New Years Blog - No Predictions Just Analysis

2008 brought financial destruction to many people. What will 2009 bring? The brightest minds in the country did not foresee the meltdown of the stock market. Seeing the economy shrivel was like watching the air being released from a balloon. What will 2009 bring?

If you believe the industry analysis (which many in the public take with a high degree of cynicism), the market will bottom out in 2009 and start to rebound in 2010. If you believe the sellers, the worst has passed…if you believe home buyers, the market has a long way to go before it bottoms (who really knows when the bottom is?). I guess it depends which position you are in.

The bottom line is nobody can predict what will happen. There are a few variables that can and will greatly impact the Humboldt County real estate market in 2009:

1. Interest rates – as of today, rates have not been this low since the 1960’s. If rates can remain the same or even drop, that can, and likely will trigger many buyers back into the market who are sitting on the fence. And if that happens you will see prices stabilize and possibly go up at the entry level points in our local market. Home sales for properties under $300,000 have remained consistent. If interest rates increase, that will put a wet blanket on real estate sales.

1. Foreclosures - Here in Humboldt County the foreclosure levels are one of the lowest in California. Should that number increase that may further depress prices.

1. Standing inventory of homes. As of 12/29/2008 there are 601 single family homes on the market in the county. That has fluctuated between 550-800 this year, so the inventory is near a low point. Statistically approximately one in every five properties has been going under contract this year. That has remained consistent this year. Should inventory numbers drop and interest rates remain constant, that could be good for sellers.

1. Stock market – many potential buyers lost money in the stock market that could have been used for real estate investing. An improvement in the stock market could be a shot in the arm for the economy and overall confidence.

1. California’s budget mess – wow that is a real wild card. The state is going broke and in this area many jobs are dependent on income derived from the state. That is a wait and see.

1. Financing – Will it become easier or more difficult to get financing. Are banks who took billions of taxpayer dollars with the supposed intent to grease the economy and lend money, continue to hoard the cash or give qualified buyers the opportunity to take advantage of historically low interest rates?

So the bottom line answer to what the real estate market will do in 2009 is anyone’s guess. Some facts can’t be argued: Interest rates are at historical lows; Prices are down in great numbers from the peak markets; Real estate as a long term investment is always solid; The population numbers are going up, not down and people have to live somewhere; The tax benefits of real estate ownership (compared to renting) are significant.

What I tell buyers is if you plan to be in the house 3-5 years, you will get the benefit of freedom of enjoyment of your own castle. The tax and appreciation benefits are ancillary but significant both immediately and over time. If anyone can predict when is “bottom” please let me know. I will wait and see what happens with any of the six above items I listed before making any predictions. I will say that I hope to be personally in the market in 2009 as a buyer.

Thank you for reading my blog entry. Happy New Year!