I came across this blog post written by Tara-Nicholle Nelson who is a broker in San Francisco and Real Estate columnist. In my opinion, she is right on point. Don't believe everything you hear from your friends-uncle's-cousin who has a real estate license in Idaho. What she is saying directly applies to the Springfield Real Estate market. Enjoy...
5 Real Estate Recovery Myths
recent market upturn, coming on the heels of 6 years of
near-Depression, has given rise to its own set of real estate myths.
Here is a handful, along with some ways you can and should rethink them.
Myth #1. It’s recovering too fast. According
to the Standard & Poor’s/Case-Shiller home-price index, American
home prices increased an average of 10.6 percent between March 2012 and
March 2013. Twelve of the 20 major metro areas tracked had
year-over-year median home price increases in the double-digits. The
list was topped by Phoenix, San Francisco and Las Vegas, all of which
saw 20 percent or greater annual home price increases.
crazy fast, to some. So crazy, in fact, that it’s created the fear that
the current market’s exuberance will re-create the steep incline and
decline in home values that we all remember not-so-fondly from the last
Here’s the deal: markets have cycles, period.
So I can guarantee you that the ups and downs will repeat, though
hopefully not to such extremes. Part of what made the last down cycle so
extreme was the fact that lenders were greenlighting massive home loans
to borrowers without requiring them to document their ability to pay
for the property over the long term. Buyers, in turn, overextended
themselves regularly. Today’s loans are allowing people to buy without
putting much down, but I haven’t seen almost any examples of the fully
stated income or so-called “liar’s” loans that really got people in
Here’s the other thing: the data can be a bit
misleading. When an area’s home values have been very, very depressed
for long, it simply doesn’t take that vast of an uptick to generate
double-digit percentage point increases. When you look at the top five
recovery markets, according to the Case-Shiller, four of them: Phoenix,
Las Vegas, Miami and Tampa – ranked among the hardest hit markets in the
foreclosure crisis and resulting downturn. (San Francisco was the
anomaly.) When you look at other markets that skated through the
recession relatively unscathed, like New York, you see the percentage
point increase year-over-year was much less impressive/ less scary
(depending on your outlook), at 2.6 percent.
Myth #2. Investors are driving demand.
In some areas, investors are buying up lots of low-priced homes. From
big Wall Street investment groups to Mom-and-Pop investors, people who
don’t plan to live in the homes they’re buying were responsible for
about 20% of May home sales. But this number is actually on a downward
path – investors were responsible for 22% of home sales in April, and
investor activity should continue to decline as prices increase, putting
a cap on the profits investors can realize.
activity is declining, buyer demand is increasing, as evidenced by
increasing numbers of cash transactions, offers per property and speed
of homes leaving the market.
First-time buyers are responsible
for 36% of current buyer activity and repeat homeowners for over 43%.
Investors have been active, but by no means are they responsible for
creating the intense buyer demand that now characterizes the market.
Myth #3. Sellers are stuck.
This time, let’s start with what’s true. Many, many sellers in hot
markets are in the midst of an exasperating Catch-22: they can finally
sell their homes, which have been underwater for years. But now they
struggle to buy, amidst the multiple offer mania – some report having to
make offers on dozens of homes, or even having to rent a place until
they can buy one.
As I see it, sellers aren’t stuck as much as
they are being forced into being strategic about sequencing their
transactions and setting up their deal points. During the recession,
millions of sellers had no equity – or negative equity. That meant they
couldn’t sell, which meant they didn’t have the money to buy – heck,
many couldn’t even refinance. That’s what I call stuck. Now, they have
the option to pull cash out to buy first, the option to refinance and
stay put, and the option to sell – period. So for my dollar, today’s
sellers are nowhere near stuck, compared with the truly stuck sellers of
Most of the sellers who have recently, truly gotten
stuck (i.e., sellers who’ve been forced to rent until they could
successfully buy) ended up in that situation because they listed their
homes first, unaware that the market truly had shifted and that their
home would fly off the market. Now, we know. So, if you’re selling in a
super-hot market, work with your agent to put a strategy in place.
Consider buying first, if you have the means or can get them. Or list
your home with a Seller’s Contingency or a rent-back agreement (where
your home’s buyer rents it back to you for a short time), to buy
yourself some extra time to score a new place. Your agent and mortgage
pros can help.
Myth #4. Rates are through the roof. Have mortgage interest rates gone up? Yes. Is the Fed signaling they intend to raise rates, too? Yes - in 2015. (Not exactly tomorrow.)
week’s reported 30 year mortgage rates were 3.94 percent, and 15-year
rates were right around 3%. Given that the record low rates clocked in
at 3.31 (30-year) and 2.62 (15-year), even today’s higher rates are not
worth your worry. Nor is an increase of rates likely to cause all the
pent-up buyer demand of the last few years to dissipate. My Dad used to
remind me that people bought homes when rates were 14% in the 80’s, and
they will buy them now, even as they inch up – because they need and
want places to live.
Myth #5. Foreclosures are a thing of the past.
Through the recession, many banks and mortgage servicers began to hold
hundreds of thousands of foreclosed homes off the market to avoid
flooding it, depressing prices even further than they already were. And
even now, these institutions continue to trickle them onto the market,
rather than creating a deluge of home inventory. Additionally, mortgage
regulators now allow servicers to rent out REOs, versus selling them,
and to hold them as long as 5 or 10 years following foreclosure, if
While we are seeing a steep decline in the number of
newly foreclosured homes, we can expect to have a higher-than-average
number of foreclosed homes – REOs – on the market for some years to
come. This so-called “shadow inventory” had declined over 10% nationwide
between January 2012 and January 2013. And with the uptick in demand,
we should continue to see this so-called “shadow inventory” of homes
decline as banks take the opportunity to get these homes off their
Author:Michelle Cantrell Phone: 417-860-6505 Dated: June 27th 2013 Views: 399 About Michelle: Michelle is a native of Southwest Missouri and has twenty-five years of experience in selling real e...
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