals of the economy... Consumers have the means to buy, but they've lacked the confidence. Once they see sales and prices stabilizing, they'll be back in the market." Conversely, with access to loosely written credit closed off, Duncan asserts, "you're likely to see continuing decline in the house prices and buyers sitting on the sidelines."

Economists say that tighter underwriting is exactly what the market needs right now. But Yun believes that the pool of ready buyers will still be larger than believed because they will have more financing options such as federally backed loans, specifically FHA loans. He recounts that FHA loans had a 20 percent share of the market in 2000 before the growth of sub prime lenders and if Congress passes reforms making them easier to obtain, which it is doing, then it can capture that share again.

I called one of my local St George Lenders, Steve Stout with SGI Mortgage to ask him about FHA reform passing and he told me that it hasn't done so yet, like anticipated. He also detailed how that he already supplies the FHA lending options as a lender. He clarified that the reform making FHA more of an option to people is not so much the requirements they have, but in outsourcing the availability of the program itself to all the different mortgage lenders there are, although reforming requirements is arguably a needed big part of it as well.

Alan Greenspan, former Federal Reserve Chairman, in speeches last year, gave a less than one in three for chances that the economy would slip into recession this year, which is the only thing that could quell a return to normalcy in the housing market. Even the Mortgage Bankers Association, sees a persistent growing of the economy through the first three quarters of the year as a basis for home buying ramping up into the end of 2008 and beginning of 2009. The key factor of how the housing is also dragging or won't be dragging on the economy is also thus taken into account in their models.

The commercial real estate is poised for continued solid performance across sectors this year. The tightening lending standards in the commercial sector have been taking place over time relegating commercial to a more normal and traditional scenario involving income investing. In other words, commercial owners plan to make more money from cash flow rather than appreciation. I can help if you need help regarding St George Commercial Real Estate.

Overall, 2008 is the year of return and not continuing decline... a year of return to normalcy.

If you'd like Brian to keep his eyes and ears peeled for you to help take advantage of good deals which equate to buying right, just give him a call or visit us on our website at St George Real Estate.


displayname said...

Hi, Colin here from AmericaHugs. I went cross country on a motorcycle a time ago. Some of the nicest people live in Utah. I read a lot a of real estate and economic blogs,one of my favorites is Calculated Risk

Brad said...

It's funny how real estate agents are always looking on the bright side or in this case making the bright side up. Most economist are stating that 2008 is looking to be worse then 2007 and that we are just beginning the slump. I have read a few economist that I happen to agree with, who state a good portion of the problem lies with the lending industry. I tie in the over-zealot real estate agents as being part of that problem also. With your poor forecasting and that of other agents, I'm sure not to take advice from a glorified used car salesman again.