There has been much speculation about whether we have hit bottom in the real estate market and whether buyers should buy now or wait for lower prices. Well the answer is simple: yes and no!

I have previously blogged on the value of using a qualified real estate in these unsure times of whether or more precisely where and how to buy. There is a saying in real estate that all real estate is local. This statement may never be more true or obvious as now. There are markets in California, Las Vegas, Arizona, Michigan, and Florida where I believe there is potential for more downside based on the froth that those markets encountered two or three years ago. The St. Louis market has the benefit of not having such large price swings and is therefore more stable in general. Additionally, St Louis is home to a diverse corporate community including the likes of Monsanto, Anheuser Busch, GM, Smurfit Stone, Brown Shoe, Express Scripts, Zoltec and many more. If one area of business slows another may not be hit by recession and with jobs comes income and again stability which helps housing prices. Qualified realtors are knowledgeable about these differences and are able to use this information to help each buyer make informed decisions.

Many people forget how long we have been working our way through this "subprime crisis". It has already been more than two years. I don’t believe this downward pressure will continue for another two years. I have already witnessed increased sales in much of  St Louis County and continue to see buyer interest. In fact, I believe that we are starting to see artificially low prices due in no small part to the difficulty many see in obtaining credit. Fannie Mae and Fredie Mac have started charging additional fees for people who have less than stellar credit. These fees are really meant to replenish the losses these entities took on with previous subprime loans. The underwriters anticipate that these current borrowers are of the same risk even though the buyer is buying a property at maybe a 20%-30%+- discount. Appraisers are being required to supply comparable sales that don’t exist and if they can’t the deal won’t get done. The media scares people all the time with how horrid real estate is and compare this downturn to the depression of the 1920s.

At the point where investors realize that homes can not be built for what they are being sold for (look at commodity prices) and private lenders begin lend with rational decision making we should see a significant pick up in sales. By that time many buyers will have missed the greatest opportunity of their life to buy real estate. People also forget that when Jimmy Carter was in office the prime rate was over 21%. Interest rates now have almost nowhere to go but up and with real estate prices 20%-30% of their highs this is the time to buy!

Buyers need to find a quality Realtor and negotiate the home they want. If they can live there for three to five years, I believe the upside will be 20%-30% to the upside. On a two hundred thousand dollar house you are talking about $40,000-$60,000. Keep in mind your investment might only be $20,000.

Best regards,

 

Nick Sepac

RE/MAX Midwest Group

Owner/Broker