Blog Fodder

Is that the correct term?  As someone who is new to blogging, I’m sure I’m going to have to learn a bunch of new terms.  I think of it as a topic or opinion that comes to my attention that I have an almost visceral reaction to.  After Melina asked me to start thinking about blogging, I seemed to be hit from several directions with these topics.

The one that hit me first was a marketing letter that I received in the mail from a competing broker at one of the big well-known firms here in town.  In the letter, that broker states several opinions about the housing market here in Salem Oregon that I believe are just flat-out wrong.  I’m going to share those opinions and my responses to each with the caveat that trying to predict the real-estate market is much like trying to predict the stock market.  If anyone could do it with a high degree of accuracy, they’d be very, very wealthy.  That said, I’m not afraid to go on record with my thoughts.

• The first opinion given in the letter is that area home prices are at bedrock.
• The second is that area home prices will INCREASE by 5% by the end of the year.
• The final statement is that housing will recover by 2011.

Before I give my response, please make it clear that I’m not trying to scare people.  It is a buyer’s market.  Inventory is up, demand is down, bank-owned and short-sale properties are putting downward pressure on the market, and interest rates are close to historical lows and I think it is a great time to buy.  I want people to buy and sell houses.  It’s my livelihood after all.  I also, however, feel that I am obligated to give people an honest assessment of the true condition of our market upon which they can make an informed decision.

I believe, based on my current market experience and news/data about the national and local economy that prices will continue to decline by 5-10% until we get to the end of 2010.  At year end 2009 the average home price in our MLS area was $215,432.  As of the end of February 2010 the average home price was $203,564.  That’s a decrease of 5.5%.  If we are to meet the other broker’s expectations for the market, we’ve got to increase from this point forward by 10.5%.  I just don’t see that happening.

That said, housing can still be an excellent investment.  If you are planning on living in the home you purchase for 5-7 years you should be able to enjoy the tax advantages and “forced savings” created by homeownership and be able ride home values to a gradual, sustainable recovery.  Not to mention, you’ll have a place to call your own.

This market is also great for a move-up buyer (someone who has outgrown their house or their area and wants to buy something more expensive).  Let’s say your current home was worth $200,000 three years ago.  The home you’re thinking of moving up to would have listed at, say, $300,000 three years ago.  The net difference is $100,000.

If we assume home prices have fallen by 25% since then, your current home is now worth $150,000.  The home you’re thinking about purchasing is now worth $225,000.  Net difference: $75,000.  If you can make the move financially, you can see that it makes sense to consider a move-up in a market like this…..especially when you factor in the very low current interest rates.

One of the major reasons I choose to join with Melina at Tomson Burnham is her dedication to providing honest, accurate information to her clients.  Our clients are smart people.  Once we educate them about our experience with the local Salem Oregon real estate market, I believe they will make the decision that is right for them, and that, ultimately, is our goal.