Yes, I understand we’re in the worst foreclosure real estate market on record; and that a lot of people did a lot of bad things; and that we’re probably only half way through getting through this real estate debacle. However — I just ask that the feds be careful how much they need to push along the recovery in the marketplace — it’s already happening.

On the street, we watch inventory, pending sales and pricing to determine if a market is about to turn around either upward or downward. We could track it in 2006 when it started halting and now it’s tracking upward.
Ahh- you say, the prices are still down. Yep. Because that’s just the final piece of the equation. Prices are down across the country, and they will probably remain soft until the inventory starts shrinking – which is what’s starting to happen.
Consider these sales and pending sales numbers across the country:
  • San Jose, CA: Sales up 51% in January 2009
  • California: 2008 sales up 26% over 2007
  • Northern Virginia (Metropolitan Washington DC): Pending Sales +41%;
  • Manassas, VA: pending sales +50%
  • Florida: January sales +13%
Market after market, sales are starting their predictable climb upward after prices have dropped by as high as 50% in some areas. Whether we like it or not, feel good about it or not, has no bearing on whether or not the markets are starting to turn around. They are.
(The charts here show Northern Virginia sales price drops that correlate with the number of sales increaseing through 2008.)
In these same markets, agents are starting to report multiple offers on bank-owned properties that need a lot more than just paint and carpet. In my office this week, my team is starting to report that while buyers have finally gotten off the fence, now there’s no inventory and what’s left is selling for $25,000 to $40,000 more than asking price in a shower of multiple offers.
No – this is NOT 2004. It’s now 2009 and we’re about to repeat the whole cycle of the last run up. Why? Simple — supply and demand, mortgage money available and willing/able buyers ready to pick up good deals who have been saving their money for three years for prices to hit the low they’ve been waiting for. Well, it’s hit it and they have pulled out their check books to start the bidding.
It will continue upward as well and here’s why.
  1. Lack of inventory. The resale inventory has been primarily been made up of foreclosures and the federal programs to rehash old mortgages and stop the foreclosure cycle will create a drain on the need of inventory. Seller-owned properties are scarece because sellers who are okay financially are upside down on their mortgages and must wait till prices return to their previous levels before they can even consider selling.
  2. Prices have hit the psychological low. When you’ve been dealing in prices around a half million dollars for years, a house priced at $300,000 sounds like a real deal. Buyers are diving in with a vengeance and bidding up; again, removing the safeguards of home inspections, home warranties, and appraisals (if they have enough cash).
  3. Small new home inventory: New home builders pulled out of the market and must now ramp up again to build the product buyers want. This will take years to get going. They just can’t start building, they have to get the infrastructure planned, permited and approved before they can turn the first shovel of dirt – this takes time.
  4. Job growth. As go jobs, so goes the housing market. Several job markets have continued churning out employment even through this latest downturn. Washington, D.C.; Boston; Dallas/Ft. Worth; Houston have added, rather than shed new jobs over the last 18 months. Meanwhile, the surge of the stimulus packages (whether you like the package or not, the attention on the urban infrastructure is a good and needed thing – that will create labor jobs) these jobs will create the need for housing in those markets. States are already applying for and spending the stimulus millions.
Economic growth creates jobs; houses are where the jobs go at night. Meanwhile, the prices have hit the bottom in many areas and already started the surge of buyers jumping off the fence. The inventory is shrinking, the next item to tip will be prices.
Anthony Carr is an award winning sales coach and managing broker in Northern Virginia. He’s tracked and written about the real estate market since 1989. His blog He’s the author of two books and contributor to Donald Trump’s The Best Real Estate Advice I Ever Received.