My New Blog

When will the housing crisis end? That is a very good question. Really the answer to that question is always more local than national. The real question is, “When will the housing crisis end for Burnett County?” Let’s look at the Multiple Listing Service statistics. At present there are 436 active residential listings in Burnett County. That includes homes on lakes and off lakes. The average list price is 230,774, and the average days on market for active listings is 176. In the past year there were 208 closed listings with the average price at 202,573 with the average days on market at 179. This means that essentially we have a two year supply of homes on the market based upon last year’s sales. The difference between the average sale price and list price is about 12.5%. We know that homes in the area typically sell at about 94% of asking. That means that on average the listed homes are at least five to six per cent over priced if we go just by the averages. So part of the solution may well be that sellers look carefully at what they have their home priced at. An over priced home will not sell in any market.

The second thing that needs to be looked at is the over supply. Some people do not have any choice but to sell their home. Other people choose to test the market or they are looking to simply do something different. That’s fine. It’s a free country. But much of the over supply could be eliminated by people deciding not to sell their home and take their house off the market or not put it on the market and wait for better days. Price is after all a function of supply and demand. The lower the demand and the greater the supply the lower the prices will be. Even if demand is stable prices will tend to drop due to an over supply. So let’s say 20% of the people that have their house for sale really don’t need to sell. That would take about 80 homes off the market. Realtors also have a responsibility to manage the supply. I know it is hard for realtors to turn down a listing. But if a realtor finds that a person doesn’t have to sell knowing the market situation, maybe the noble thing to do is say, “You know, there is a huge over supply on the market. If you really don’t have to sell maybe you should wait until the market is better.” That could go along way to help stabilize prices for those who really do need to sell.

The third thing that needs to happen is the psychology needs to change. I recently read an article in money magazine that states many people that actually make money do so by going against the herd mentality. They buy low and sell high. And they typically buy when things are bad. It takes some real fortitude to buy when the market is down, but in reality that’s the best time to buy. Two of my sons bought houses in the past year. They would never have been able to afford their homes without this down market. They got excellent buys. Granted I told them don’t expect to buy and then sell in a year or two, but NOW is clearly a good time. Interest rates are going up some, but they are still historically low. The government is out there to spur on the housing market by giving grants to first time home buyers. If you are thinking, “Well maybe the market will go down more” then you are probably going to miss the bottom and buy on the upswing. My suggestion to people is if you want a home of your own NOW is the time. We may never see a period of low prices AND low interest rates for a very long time.

People in the stock market say it is best to buy when the market is in a funk.  It takes guts to do that however, because people often think it will go lower and they don't want to loose money even if it is on paper.  But they are not the shrewd investors that make the money.  Buy low sell high is always the best approach to the market. 

Well it is the same for real estate.  It is generally best to buy when no one else is.  You are apt to get the best deal.  And right now interest rates are pretty low in historical terms.  We may never see low prices and low interest rates again!   So why don't people buy?  Part of the problem is the feeling that things will get worse.  And there may well be areas in which a further price correction is needed.  In that case one should wait. But trying to determine that exact lowest point in the market is very difficult.  The best thing to do is some homework, and if the general feeling is that prices are starting to bottom out then buy.  This is especially true if you can find a good foreclosure sale that requires minimum of work.  They are out there.

But don't ask a real estate agent.  They always want to sell you something, because that's how they make money.  Talk to the appraisers.  We are constantly looking at the total supply and demand that is out there.  A good appraiser will give you honest and forthright information about the trends in the market for an area.  It might cost you a bit for the consulting work, but it will pay big dividends in the future.