While the number of sales has dropped off from last year, a real estate market does exist here in Annapolis, MD. Buyers are still doing a little bit of fence sitting as they watch to see if prices are going to fall further. For those buyers looking to purchase a primary residence that they plan to live in for the next 5 -7 years, now is a good time to buy. There’s lots of inventory to choose from, interest rates are still low and sellers are willing to accept offers of less than full price. It’s also possible to have the seller pay some closing costs and accept offers with contingencies for inspection items. All of these things will differ depending on each individual property’s overall characteristics; like condition, location and features. Contrary to popular belief, mortgage money is still available at great rates and terms.
Ironically, buyers purchasing properties today are getting much better prices and terms then buyers who purchased during the height of the market back in 2003-2005. You’d think more buyers would be willing to take advantage of the current market, however it seems the human condition is much like that of sheep, skittish until prompted by an external force moving the herd in another direction. It would seem that it’s better to buy the same house for 7-10% below asking price as opposed to competing with other buyers for the same property and offering thousands more then list price through virtue of an escalation clause. Maybe buyers know something we don’t. Sure, it doesn’t make sense to buy something in this market that you’re only going to live in for a couple of years, but if you intent is to stay for 4 or more years, now is a good market to get a great buy, especially with 30 year fixed rate mortgages at or about 6.5%! We remember when rates were 8 – 10% not too long ago. Let’s not even think about the 18% rates when Jimmy Carter was President.
Sellers looking to get their property sold need to make sure that they have taken steps to increase their chances by addressing condition issues like painting, flooring and repairs. Investing $2,000 to $3,000 in the right repairs can make a difference in shortening the time on the market and the ultimate sales price of the property. Buyers today are looking for houses that they can move right into without needing to do anything. Today when a buyer mentions a fixer-upper, they often are referring to a house that needs a room or two painted. Cleaning and modest improvements can do wonders!
Investors are now entering the market at the lower end of the price range, buying properties that can be bought at significant reductions in price along with closing costs also being paid by the seller. These investors are looking to add properties to their rental inventory, having tenants pay the mortgage until the market turns upward again, when they can sell for a profit. It’s a long-term flip as opposed to the short-term flip that we saw happening during the height of the market when property was gaining equity almost every month. During the hot market investors were able to buy a property, clean it up; make some modest improvements and turn around and sell it for a profit in a short period of time, usually within a few months. Investors now are buying properties at the low end of the price range and basically doing the same thing – cleaning and improving – but at a price range that will be able to be affordably rented, until the market improves when the investor can sell the property for their target profit range. They recognize that with a little patience their investment will produce a equity gain
People are talking about when they think the market will improve and turn around. Real estate moves in cycles, but we believe that the cycle will be shorter due to census population estimates. No one has the crystal ball that allows flawless market predictions, however if the economy remains relatively stable and unemployment levels reasonably low; the real estate cycle should move upward in a shorter period of time than in the past, due to estimates by the U.S. Census Bureau, predicting U.S. population doubling from 300 million in 2006, to 600 million by 2043. Simple supply and demand.