As we mentioned in our last update, the mortgage market is changing on a daily basis. Many of these changes are the direct result of the financial crisis that tossed our economy into the Great Recession. According to most economist, our economy “officially” came out of the Great Recession many months ago. Of course, the only way economist can stake claim to our exit from the most devastating recession since the Great Depression is by looking into the rear view mirror. In other words, only after reviewing past economic growth numbers are they able to officially announce that the recovery is underway. And by recovery, they mean that the total basket of goods and services (GDP or Gross Domestic Product) in the US is growing again. This growth, however, has not benefited most citizens. If you've ever heard of something called a "Jobless Recovery," then this one must be the mother of all Jobless Recoveries! Although our GDP has been reported to be growing again, very few small companies and many self-employed individuals have not reaped the benefit of this growth. Multi-national corporations and certain defined industry sectors have been the primary beneficiaries of the government stimulus package. Quite simply, our government has tossed over a trillion dollars at various sectors of our economy in an effort to spark a self-sustaining recovery. The problem with our current situation is that many of larger corporations have responded to slow growth by cutting their most costly expense line item - labor. Labor is expensive and salaries are just the beginning of the expenses associated with hiring. Medicare, unemployment, social security and health care obligations exist with every employee. In addition, many companies have gone outside of the US to replace our workers with cheaper labor. And the employees that are still working are expected to do more with less. Until companies see the return of real demand for products and services (outside of what is being generated by government stimulus dollars), they are going to continue to hire on an emergency only basis.
So, unemployment is the real problem with real estate today. Are interest rates low enough? You bet. Is financing available to qualified borrowers? Absolutely! Do potential homebuyers purchase property when they are concerned about their job? Not likely.
The longer unemployment stays high, the more likely it is that the current levels of employment will become the "norm". Unemployment has been particularly difficult on the younger and older population. I hope we’re wrong, but our current employment dynamics may be with us for awhile. Our nation’s patience will be tested.
Nonetheless, all real estate is local. In Wilmington and the surrounding counties, we are seeing some stabilization of prices. In fact, with the relocation of our troops, Jacksonville and parts of Pender County are booming. The biggest threats to housing continue to be the prospects for a double dip recession and the continued escalation of bank foreclosures and short sales. If you are looking to purchase a foreclosure or a short sale, plan on the purchase process taking longer than normal. Some of these purchases go very smoothly and some seem to drag on forever. The moratorium on foreclosures announced by some lenders hasn’t really had much of an effect on our market. We are hopeful that this foreclosure moratorium will be resolved quickly. The last thing our local and national market needs right now is additional title transfer obstacles.
If you are considering the purchase of your first home or if you’re considering stepping up in price point, now is not a bad time. Will prices go up from here? No one knows for sure, but most feel like we are closer to the bottom than we are the top. If your time frame is longer than five years, right now is probably one of the best opportunities in decades to purchase. We also don’t see interest rates moving significantly in either direction. Steady and low is what we believe will be the case through the fall and winter months. The 2011 spring market will set the tone for the rest of 2011.
As always, feel free to call us for mortgage quotes or just to touch base. If you’re still one of those that hasn’t looked into refinancing your home, it’s still not too late.
Best,
J.D. and Troy
Coming REAL Soon!