Realistic expectations about the housing market


Are your expectations about the housing market unrealistic? Clark was recently stunned by a story in The Wall Street Journal that reported the average American thinks their home’s value is going to rebound in the next 6 months.

That’s not going to happen.

Housing prices around the country have fallen by huge amounts. The worst markets are down 35% year-over-year from peak to trough. More foreclosures in 2009 will mean continued pricing pressure on home values. Now that’s a realistic assessment.

So what does this mean to you and your house? Well, the good news is that most of us have no need to sell. So even if your market is down, it is only a paper loss, not a real one since you won’t be selling anytime soon.

Typically, home values go up at the rate of inflation plus a little more each year. Right now, we’re going through a classic standard correction — prices went out of sight; they came crashing down; and now recovery will be gradual and we’ll eventually get back on track with traditional increases in home values.

Clark is often asked if there is a “magic moment” when it’s best to sell. There’s no answer to that. The home market gets a normal burst of activity starting sometime between February and April. Early-to-mid 2009 may be your best bet if you’re in a non-bubble market. That’s just a general gist, without accounting for the fact that all real estate is truly local.

The moves by the federal government to lower mortgage rates mean that you may now be able to sell to a qualified buyer who may not have qualified as recently as a week or 10 days ago.

One last word of advice: Be realistic. Don’t go by last year’s comps. And realize that housing is not a “can’t miss” thing. The Wall Street Journal reports that many Americans think real estate is the best source of long-term financial security. Not so, says Clark. Stocks, bonds and mutual funds are still the best bet — even though that may sound crazy right now.

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