Tuesday, November 27, 2012

You don’t know you’ve hit bottom until you start to go up

We’ve mentioned in previous posts the importance of buyer perception on the market. While many factors led to the downturn of the market, much of what kept it there was the uncertainty of when it would pick back up.

In the beginning, the uncertainty led to a lack of movement in the market. People did not want to invest in a mortgage, either because they were waiting for lower prices if the market plummeted further, or they were uncertain if their investments would hold value. People were waiting to see what the bottom of the market looked like.
The record-low home prices and interest rates while the market was down provided unique opportunities for those interested in entering the market for the first time, but the lows did not provide long-term benefits that many other homeowners needed. And as we saw with the mortgage crisis, the long-term benefits have the most positive effect on building a successful and sustainable economy.

Recent reports of movement in the housing market are providing positive projections about long-term benefits. The National Association of Realtors reported that the national median existing single-family home price was $186,100 for the third quarter. This is up 7.6 percent from $173,000 in the third quarter of 2011. This increase is the strongest year-over-year price increase since the first quarter in 2006.

Consistent with the National Association of Realtors report, a recent article in the Atlanta Business Chronicle reported that metro Atlanta’s home prices were on the rise in September. Georgia home prices saw a 2.2 percent year-over-year increase.
The national and local increase indicates that the market is finished operating at the bottom and ready to start moving in the right direction.

An increase in housing prices positively influences the market in a couple ways. First, it influences homeowners’ return on investment. One of the most discouraging things for homeowners during the recession was the uncertainty of their home’s worth. An increase in housing prices allows homeowners a more positive outlook on their investments. This more positive outlook on ROI influences more people to sell homes and enter the market as buyers. Over time, this increase in the number of buyers will lead to an increase in home construction.

The influence housing prices will have on the current market will be gradual, so it is important to allow time for recovery. The new reports of home prices increasing are valuable in assessing the direction of the market, but it would be premature for homeowners to make sudden decisions based solely on the recent numbers.

However, for those waiting to hear the worst is over, an increase in housing prices is good news.

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