12/12/2006

The Recent Housing Slowdown

by Natalie G. Owens

In their most recent joint release issued on November 9, 2006, the US Census Bureau and the US Department of Housing and Social Development stated that:

-Sales of new one-family houses in October 2006 were at a seasonally adjusted annual rate of 1,000,000, according to estimates released jointly today...This is 3.2 percent...below the revised September rate of 1,037,000, ad is 25.4 percent...below the October 2005 estimate of 1,346,000.-

The National Association of Homebuilders (NAHB) also demonstrates, in its Housing Market Index, a rather extraordinary housing slowdown. Furthermore, this decrease in home sales does not appear to be changing direction at any time in the next few months. On the down side, this may prove to have a negative effect on the overall economy. However, there are also positives to be gained from this phenomenon.

Typically, a housing slowdown may be taken as the reflection of a public response in reaction to inflated home prices and too-high interest rates for loans. In this sense, it can be regarded as a sort of monitoring gauge for the housing and mortgage industry. When home prices are way too high, people lose the desire and inclination to buy. This is nothing if not an important application of the basic economic rules of supply and demand. As prices decrease, so do the average home sales - at least, this is what is expected.

The true fact of the matter is that it appears to be widely believed that the recent slowdown shows no signs of abating. This may be due to several factors going on in our economy today. People may simply have less purchasing power, but it may also mean that the general public has become a much more demanding customer. People want to get the best possible service or product at the least possible price.

The advantage of an extended decrease in sales is that, although this state of affairs may present negative implications for the financial market, it may nonetheless extend untold benefits to a potential buyer. Mortgage companies are going to have to change their policies to accommodate a wider range of buyers - such as, for example, providing adequate financing (including 100% financing) to people possessing a lower than average to very low credit rating, while charging lower interest rates. This same class of potential buyers would most probably not stand a chance of acquiring their own property in a thriving housing market.

Similarly, homeowners who wish to put their homes for sale in this - for them - dodgy market, may have to prepare themselves for the eventuality that their prices will have to be taken down a few significantly big notches. Sellers find out soon enough that they often won't be able to fetch anywhere near the desired asking price for their homes or investment properties. I recently spoke to someone who made an offer for $50k lower than the seller's asking price, which offer was almost instantly accepted! Such occurrences must surely be the stuff of dreams for anyone with a plan to own their own home at this time.

We are, today, truly experiencing what is known as a buyers' market. This means that not everyone is happy about what's happening but that's what any market is really all about. When one is up, the other is down. It's time for homebuyers to celebrate and take advantage of this situation. My advice to you: make wise decisions and invest your money in dreams that will bear fruit in great ways. After analyzing the swing of things, if you are a potential first time buyer, it seems possible that no other decision could bring more financial rewards and savings, at this stage, than the one of becoming owner of your own home.





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