Looking at Whidbey Island Real Estate Statistics ending Dec 2009, our year to date sold homes finished ahead of last year. Active listing inventory is down but I think that may have more to do with it being December, and we will need to see what happens in the early months of 2010 to give any weight to this statistic. The year to date sold prices is down ( -11% ) on South Whidbey. So, even though we see some stabilization, there are still homes being sold at lower prices today. Because we have so few homes that sell, many of our statistics can be highly affected by a sale of a foreclosure home. So this must be considered when applying data to our outlook. Days on market, (DOM) are up, which usually reflects less buyers currently moving forward to purchase. Again, seasonality is a big issue here, and December has not usually been a strong month.
It is clear now that the housing boom of 2004 – 2006 was temporary and artificial. It wasn’t an indication of forever escalating prices; though many seemed to believe so. The boom market was a bubble of inflated prices and irrational expectations of unqualified profits. These beliefs were fed by bank and mortgage companies making loans that should not have been made. Just as the stock market bubble that preceded the Great Depression created investors of doormen, maids, construction laborers, bartenders, and others seeking to capitalize on skyrocketing stock prices; the housing bubble created a wild frenzy of speculation and inflated home prices that was impossible to sustain.
Homeowners who purchased anticipating great profit, particularly those who bought early enough to borrow against their profits, have seen their dreams of easy money and growing equities vanish. More than two million of those homes have fallen to foreclosure, and many more may follow. This is a depressing fact, but one that we will have to consider in pricing homes for sale in the future.
Hindsight is great, and shows the error of such paths. We should have known better, but we didn’t want to miss what appeared the opportunity of a lifetime. Homes, however, are not a commodity to be traded like soybeans, pork bellies, or precious metals. Homes are just that, a place to live, raise a family, create memories, and find solace at the end of day.
The bursting of the housing bubble may ultimately restore order to both housing and the financial markets; and hopefully a repeat of this will not occur in the near future.
With that in mind, should anyone buy a home today? Of course some should. But those who are motivated solely by profit may find disappointment. Will home prices increase? Absolutely. But it may take time, and it may not be what everyone’s expectation has been.
History tells us that the prices of those homes bought with careful consideration of both location and value will increase at a rate above the rate of inflation. It is therefore important in the new year to take a look at the home you have for sale, are considering selling, or to buy, and see if it fits the new criteria. If not, it may be time to adjust your thinking.
