When is the real estate market going to get back to normal?
The age old question of “what is normal” is applied to many things and when talking about residential real estate sales it is somewhat of a sliding scale. Your perspective is going to be influenced by where you are in the market now and when you last bought or sold.
I am writing this in March of 2013 and have been both a real estate agent since 1993 and a real estate consumer on a regular basis over the last 21 years. I have bought and sold a lot of houses for myself and my clients and have seen a variety of markets.
The “normal” for my parents who bought in the 50’s and only owned one house will not be the “normal” for most of my readers. My “Boomer” clients may remember big down payments, 18% interest rates and being glad to get them. The “Gen X’ers” are more apt to think of normal as 3-5% down or sometimes zero down with interest rates 5 – 7%, adjustable mortgages (ARMS), balloon mortgages, the introduction of FHA backed loans to get these lower down payments and the private mortgage market rushing to match them.
When I started in real estate, just about everything was FHA or VA insured and most buyers had very little to put down and seldom had any equity in their house. The mantra was buy as much as you could qualify for. As least in the 90’s and early 2000’s there were checks and balances that prevented a buyer from buying more then a certain price based on debt and income.
The mid 2000’s however saw those safety’s removed and that mindset had them buying more expensive houses and not having the income to support the payment. This create many purchases made on speculation with buyers thinking:
- Prices are going up SO fast and money is SO easy to get I’ll take an adjustable mortgage now so I can stretch to get into a house I can barely make the payment on and in a year refinance to get a lower FIXED rate.
- The economy is so good that even though I can’t afford the payments now (let alone upkeep of the house) my job will surely get better and my income will go up and I will be able to afford it next year so I will buy it now and hope for the best!
So what is the new normal?
I would have to say there really is not a “normal” after all. Real estate exists on a continuum, moving from one end to the other then back again. I will admit I thought it would take a lot longer after the 2008 swing to see anything less then 20% down but we are already seeing 3-5% down programs again. I have my doubts we will ever see the stated income products like we had then but I would not be surprised if we saw a product to cater to the self-employed that gave consideration to something other then the bottom line taxable income.
So what should you do? Timing of the market is for the lucky and for professional real estate investors. If you need to sell, then sell! If need to buy then buy! If you are happy where you are it then stay put. The average home owner will have several homes over the years and you are sure to experience a number of different markets and except for the extremes it averages out.
Tom Schroth, is a career agent with over 20 years helping people buy and sell their homes and has owned over a dozen homes personally including rentals, investment properties, flips and rehabs. He practices what he preaches by making real estate not just a place you call home but a wealth building investment. Tom runs the Schroth Realty Group, schrothrealtygroup.com, a team of professionals dedicated to providing real estate buyers and sellers in the metro Atlanta area an exceptional experience. His resume included hundreds of real estate transactions, a broker’s license in both Georgia and Ohio, founding a real estate company, and managing and office of one of the largest real estate networks in Atlanta. Tom Schroth also runs Whiteboard Group, a business development consultancy and coaches business owners and individuals to help them get clear on their goals and take steps to achieve them and “Perform at Their Highest Level” see: wboardgroup.com and Tom’s other blog, “Business Yoda” businessyoda.com.
Do you have house to sell? Are looking to purchase real estate? Contact Tom’s team at 888-724-7864