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Can These 3 Things Really Derail our Home Market?

Who threw this monkey wrench in here?

You might have been reading or hearing all sorts of conflicting news about our market.  Prices are up, prices are down, inventory is up, foreclosures are down… Trali wali, trali wali as some say in Eastern Europe.

Forgive the media, they generalize too much and often pick the more negative side of the story.  Then they lick that bone like a golden retriever after a day’s out in the field.

The word is out that there are 3 monkey wrenches that may derail our slowly recovering real estate market.

First, the expiring homebuyer’s tax credit. It’s been credited with getting a lot of buyers into the market that wouldn’t have been there otherwise. It goes bye bye in spring.

Second, foreclosures.  They continue to rise because many homeowners in financial distress are simply making the decision to walk away from their homes.  Sometimes getting rid of debt can be as easy as that.

Third wrench is the low interest rates are taking a train to Canada as well.  They’re low now in large part due to Federal Reserve purchases of mortgage-backed securities.  Those purchases are due to stop near the end of March. This move will likely cause interest rates to turn upward.

So what do you think?  Is it possible that these three factors coming together at roughly the same time could create a perfect storm and throw our fragile real estate market into chaos again?

Anything is possible, especially in more vulnerable parts of the country.  Here, in Silicon Valley, the major scare of the economy falling off the cliff is evaporating like the morning’s dew.

Last weekend Santa Row and Valley Fair Mall were packed with people.  Open houses were busy.  Things are moving forwards here in the County.  Sure not as many people can afford a home these days but the market doesn’t have as much to offer also.  If you check, you’ll notice that we have 20% more homes tied up under contract than available for purchase.

With spring time, even more buyers will go out and finally make the decision to take advantage of the lower home and condo prices.  The more foreclosures to choose from the better.

That $8,000 credit is useful of course but when we’re dealing with an average home price of 600K, it is hardly a deal breaker for anyone.

Interests rates are always a factor but we have such a broad price range of homes that even if the rates creep up a bit, folks will be able to find a home that they like.  Maybe a bit smaller one… but hey, it comes with advantages – lower utility costs.

Will keep you updated here.  Take care.

{ 1 comment… add one }
  • Cameron Benz July 31, 2010, 4:26 am

    Is the average home price in your area $600k? That is hardly representative of the rest of the nation. It’s about half of that in Western Washington State and about half again of that in the Eastern half of Washington State. As I’m sure you well know, the real estate market is a different beast in different regions, and even different towns in the same county.

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