Stavs,
Sorry for the delay but here is a 35,000 foot overview of the Lehigh Valley Real Estate Market:
The housing market has softened with longer days on the market for listed properties (I would say its about 90 -150 days) and an increase in inventory (currently I would say about 7 to 9 months) which has contributed to reported 5% (I believe from the morning call/MLS) drop in home values. I would say it is probably deeper then that, I would say home values have dropped about 10-12%.
Unfortunatly the market will not resume its growth/correction until these couple of things happen (In other words here are the 3 main factors to the lag in the market):
1) Financing:
The Financing/Banking industry must steady this credit mess that has shredded the national and local Buyers Pool. It will be very difficult to gain any momentum in any market if we do not have the access to money or funding. Remember that the market depends on every price level - so the first time home buyer who is buying at $150,000, is allowing that homeowner to buy at $225,000, which then allows that home buyer to buy at $300,000 and so on up the later. So if the first block is not in place (meaning first time buyers are not able to get financing then the rest of the blocks are out of place). And although there is money available currently for mortgages, a lot of banks and institutions have over-tightened on financing.
So whether the gov't can agree on a bailout, or we go into a self imposed correction remains to be seen. But depending on that resolution utlimately will determine the depth of the softening effect.
NO LINK NEEDED FOR THIS ONE.
2) Oil and Other Home Utilities Increase (Energy Costs)
This is slowly seeping to a #3 - but monitor this very closely. Oil was a major catalyst in the economic slow down as a whole, with people paying $65 to fill up their cars that left little room to dine out, or buy a couch, or buy whatever. But as the speculation comes out of this market and oil subsequently drops, this will ease some of the fears for home heating costs, which should put a little more confort in the buying decision. The only reservation would be on the PPL rate increase scheduled to take place in 09 or 10. That could a factor that would keep some potential buyers away from the market place.
PPL Hike May Shock Customers; PUC: If Cap Ended Now, Average Monthly Bill Would Jump $71.78
If oil were to jump back up and PPL increases their rates, that could be a drag in the marketplace. By drag I mean this will not stop people from buying but will certainly either have them look closer at the energy of the home or by a less expesive house for affordability sake.
3) Overall Consumer Confidence/ Economic/ Job Confidence (Dual Point)
This is creeping into the #2 spot because there is a growing concern that if the overall economy continues to slow, more jobs maybe lost, which would put mortgages in jeopardy.
Consumer Confidence Index - The Conference Board
Historically who are ones most effected by layoffs as it pertains to mortgages MIDDLE MANAGEMENT and this sector is normally buying homes somewhere in the $300,00 to $400,000 range. So the argument of housing increasing so much over median income is a joke for 2 reasons.
(1) Logically there are more lower paying jobs then they are high paying ones, and the creation of jobs holds true to this thinking. For every X# of entry level personell they need 1 manager. For every X# of managers they need X director. So to make housing sit in line with the affordability of entery level personell is ludicris, impossible, and an extreme risk because there is a lack of equity/cash on hand. Once this personell has saved cash/equity then and is deemed a qualified risk to hand over $150K to, there is a value there -you have worked, saved, sweated, and put up with god knows what else to have something you call HOME!!!!!
(2) In today's society, most, but not all of the time there are 2 INCOMES PER HOUSEHOLD, which creates a drastically different affordability index.
These are not the only 3 factors, but I feel these are the 3 main ones that once they comeback the market will regain its strength. In fact, once the factors comeback, historically you will see a "rush" into the marketplace causing not just a steadying but a slight increase in the marketplace. Lets face it interest rates are still LOW, and if home prices stay the same Buyers can pick up a quick 10% in the marketplace.
SO FOR SELLERS:
You may still be able to take advantage of this marketplace if:
1)you have a good equity position. If you bought more then 4 years ago, and you have a need to move UP to a bigger house... based on general stats of your house at (using round numbers) $200,000 is worth 10% less but the house you buy at $300,000 is worth 10% less you made out by $10,000.00
2) Your buying for long term.
REMEMBER the #1 rule to money BUY LOW - SELL HIGH.
FOR BUYERS:
If you can get qualified from a bank and you are thinking of housing as a LONG TERM investment, and you are secure with your job - now is a great time to buy.
Sorry for the long winded approach to the answer but the questions was a complicated one Stavs
Thanks
Jeff
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