What Will This Opposite Market Attract

(Buyers are finally realizing that the real estate market is in their favor. This took longer to grasp than it would have decades ago but since the market has been booming for sellers for just about the past decade, buyers were a little skeptical at first.)

There are many indications that the real estate market is about 99 percent opposite from where it was just about a year ago. But what should people expect to come from this new buyer’s market?

The article, “U.S. home sales, prices decline in third quarter” posted November 20, 2006 on Inman News, reestablishes the fact of a slowing market while the future is still up in the air.

“Total sales of single-family homes, apartment condos and co-ops dropped 12.7 percent in the third quarter compared to third-quarter 2005, the National Association of Realtors (NAR) reported today.”

Nevada had the steepest sales decline at 38 percent.

The NAR also announced that among a sample of the 148 metropolitan areas that are most economically involved, the existing homes sales price dropped by 1.2 percent in the third quarter of 2006 from the same quarter in 2005.

David Lereah, NAR’s chief economist, said in a released statement that the current market conditions embody those opposite to a year ago.

“‘Last year we had a record sales market and historically tight supplies of homes with buyers bidding over the asking price,’ he said. ‘With the market in full transition, buyers now have choices and sellers are more willing to negotiate -- under these circumstances it's no surprise that overall home prices are slightly below a year ago. We expect this trend to continue in the months ahead, but we'll see modest appreciation in most of the country in 2007.’”

Buyers are realizing that it is finally their market. After years of having to fight just for the right to negotiate a sale that usually ended up being more than the original asking price, buyers are now taking their time controlling the pace and price of sales.

However, buyers are starting to conduct transactions again and housing starts (new homes) are declining at fast paces, which could lead to the market leveling out in future months.

“Pat Vredevoogd Combs, NAR president, said in a statement that the supply of homes is at its highest level in over a decade, though ‘inventories are starting to decline.’”

As inventories decline, sellers will have more authority to raise the asking price. The housing market has and always will come down to supply versus demand.

If the supply is more than the demand, prices will decrease. But as demonstrated during the boom (2000 to 2005), when the demand far outweighs the supply, prices will escalate.

So, since this market currently has more supply than demand and is opposite from last year, what will come from it? Will it turn 180 degrees and turn to a seller’s market like last years went from seller to buyer, or will the market just continue to lower in price so much that sales have to pick up.

One thing is for certain, the housing market will continue to go in cycles, and just how long will each cycle last is the potential million dollar question.

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