Have You Missed Your Opportunity to Buy Real Estate?

Average selling prices for residential real estate have been rising consistently this year due to constrained inventory earlier in the year, a reduction in the percentage of distressed property being sold, a new trend by the institutions owning foreclosed property to fix them up to get a higher price, pent up demand left over from the recession, and consumer confidence driven by local economic factors. Also, mortgage interest rates have been rising and are now about a percentage point higher than the lows we experienced in the recent twelve months. Rates are projected to drift upward.

The institutional and cash buyers that flocked to the market in recent years buying up primarily low priced distressed property to get rich quick are showing less interest as prices rise and the inventory of low priced property declines.

So with the greater Lansing housing market in recovery mode for the past two years does this mean the opportunity for potential buyers of personal or investment property has passed them by? I don’t think so and here’s why.

When you look at statistics regarding new household formations and affordability they point to a continued recovery. The local economy is strong across a broad range of industries which will continue to drive the consumer confidence supporting housing.

Comparing average selling prices and unit volume now to the peak we hit in 2005-2006 shows there is still much room for improvement. Additionally the recovery here has affected areas differently with some up double digits in volume and units while others have declined from last year. So though the market trajectory is up and solid the growth is uneven. This in itself presents opportunity for the savvy educated buyer.

Inventory of resale homes has actually increased in recent months which not only improves choice but mutes the pace of rising prices. The low priced segment of the market has led our recovery but I feel the cooling of this segment is translating to our broader market and recently the demand for upper tier property has improved markedly. Even if our market returns to an historical growth rate of 3.8%, housing will remain a good investment.

The “get rich quick” investors the past few years are being replaced by “value” investors who see a sustainable local market, good demand for quality rentals, and rising rental rates. These investors will continue to provide support for the market though to a lesser extent as in the past.

Mortgage  financing is still readily available to credit worthy employed borrowers with very low or no down payments at interest rates close to historical lows currently at a four month low. If interest rates rise in the next two years as expected to around 5% this in itself should not be sufficient to depress sales. The contribution that home ownership makes to enhanced lifestyle and wealth building will remain strong and the dream of home ownership is alive and well.

Taking all this into account, we believe that the purchase of residential real estate for first time buyers, move up buyers, and investors alike remians a wise move and we see a healthy real estate market in greater Lansing for years to come.