Cold Winter, But Hints of Spring!

Cold Winter Winds, but hints of a Warm Spring

The swamp Yankees among us do not put much faith in predictions unless they are in farmer’s almanac, and even then they are suspicious. Truth be told, there is wisdom in their cynicism. It is a product of generations of experience in dealing with harsh elements of New England weather. (Good preparation for the Patriots implosion on January 10th). So with that appropriate ‘disclaimer, it is appropriate that we talk about the real estate market in Rhode Island.

“Average price showed an increase in December 2009, the first increase since mid 2006.
That has been three and half years since the average increased in a single month. Over 40 months of reduction has finally ended. Secondly, the number of sales increased by 17% in December 2009 over December 2008. It is true that it was helped by extension/ expansion of the tax credit. Low interest rates and good housing choices are other enabling factors. But there was one macro economic fact: housing prices, or rather housing values, reach equilibrium. In other words, housing prices become so competitive, that they became compelling. To quote. Business Week, if you do not buy a house now,” You are either broke or stupid.”

Much has been made about the importance of the high Rhode Island unemployment rate and the significant number of short sales and foreclosures. But we are seeing real estate fundaments more clearly: Prices and supply are coming into a balance.

So what does this mean for the up coming spring market. It is encouraging.

The goal of the extension of the $8000 tax credit and its $6500 expansion for repeat buyers is to prime the spring market and stabilize values. The important note is that the credit ends with sales agreements signed after 30 April. You have until 30 June to close the transaction and qualify, but you must have the agreement signed, valid prior to 30 April 2010. So as a buyer it is important to start searching soon to benefit from the credit. For sellers it makes sense to put your house on BEFORE the spring market. We are recommending you do it now. There are fewer houses on the market so competition among houses is less intense. Furthermore, the buyers who are out looking now tend to be very serious. That means that you will not necessarily have a lot of showings, but those that you will have, will tend to be serious.

Additionally, buyers are the most researched and informed that we have ever seen.
They know the comparables, market conditions, and the ‘nuances’ of the market.
They are, generally looking for homes in superior condition, at below market prices.
As sellers, there is no patience within the market for poorly priced houses. It you are priced over the market, you are wasting your time. This market is all about price. (Sound familiar). What is making the price issue even more important is the difficulty with appraisals. Anyone who is getting a mortgage will need an appraisal as part of the approval process. If the appraiser values the house at less than sales price, which has happened a lot this year, then the transaction can fall apart. In order to keep the transaction together, the seller may have to adjust their price. It is a real challenge.

One other observation, we are moving back to a normal market. That is prices are now compelling and seller and buyers, particularly in the market below 350k, are in what most Realtors would describe as normal. Neither really has the advantage.

Finally, pre qualification of buyers is critical for buyers and sellers. Most sellers will not negotiate unless they ‘KNOW’ the buyer is qualified. Buyers should be qualified for financing BEFORE they start to look at housing. There is little value is looking at houses that you cannot afford.

Let us know if we can help you sell your property or purchase a new one.