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August 9, 2010

State of the Market - Part II

Filed under: the home market — marc @ 2:30 am

In the previous posting on my site I discussed market trends and why, at the time I felt that we would continue to experience market decline through 2010. 

Realtors, homeowners, builders and developers alike are no longer in a state of denial when it comes acknowledging that we have experienced serious market decline. 

Current Market Trends ~ Inventory appears to have leveled off for most market sectors, especially in the lower price points (regardless of what market we are talking about).  The spring months experienced a surge in activity by way of greater sales and more prospective buyers bidding on properties.  As we are now in August and the market has returned to its anemic pace of last year it is clear that the “surge” in activity that we experienced was attributed to the Federal Tax Credits that were being offered to prospective home buyers.   Yes, it certainly looked good for a couple short months but now we are back in the doldrums of a stale real estate market. 

Market Complications ~ Complicating the anemic market further is the fact that credit and mortgages are hard to come by.   More stringent reporting requirements that have been placed on banks by Fannie Mae combined with a revised credit score reporting system (as it relates to mortgage applications) have only exasperated the home market. 

What will it Take? ~ An ease of credit and mortgage requirements along with a real increase in real income are necessary to refuel this stale market.   The last time we experienced such a down market was in 1991/1992.  It took nearly 7 years for the market to recover and that is likely true for this market as well.

The market continues its correction reflective of the fact that home prices just got to be too expensive relative to what people can actually afford.  According to the Connecticut Economic Resource Commission, in 2008 the average annual household income for the Town of Guilford was $97,577.   Comparing this figure to the State average of $67,236 the Guilford figure stacks up quite favorably.  The Guilford figure of $97,577 compared to the median house price of $425,000 looks less favorable and, when compared to the average new construction price of $750,000 at that time, the affordability becomes even less feasible. 

What’s Ahead? ~ A continued downward trend in prices and values are expected, especially in areas where abundant inventory exists.  This appraiser is convinced that the market will continue its 6% decline for the general market through the end of the year and likely well into 2011.