Last weekend seemed like a trip down memory lane with respect to open house activity. I showed one couple 6 properties in the mid-$200,000 range in Concord. At every stop, there was a least one other agent showing a prospective buyer the same house. After the showing, there would be a “client-agent” huddle filled with whispering, gesturing and furrowed brows. Wow, are we in 2005 again and nobody bothered to tell us? Is the rush about to start with multiple offers, ingratiating buyer letters to sellers, and agents going crazy trying to get their client’s offer accepted? Is the big opportunity to get in on the ground floor/crawl space here?
While I am always optimistic about the long term benefits of owning real estate, I am concerned that 2012 might not be the year we start the new ascent in values. The recent deal between the federal government and the major banks will have a significant impact on the housing supply. I suspect it will end, for now, the inventory-starved conditions in the current market. Banks do not like uncertainty. They have been sitting on a huge inventory of REO properties for an extended period of time waiting to see what the government would do. Now they know what the plan is. If it is to their financial advantage to start liquidating that inventory, they will do so. My guess is that by the end of the first second of 2012, there will be a significant increase in inventory in the local market. The price of housing is regulated by the laws of supply and demand. Increased supply will mean lower prices. Lower prices will cause buyers to go to the sidelines and wait for the real bottom to hit. As buyers drop out, demand will decrease. This will lower prices even further.
Here is what I am advising buyers right now. If you are looking for a home to live in and find just the right one, go for it! Interest rates are unbelievably low so you can really use your downpayment and mortgage to leverage a home. It will be more than investment. It will be a place that you can enjoy for an extended period of time and have equity when you are ready to sell. If you are an investor, drive a hard bargain. Seek sellers who really must sell right now and negotiate the lowest price possible. If the seller says “no”, simply wait until conditions improve.