Market Saturation

From a national perspective, existing home sales decreased in July while new home sales increased during the same time frame. More important, however, is the fact that the inventory of homes on the market is at a 9.6 month supply nationally. A 6 month supply is considered appropriate during a healthy real estate market (source: Wall Street Journal 8/28/07, pg A2 and related articles).

On a local level, prices of homes on the market increased by approximately $30,000 on average from Q1 to Q2 (as of 6/30/07) in Essex County while the inventory of available homes ballooned on a level reflective of the national market as described above (source: National Association of Realtors in conjunction with MLS Property Information Network, Inc.).

The foregoing is indicative of contrasting perspectives. Builders appear to be ahead of (or at least in line with) the curve with respect to the market correction. To the extent that new homes are selling, it is because many builders are in triage mode and trying to stop the bleeding. The converse is true with respect to most homeowners who refuse to acknowledge the correction, thus contributing to the increase in inventory. The increase in average days on market due to aggressive pricing only causes confusion for buyers who lose track of inventory and have too many options to make an informed decision.

Fall-out:

If you are selling your home, paying attention to staging and distinguishing your property is more important now than at any point in the last few years. Buyer statements such as "I already saw this property" are commonplace. Placing a property on the market prematurely - or without making necessary repairs or upgrades - will likely have devastating consequences in relation to the selling price.

With the above in mind, if you are a buyer, look for properties that do not present well, but meet your general requirements as to lay out, square footage, etc. Given the glut of inventory, these homes will languish on the market. With a little elbow grease, you could end up with a steal in the months to come.

Time to buy rental property?

At present the only readily available loans for residential borrowers are grade-A loans and, to a certain extent, jumbo loans (at a premium, however). Although just yesterday Bank of America invested 2 billion dollars in Countywide and four banks (including Bank of America) borrowed 1/2 million dollars each from the discount window, no experts I have heard speak on the matter predict a quick turnaround in this liquidity crunch. In fact, the Chairman and CEO of Countrywide in an interview this morning on CNBC stated in pertinent part (and I paraphrase) that in the last 5 years high risk loans were authorized which never should have been given out. It stands to reason that no lenders are eager to repeat the mistakes of recent history. Meanwhile, foreclosures are increasing in local inner cities and this will eventually bleed over into other markets.

If sub-prime and alt-A loans will no longer be available and you are able to identify an area with no major condominium developments under construction (possible apartment buildings and potential competition), is it not an opportune time to explore purchasing rental properties?

This November-March may present quite a buying opportunity for rental properties with the ensuing months' foreclosures and loan denials creating an eager rental population.

Potential pitfalls, to name a few, are ongoing construction projects with sunk costs making abandonment cost prohibitive and/or mortgage lenders who return to the status quo of recent years.

Introduction

This is an exciting new phase of the ongoing development of JW Real Estate, LLC. Unfortunately, many real estate companies and professionals allow technological advancement to overwhelm them, thus becoming dinosaurs in the industry. My primary goal, outside of earning the trust of my clients, is to make sure I do not fall into the above-mentioned trap. Creating a blog seemed like the next logical step in my attempt to remain relevant and to best service my clients. Moreover, I envision this blog as becoming important to my clients, associates, family and friends when planning for their economic futures.

I enjoy the privilege of being associated with people from all walks of life and, thus, encourage all of you to bring your unique experiences and perspectives to this on-line forum in order to maximize our knowledge of the world around us on a micro level. Most economic and real estate information is provided on a macro level and, thus, quite often does not reflect the true landscape for my area of concentration which is from Boston, Massachusetts to Southern New Hampshire.

My closest contacts are real estate professionals, attorneys, construction company owners and workers, financial planners, computer programmers, software developers and health care professionals. All of you are valuable in defining our market and helping each other to make wise fiscal decisions. I encourage you to use this as a forum to share your thoughts and as a future resource.

As an aside, we had our first annual Lowell Spinners outing on Saturday and from all accounts, it was a rousing success! My only negative thought is that we need to be firmer with RSVP deadlines next year so as to maximize attendance. For the 90+ of you who participated, my wife Kristen and I thank you for for making the event so successful and we look forward to seeing you next year.