I’m normally no Pollyanna, but the real estate market—as dead as is had been—is beginning to show signs of a pulse. Even the Sarasota Herald Tribune offered veiled signs of improvement—with the headline “It’s a Great Time to Buy, Sort of.” We Realtors are afraid to say the worst is over—but we are musing about a slow turn around in the market.
The Fed’s early, anecdotal look at the economy in the Beige Book last week was surprisingly neutral for a change, even positive. The ongoing foreclosure scandal, which I wrote about last week, could put a damper on new mortgage financing despite record-low rates. But it also will keep some homes off the market for now—helping us dry up the huge inventory of homes for sale.
Federal numbers that are released monthly and the usually restated later are due out this week, existing home sales for September due out Monday and new home sales are due out Wednesday. These indicators will be closely watched. A decline in supply would be a good sign, although we remain far from a normal inventory bottom.
Florida numbers are not much like the Federal numbers. You don’t have to call Kreskin to see what’s going on here. The For Sale signs on homes, the vacant gas stations, the big signs on your old favorite restaurants, and the car dealers with limited inventory tell the story better than the Federal Government’s statistics.
But still faced with the possibility of good news, let me reflect on where we are right now. The houses that are selling are closing in the “Half-Off” range. And I am not just reflecting on the expensive ones. Of course we always suspected that the very expensive condos would have to come down to get people to even make an offer, but 60% or more is pretty drastic. I must say I smile when I see something that was once so pricey that only a John Travolta could afford it, finally selling for what a nice neighborhood family house once commanded.
Land sales (building lots) are dead because in general people don’t want to tie-up their savings in a vacant lot, and generally speaking banks won’t finance raw land anyway—and certainly not at the very low rates you can find everywhere. And also, since that market is dead, the inventory is building (and so prices are dropping) as more and more people who thought they would build one day are coming to the realization that they can buy a house on as good or a better lot for LESS than they can build.
Are Americans spending yet? Well if they have a job or some income, maybe yes. On Wednesday this week we’ll see what’s up with durable goods. Those figures will help illustrate demand to come as retailers restock big items like refrigerators and cars, presuming they sold enough the previous month. Once these figures begin to climb, we should see jobs increase. (And so unemployment decreases).
The Fed wants inflation. If Americans aren’t out buying big-ticket items, the government may decide to engineer inflation for us, that is, print more dollars. Back when Ford was the President, interest rates for home loans reached 18%, while today the rates are in the low 4’s. Back then the President wore a button that said, “WIN”, it stood for Whip Inflation Now. Back then Inflation was the reason nobody was saving money—why would you save if the prices were going up everywhere? The smart folks bought all they could afford—after all you could always sell for a profit.
My own opinion is home loan rates seem in equilibrium at about the 8% range. Today borrowing money is a bargain. But inflation will change that. It will drive rates up, but also it drives up the interest you can get on your savings. It will raise your home value, and means that if you sell you will get more for the home, but if your a buyer, you will have to spend (borrow) more money.
Getting back to the question, “Is this a good time to buy?” Yes, Virginia there is a Santa Claus. And too, it’s a good time to buy, but not yet a good time to speculate.
Dane Hahn is a Broker Associate at Tarpon Coast Realty in Englewood. He will answer your questions, or help you buy or sell a house, you can reach him at 941-681-0312 or via email dane.hahn@gmail.com
