A recent article references Americans tendency to pick up and move to seek new opportunities, and characterizes the housing collapse as “the sudden imprisonment of millions in our homes.” Millions are watching for signs of recovery before making a move. What signs should one look for?
· The Price of Land – Housing construction is stuck with the collapse of land values and reluctance of banks to loan on lot purchases. Will the government need to over 3% on lot loans for first time homebuyers to get new construction going again?
· Decline in Foreclosures – The crisis started with foreclosures by those who paid overinflated prices and bailed when they couldn’t meet the ARM payment increase. Then we had people who lost their jobs foreclosing. So jobs will be the leading indicator on fewer foreclosures. Of note, in ABQ the foreclosure sales prices are only 5% below market value. Not such great deals!
· Assumed Appreciation Stymies Baby-Boomers – The only ones buying have been First Time Homeowners. Now we see those sellers buying the next price range up for growing families. However, Baby-Boomers are stuck trying to dump expensive large homes. Their focus is on not wanting to lose anticipated gains from homes they have owned for years so they price too high or are hanging tight. Instead they might be downsizing into great values and dealing with imaginary gains now gone. As the younger generation might say, “Deal with it! It is what it is.” At an anticipated appreciation starting in 2012 of 1-3% a year in ABQ, one can’t hang on a couple years and hope to get that assumed appreciation.
· Return of Second Mortgages – Blaming second mortgages may have been appropriate when they were at 125% of value, but a 5-15% second mortgage on a valid market value needs to return to get the buyers off the dime. Very few buyers have 20% cash to make the 80% equity loans banks are now requiring. We are seeing local lenders come back with the lovable 80-15-5 loans. When those become available, homes will start to sell.
· Home Improvements Return – With fear of not getting their money back, homeowners stopped putting money into their homes to make improvements that might raise the sale value. We still see that hesitation as buyers look for deals and are willing to put in sweat equity. If they can’t get a good cheap foreclosure (which they usually can’t), they will go for a good home needing updates. When buyers put value into improvements, it will indicate confidence that the market is strong again and home improvement spending and market values will tend to go up again. In the meantime, I am waiting to put in those stainless steel appliances and marble countertops.
Labels: Albuquerque, housing, judy pierson, new home, New Mexico, nm, real estate, realtor, recovery
