I kept thinking I didn’t need to do laundry, clean those toilets, or do market reports this month as I was sure that I was going to be gone on the 21st. What is the point of crunching market data if I was one of the chosen? Unfortunately, it does appear that Lucifer and I have spent too much time together for me to quality for Rapture. Seduced by the dark side again, as usual. As such, I have to write up my Salem market report for May.
I can think of only one reason that home sales were down in April 2011 over 2010 and that has to do with everyone spending their money on their final days. Why buy a house, when you are going to fly in the air in just a few short weeks?
But the real reason home sales were down over last year is because April 30th was the last day to get under contract for the home buyer tax credit. This isn’t a big surprise. 2009 continues to be the worst real estate year and while the market is still volatile, sales have been up since then.
Salem also saw a pre-Rapture plummet in home prices. Clearly, home buyers were out in droves looking for heavenly home prices here in Salem. I guess their thinking was if they were going to get pulled away from our good earth, then it better be a screaming deal. The average home price in April was $165,998 and the median $154,937. 2007 was the peak in the Salem market and the average is down 30.2% since then and the median is down 26.5%.
Foreclosures and short sales were 17% of homes sold in April so they are a growing part of our market segment and will be for some time.
Now that I finished my market report it means I have to clean my toilets and do some laundry. Damn Rapture letting me down. I guess if I need to be taken away, I’ll just have to go to my old standby, Calgon.
I think we can all agree now that the whole first time tax credit was just robbing our grandkids piggy bank so we could get one last housing heroin hit. I remain very pessimistic about the market. Two things:
1) I have a suspicion that the shadow inventory is way bigger than we are giving it credit for. There are several families in my West Salem hood that bought their houses in ~2006 who want to get the heck out of Dodge, but KNOW that they would be screwed if they put their house on the market. And how many bank owned houses are out there, but not on the market? How many families really should be foreclosed on, but aren’t because it doesn’t behoove the banks to have too many foreclosures?
2) The fundamental philosophy towards real estate has changed. Just a few years ago the mantra was a. real estate always appreciates in value and b. home ownership is beneficial to society and should therefore be subsidized by the gov. I think the current rising generation is going to be extremely cautious about home ownership after what they have seen their parents go through. For crying out loud, what a juxtaposition of generations! The previous generation saw their homes triple in value and the current saw theirs decrease by 30%. And to the political variable: if you were to guess today, would you think that future administrations are more likely or less likely to bail out banks, keep interest rates low, and subsidize home ownership?
You know I think CoreLogic is doing a pretty good job of catching that shadow inventory because of the way they count their statistics. I actually wrote a post about it a couple of months ago. There are many people that are underwater that are stuck. I feel really bad for those people as they are in a very difficult position. Strategic short sales are becoming more and more common as people try and deal with their massive losses. It is taking about a year for homes to hit the real estate market, but some banks are much faster. Foreclosures will be a chunk of our market for the next few years.
I agree the philosophy towards real estate has changed, but I think Gen Y’s are less materialistic, generally speaking, compared to Gen X and boomers. So I don’t think it is a philosophy just about real estate. They are raised with more environmental awareness and that runs through the philosophy of the generation. I also think, unlike the boomers, that it is a highly mobile generation and so, quite frankly, for many of them renting makes much more sense than buying. I think the crushing debt experienced by X’ers and Boomers isn’t appealing and that isn’t a bad thing. The real estate landscape is changing and I’m not sure that is a bad thing. I’m a very fiscally conservative person and it is always hard to watch people make bad financial decisions. I’d rather see someone rent then be trapped in a house just because they think they are supposed to buy one.
Don’t even get me started on the bumbling government over housing. What I find interesting over the tax credit is the most agents I talked to were totally against it. Especially the second credit. I’d say at least 70% of the agents I talked to were totally opposed to the second tax credit. We didn’t feel it would be good for our industry and the economy in the long run. I think many in the public think agents support what is happening at the governmental level. Some things we are happy about, such as the tenant protection laws in short sales/foreclosures, and some things we just shake our heads at, like the tax credit.