A Slump Or Normal Real Estate Market?

July 18, 2007

Finally, we’re settling into a normal real estate market. While many media reports indicate bad news, with slow sales, lowering home values in some areas and slowly rising mortgage interest rates, all these factors are just deflating the boom years to the point where the market has returned to a more normal, balanced and stable point. At least, that’s where we are from a historical perspective.

"Over the last few years, sellers held all the power because there was a sense of urgency in the market," said Brett Long, vice president of Fox Chase Bank. "That sense of urgency has disappeared and market conditions have returned to normal. Buyers are waiting to see a model home instead of just buying what they see on construction plans. Buyers now want to negotiate and wait for the right deal." The same trend is seen in the marketing of previously owned homes.

That sounds like a description of a very normal market. But many home sellers aren’t used to these conditions yet and, in many cases, are having a tough time adapting to them. It means being more realistic in pricing a home, waiting for a longer period for a buyer to be found and a sale to be consummated, and being willing to negotiate.

Home prices now show a widely dispersed drop in single-family home prices, resulting in a continued decline in the incidence of overvaluation in the market, it was revealed in a recent study and survey by Global Insight, an economic analysis and forecasting company. Of the 317 metro areas covered in the study, 157 of them experienced price declines in recent months. That, combined with wage gains and slow but steady interest rate increases, has reduced the widespread overvaluation of homes.

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