Our more recent communications have included some encouraging news, as market indicators are starting to reveal positive shifts occurring in the local housing market. This does not imply that the market has rebounded—only that we're past the days where the elevator keeps on descending, as it appears we are arriving at ground floor.
What are the positive shifts?
1. The most encouraging sign is that a trend of declining inventory has likely been established (using a year-to-year comparison) and will probably accelerate.
2. The brakes have been applied on the decline in buyer activity, and there is reason to hope second-half 2008 comparisons will show break-even numbers or possibly increases as compared to 2007.
3. There are early signs that the regional decline in home prices could be stabilizing.
4. The traditional home market (excluding foreclosures and short sales) has not experienced the massive decline in price as is commonly presumed. The median price of these properties has only dipped 2.7 percent so far in 2008, as opposed to 8.8 percent for foreclosures and short sales.
So are we experiencing a recovering market? To be blunt, no, but there is a faint light at the end of the tunnel, and we are confident that it is not a train. Economists say that a recession is not validated until you have been in it for a few months. The same is true with a market recovery.
Think of it like coming home at night and turning on your house lights. When you first arrive home, you turn on your garage and entry lights, then maybe you flick switches in the kitchen or family room, awhile later you're illuminating a bedroom and bathroom.
Similarly, the Twin Cities housing market will experience a recovery in stages. The first light was a decline in listing activity, which was followed by a decline in overall homes for sale. The next light will likely be improvements in the mortgage underwriting environment, which will lead to a modest and sustainable increase in buyer activity. Another light will be a reduction of lender-mediated property activity. Eventually, we will experience modest growth in home values.
We are justified in celebrating the encouraging signs, but the housing market continues to face a variety of challenges—a large oversupply of homes for sale, lender-mediated property sales, tightened lending standards, tepid buyer activity, weakened home prices and home owners in positions of negative equity, among other grimace-inducing factors. Understandably, this tough-love synergy has produced a severe lack of consumer confidence in the housing market, locally and nationally.
These challenges will thwart a quick rebound from our current conditions and make the road back to a balanced market a long and gradual journey. The encouraging news today is we appear ready to begin the return journey.
Along the way, we will continue to gather market data, analyze housing trends and share our findings in order to keep you informed and better prepared to operate your businesses. We are in this together, and together we will persevere.
Great Job Mark. Keep up the Good work.
Posted by: Benjamin | July 03, 2008 at 08:02 PM
Great Job Mark. Keep up the Good work.
Posted by: Benjamin | July 03, 2008 at 08:03 PM