Monday, July 19, 2010

SPEED BRAKES APPLIED!


Earlier this year I, along with others, predicted that the second half of 2010 would see a slowing in the local and national real estate markets. It would appear that this prediction is now a reality.

Fearing the extra costs associated with the HST, as well as forecasts of mortgage rate increases and tougher mortgage qualifications, it was inevitable that buyers would get into the game earlier rather than later in 2010. As a result, there are now fewer buyers in the market and consequently there are more homes listed for sale for longer periods of time. Inevitably, this combination of increased supply and reduced demand will cause prices to drop or, at best, to stabilize.

If you don’t need to sell in 2010 but think the prices will be better next year, remember that prices don’t always go up in the short term. For those of us who have seen the ups and downs of the real estate cycle over the years, we know that the next upswing may be more than a year away. For example, when the boom of the late 1980s and early 1990s ended, it took more than 5 years for local real estate prices to come ‘off the bottom’.

There may also be some who believe that the influx of additional personnel to CFB Trenton will force prices up in the short term. However, keep in mind that there are always other variables at work that influence the market and affect the value of your most important investment. These could include mortgage rates, the US economy, a change in government, or another unforeseen factor. Just ask the folks on the coast of Louisiana if they could have predicted the downturn in their real estate prices!

So how much has the market slipped? Here are some national and local statistics.

The Canadian Real Estate Association (CREA), representing 99,000 REALTORS® nationwide, reported that in June 2010 national home sales via the Multiple Listing Service receded 8.2 percent from May 2010. Furthermore, sales activity was down 19.7 percent in June 2010 compared to June 2009. The President of the CREA suggested sellers should consult their REALTOR® on how to price and present their homes in these more challenging times.

The Quinte & District Real Estate Board reported more than a 12 percent drop in residential sales in June 2010 when compared to the same period in 2009. Furthermore, year to date, there are now almost 8 percent more homes on the market than there were in the first 6 months of 2009. Theoretically, you could also argue that the 5 percent drop in the number of local REALTORS® over the last year is another indicator of a turn in the market.

Are you a buyer looking to jump into the market this year? The interest rates are up slightly but the prices are coming down. Now may be the time to jump. The speed brakes won’t be applied forever!