It's not a Buyer's Market, it's a First Time Buyer's Market. Real Estate is perhaps the only part of the economy that is a bottom up business. No one can move up until the first timer buys, and they are buying right now!
The median sales price of homes throughout the US is declining, that's indisputable. But look at the numbers. In St. Louis, where I practice, we are pretty typical of the nation. In our market over the last few years, the median price has fallen from just under $200,000 to just under $150,000. "Wow", you say, "that's a 25% drop in median prices, homes must be a terrible investment!". On the surface it does seem that way, yet if you do an appreciation analysis for most zip codes you find an average appreciation of between 3% and 5% per year over time which exactly matches the historic average for St. Louis! How can that be?
Median price is determined by adding up all of the sales and their prices and determining the 'middle" point. I know, I got confused when they taught me this in school too. But what the median tells us is the price where half of the sales took place above that line and half of the sales took place below. When you chart the units/price relationship, it becomes astoundingly clear. The chart looks like a huge camel hump in the under $200,000 range, while everything above it is low and flat. That has huge meaning for Buyers, Sellers and Real Estate Professionals.
It's not that the value of real estate has fallen so much, it's about who is buying and who is successfully selling and who is helping them buy and sell. If the majority of the business is happening below $200,000 (your market may have a different number), and you are a Seller looking for $300K or more, you will have a difficult time in this market. On the other hand, if you are an investor looking for a rental, if you are a first time buyer looking for your starter home, if you are a seller looking to move from your first or second home, or you are a real estate professional helping those folks, you're in the game. In fact, the game hasn't changed, the field has!
First time buyers have an historic opportunity! Homes and mortgages are on sale PLUS the government will literally PAY you to buy a house before December of this year! That has never happened before! This can't last forever, the tax credit may or may not be extended or modified. What is for sure is that either interest rates or home prices will rise. Mortages are the more volatile and therefore more likely to rise particularly given the governments monitary policies which are almost guaranteed to cause inflation and which almost always leads to higher interest rates. A 1% increase in interest rate is equal to a $10,000 for every $100,000 increase in home price in terms of payment! In other words, for $100,000 home a 1% increase in interest rate will have the same effect on payment as a $10,000 increase in price, while on a $200,000 it would be the same as a $20,000 increase in price. That's big money!
To learn more about opportunites to buy and sell in St. Louis, please contact me at 314-440-1507, e-mail at phutsler@kw.com or go to www.HutslerTeam.com and search St. Louis area properties and opportunities.
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