By Victor Normand
Published: August 2011
Washington Irving’s character, Rip Van Winkle awoke from his very long
nap to find many unbelievable changes in his village. If Rip was a real estate agent and took such nap today, one of the amazing changes he would find is the large number of missing home buyers.
With interest rates headed for 4% he would wonder where the buyers were. The old rate calculation books popular before internet calculators haven’t published rates below 7% in decades.
He would find home prices that have had fallen on average 10% to 20%, more in some higher priced areas. And lots of those houses are on the market today; listings are up more than 20% from two years ago.
And, if he had his eye on a particular house a few years ago, not only could he buy it today for much less, but chances are the owners have had to upgrade the property with granite counter tops, hard wood floors, new roofs and septic systems, among other things, just to prepare it for this market.
Will prices trend lower? Most experts say no and those who think declines are likely don’t see a repeat of the past two years, and in fact many markets are now experiencing price increases. How about interest rate increases? Not eminent but they are coming.
So, logically, now is the time to buy. And therein lies the answer to the question “Where are the Buyers?” Logic has been pushed aside and emotion has taken over. Who can argue with emotion? You can try but emotional arguments are, well emotional. Granted unemployment is still high (7.6% in Massachusetts), and there are economic uncertainties for many, but for the vast majority of consumers, life is stable..
The good news is that since we are talking about buyer sentiment for which there is no known cure, it is also not fatal. It will pass and when it does, emotion and logic will merge to lift the market and better times will be back. Some folks will be at the head of the line and get the best deals; most will be running to catch up.