Are We at the Bottom?

We all want to hear good news.  The media is looking for it so they give it to us in small  bites.  One of the bites is that the housing market has hit the bottom and signs of an improving market are there.  I am not sure how you can make that statement.  We don't know the bottom has been reached until 6 months afterwards. It is not like we have jumped into the pool and dropped down and down until our lungs are ready to burst, and then our feet hit the bottom and we push ourselves up. 

 

My take on it is this. We will know the market is growing out of its misery when we see houses above $350,000 in the Twin Cities start to sell at a better pace.  The Mpls Area Assoc of Realtors will tell you that the houses that are selling are those not below $270,000 but those below $200,000.  We are not experiencing the spiraling up when the small houses sell.  In a traditional market when a $150,000  house sells that buyer will buy a $200,000.  Then the $200,000 buyer goes onto buy the $275,000 and that buyer reaches up to buy $350,000 and the $350,000 goes for the $500,000 home and the market takes off.  That first seller  right now is the bank.  That means no house is bought after the sale of the foreclosed $150,000 home. We will have a healthy real estate market when that chain of sales returns. 

 

The condo market and townhouse market is suffering right now, because sellers cannot sell their larger homes and scale down to the condo and townhouse they once wanted.  They remain "stuck" one more year with the "big" house.  The fall market was when I used to list many of the four bedroom homes.  The sellers no longer wanted the fall and winter chores of the large house and were ready to become snow birds.  This year they cannot sell as the market is not demanding their house at a price they are willing to sell at.

 

Better times in real estate are coming.  I feel we need to be cautious in the Twin Cities to say it is over.  Job losses, the lack of interest in the consumer purchasing, and other external factors are too great to throw the victory party yet.