For all but those who are still in denial, the housing boom has come to an end. Average prices for houses are declining and the number of sales is down, yet the inventory of available homes continues to grow. People are no longer bidding up the prices of properties for sale, and new home builders are now offering discounts of up to $100,000 to the shock of those who have recently paid full price with the expectation of continued appreciation.
Obviously, this is no longer a sellers market. There is talk that housing is now a buyers market. I don’t think so. The buyers have all bought. Sure there are a couple of holdouts (like myself) who never bought because we could not justify to ourselves the huge difference in price between renting and buying, despite the continuous comments from all those around me that I was missing-out on the housing boom. I just could not see that as a reason to buy.
What is the incentive to buy now? The bubble is just starting to pop. Approximately 25% of all sales last year were for second homes/investment properties. Now that the investments are not accumulating any equity, there will be a big push to sell. Many will have to sell, starting with those who purchased using interest-only loans. This will result in ongoing selling pressure in the market and the longer a place remains unsold, the more desperate the owner is likely to become. Those who just cannot get a grip on the severity of their situation will eventually end up having their house foreclosed on.
With the housing market in DC crashing, is this going to make me a buyer? Rents are still cheap, and many who cannot sell their properties are now desperate to find renters. So what is the benefit of buying now? I really do not see any. Those buying now are still likely to overpay as most that need to sell have yet to put their properties on the market, instead waiting for spring when the market is supposed to pickup. I suspect by then the market will be in a rapid decline, once homeowners realize that they owe more on the property than it is worth. In addition to all the existing properties on the market, there is a large number of new houses and condos currently being constructed. Just in the DC area, there are 50,000 new condos being built.
I just moved from Washington, DC nine miles down the road to now rent in Mclean, VA.
Buyers market? I don’t think so. It’s a renters market.
One thing that I just don’t understand. How is it that all these people get burned in the stock market, somehow thought that they could make a fortune in Real Estate?
Great Housing Bubble Blogs:
The Housing Bubble 2
Bubble Meter – DC Area
There are many more. Check the blogrolls on these sites for the others. Here are some of my previous bubble posts:
DC Housing Bubble: Popped - 13 November 05
Long Island Housing Bubble Popping - 20 September 05
DC Housing Bubble Popping - 02 August 05