West Cobb Real Estate News!

NAR economist underlines real estate’s silver lining

Laurence Yun, the chief economist for NAR, had plenty of positive news for
Realtors at last month’s conference. Yun attributed much of today’s subprime
mortgage problem to greed. Wall Street wanted the 10-12 percent return that
subprime mortgages yielded as opposed to the smaller returns from more
traditional mortgage products. His take on the Wall Street types: “They gambled.
They lost.”

Yun’s outlook for 2008 sees a shift from greedy speculators to serious
homeowners. 2008 will be a year of opportunity where there will be serious,
healthy business. Furthermore, Yun predicted that the market returns to normal
by 2009.

According to Yun, one of the biggest mistakes that reporters make is talking
about national trends. Nationally, 2007 was the fifth best year ever on record.
Home prices declined about 1.5 percent after a 50 percent run up in prices.

The challenge is that national numbers are pretty much irrelevant. Yun argues
that talking about national averages is about as effective as having a national
weather forecast. Like the weather, all real estate markets are local. In fact,
you may have a buyer’s market and a seller’s market operating within a single
market area based exclusively upon price point. Here are the other key pieces of
positive news from Yun’s economic report:

1. New housing starts: Even though these are dropping, there
was too much building in recent years. The market is simply adjusting to normal
supply-and-demand pressures. The inventory is “being controlled which makes
stabilization occur more quickly.”

2. Foreclosures: According to Yun, the 41 percent increase
in foreclosures has resulted primarily from investor-heavy real estate purchases
in Arizona, California, Florida and Nevada. The majority of these individuals
are flippers whose investments did not payoff. More importantly, the number of
foreclosures in Utah, New Mexico, North Carolina and South Carolina is actually
declining.

3. Under-priced markets and superstar cities: Although the
coastal markets are still overpriced, Middle America is under priced.
Nevertheless, Yun cites a new trend termed, “superstar” cities. These cities
will command premium prices, regardless of what the market does. There is so
much wealth concentrated in these areas, that measurements are simply not
predictive. In addition to London, Paris, Tokyo and New York, Yun also
identified San Francisco, Miami and Seattle as potential new superstar cities.

4. The recovery has started: Other than the three states hit
heavily by job losses in the automotive industry (Indiana, Michigan and Ohio),
the states that first experienced a downturn in the Northeast, are now in
recovery. Specifically, Connecticut, Massachusetts, New York and Rhode Island
were the first to feel the slump and are now well into a recovery. Furthermore,
there appears to be a pent-up demand for first-time buyer properties due to a
large number of Gen Ys (born 1977 to 1994) that are now buying their first
homes. Falling interest rates will motivate many of these buyers to step into
the market now.

5. New jobs and corporate profits are still strong:
Corporate profits are still strong with companies as diverse as Microsoft and
Jack Daniels reporting close to record profits. Furthermore, the economy has
generated 4 million net new jobs and wages are rising.

6. A weak dollar may harbinger more foreign investment in U.S. real
estate
Although the decline of the U.S. dollar will end up costing
us more when we go overseas or purchase imports, it has resulted in more
manufacturing jobs returning to the U.S. It also may mean more foreign
investment in U.S. properties as well. Just a few years ago, the Canadian dollar
was only worth 70 cents in U.S. currency. Today, the Canadian dollar has been
hovering at about $1.05 to $1.10 U.S. What this means is that we can expect more
Canadians and Europeans to be purchasing U.S. property, because our prices are
approximately 50 percent cheaper than they were just three years ago.

7. Real estate: Still the best shelter: For those agents who
represent reluctant first-time buyers, Yun points to some interesting research
from the Federal Reserve. Between 1995 and 2004, the average renter accumulated
$4,000 in wealth. In contrast, the average homeowner accumulated $184,400.
Furthermore, the typical homeowner holds their property for six years. Within
this period of time, NAR’s research shows that approximately 97 percent of the
homeowners will have a positive equity position after that period of time.

Bottom line: 2008 represents the best window that buyers will have to find
excellent deals with excellent financing. Get the word out there. If they wait,
prices and interest rates will be higher and the reluctant buyer may be forced
out of the market.

Source:

By Bernice Ross
Inman News