While it is true that there is a housing "slowdown", what is indisputable is the fact that Real Estate continues to be the single greatest source of individual wealth. Local and and national trends continue to support a healthy economy that supports a normal real estate market.
DEMOGRAPHICS: Baby boomers are at their peak earning years and are buying bigger and more expensive homes and vacation homes. Generation X and Y are buying a first home or moving to larger ones. Immigration has created a growing market of home buyers. Singles, especially women, are the largest growing population segment of home buyers.
Our national and local economy continue to generate job and income growth. Interest rates remain at historic lows.
In the tri-state region, there exists a temporary decrease in the pool of buyers. Why? Extremely low interest rates and concern about rising prices caused many people to purchase a home BEFORE they might have in a more normal market. This has caused a temporary decrease in the number of current buyers in the market place.
Also, there are legitimate concerns about affordability. Prices in the tri-state area have risen 68% over the past five years, while income has risen onlly 25%.
Where are we now? The number of sales in Trend Multiple Listing Service decreased 19 to 23% in the third quarter, compared to the same period in 2005. Inventory has increased by 35.6%. There is now an 8 month supply of houses for sale compared with a 5 month supply in 2005 and 4 months in 2004. Average days on market has risen from 41 to 56.
How long will this last? Our best guesstimate is that it will last through all of 2007 and into the spring of 2008. Partly, this is due to the fact that sellers' and buyers' expectations are far apart. Many sellers still expect a double digit annual appreciation. Once they accept and understand the current market, asking prices will adjust, creating more buyer activity. Then a process of recovery will begin. Affordability will increase and buyer confidence will be enhanced.