What's Happening in Today's Market?

In many local areas, the number of home sales was up in the 4th quarter from the same period last year, somewhat of a surprise given the economic climate. There are two factors contributing to the increase in sales. The first is price. The areas that have seen the highest growth in sales are also the ones that have seen the greatest price declines. Secondly, interest rates reached long-term lows again in the 4th quarter, nearing 5% for a conforming fixed rate loan. Despite the increase in activity over last year, all areas saw price declines.

The silver lining in our market currently is the lack of available inventory of homes for sale. As of today, the lower priced areas are still seeing the lowest available inventory. Many buyers seem to have determined that the market is bottoming out in these areas, and with the increased affordability and low interest rates, are taking the opportunity to buy now. This is a good sign pointing to a market recovery sooner than later. The number of foreclosures in the more expensive areas have remained low, keeping prices from sinking as quickly. These areas may see further price declines before we see buyer activity start to increase dramatically.

Another interesting factor is the rental amounts have been decreasing at all price levels, and there is more availability of rentals than in quite awhile. This would seem to reflect the effects of a poorer economy as fewer people overall appear to be moving into or staying in the area. Rents are down at least 10-15% in many areas from a year ago.

In the recently passed stimulus package, there are two main benefits for housing in general. The conforming loan limits for high priced areas like ours have been raised again to $729,000, potentially enabling more buyers to qualify under the higher limit. Secondly, an $8000 tax credit has been added for first time home buyers (or those that haven't bought a home in 3 years). Unlike the previous $7500 tax credit put in place last year, this one does not have to be repaid. Please talk to your tax advisor for further information if you are considering buying a home in the near future.