Unreported Housing Data

The media reported in August that home sales dropped 27% year over year. Realtors knew this in June. Official housing data is a lagging indicator of what is actually happening in the market. Here is the top secret info that you will find out about from the media at the beginning of next year.
After a slow summer with a lot of negative news about the real estate market, the fall is finally here. Traditionally, October/November is one of the best times of the year to sell because of low inventory and anxious buyers. This year isn’t any different as 19% of sellers took their homes off the market in the last two months; plus, 30 year fixed rate mortgages are at 3.93% (as of 10/14/10). The time to sell is now while rates are low and before the 19% of sellers that took their homes off the market re-list.

The bad news is that since May, home prices have dropped about 5-10% in the Boulder, Colorado area (and 5-10% nationwide from what my contacts have told me). This drop will be reported at the beginning of next year and only reflects same home sales, not average sales price. For example, a home that may have sold for $500,000 in March 2010 is now selling for $450,000. WHAT HAPPENED? Inventory was too high and sellers started to capitulate on price, causing a chain reaction of falling prices. This phenomenon has the Federal Reserve scared about a deflationary economy and is part of the reason they are trying to cause inflation.
Everyone’s situation is different, what is yours?

Buying: Rents are starting to rise and you can lock in your monthly payment at below 4.0% which means a $300,000 house will run about $1,450 per month including taxes and insurance.

Selling: Great time to move up and a bad time to downsize. Low rates and ample bargains mean taking a hit when you sell but getting an even greater deal when you buy.

Staying: Refinance at these record low rates. Appraisals may be a problem but there are programs for loans owned by FHA, Fannie, and Freddie that will help you refinance without bringing money to the table.

Investing: Make sure that you are diversified as even the brightest economists don’t know what will happen. Inflation will ultimately raise rents, property values, and interest rates, while deflation will cause the opposite.