What, me worry?
The Washington Post continued it’s attack on the housing market this morning. Those of us that work in real estate have watched the market change from optimistic to “running scared” as the Post has continued to print articles predicting a burst of the housing bubble. Today’s offering, under full color photo, questioned the stability of the DC housing market. The column written by Tomoeh Murakami Tse went to great lengths to reveal that no one agrees which direction the market is taking. Different experts and institutions are quoted to support widely diverse theories on whether or not the market is up, down or sideways. Who to believe?
I live this industry. I work in a very active office. The market has changed. That being said, the market is always changing. There is a normal ebb and flow that occurs in this market. Buyers and sellers are impacted by interest rates, the cost of living, government policies and the amount of first time buyers in the market. This area does not feel the pain of a fluctuating job market. Local governments continue to support the housing industry. The market is alive and well in the Maryland suburbs.
The one thing that impacts the housing market above all other factors is the media. If the press begins reporting gloom and doom, the populace seems to follow. If reports tell of a booming market, sellers end up receiving multiple offers and prices soar. Local and national papers can offer findings from all the ivory tower institutes that support both sides of every equation. Thousands of dollars can be spent to produce reports that are then in turn analyzed to explain pricing of property. No one can seem to agree on the reason that home values shot up in the last two years, nor can the offer a concrete reason why things have leveled off.
A visit to your local library and reviewing news articles will reveal stories that told of the wild market we were experiencing over the last couple years. Agents were unlocking doors at open houses while a parking lot full of buyers waited a chance to quickly walk through and make an offer. Homes were listed at one price that was the starting point of a bidding war that rivaled EBay. Sellers were accepting offers at a certain point in time (a deadline to the bidding war) and then review multiple escalating offers for their property. As one house sold, another up the block came on the market at a higher price and the cycle began again. Stories continued to be printed.
As last fall began, the natural slow down in home buying occurred. One reporter after another began to herald this annual event as the actual end of the wild market. Housing sales began to slow somewhat, but the media continued to predict the bubble was bursting and lean times were ahead. Interest rates began to creep up and the market slowed some more.
Spring is here and the market is not as frenzied. Today the Post printed the story I mentioned. I do not have concerns. I have been around long enough to understand the natural cycle of our market. It is slower. There was no bursting bubble. The cost for the first time homebuyer has increased beyond the comfort zone. It is not just interest rates, they remain very low from a historical perspective. It is the ugly appearance of points which have re-entered the loan approval process. Points translate to increased cash needed to purchase a home (on a $300,000 purchase, 2 points equal an additional $6,000 needed at settlement). The uncontrolled cost of living increases such as gasoline headed above $3.00 per gallon and Pepco rates increasing 40% are an example of items that are depleting expendable cash available to first time buyers. As budgets are adjusted, the market will become more active.
I can only share that if you are thinking of buying or selling a home, today is the best day to do so. Housing may go up and down over the short term, but it remains the American Dream. If you must read the Post, understand that they have to sell papers and touching your fears does that much better than just sticking to the facts.