LAKE MARKET DOWNTURN?
With the lake
real estate market as well as the national market seeing a slowdown in the
number of homes sold and price appreciation slowing; you may have concerns
about what happens next. Having lived
(with a career in real estate) through the real estate and overall economy
crash starting in late 2007; I understand why you might be nervous about where
the market is heading.
Here are my
thoughts as to why today’s market is not getting ready to tank and is much
different than the housing bubble that burst 12 years ago.
Since 2007, short
sales and foreclosures accounted for a third of all homes purchased. The Mortgage Banker’s Association reported in
late February that the percentage of loans in the foreclosure process at the
end of 2018 was just .95 percent. This
is the lowest foreclosure rate since 1996.
When the bubble
burst in 2007, home values started to decrease. Over a four to six-year time frame, homes lost
25-30 percent of their value. Although
homes are not appreciating at the rates they were a year ago, they are not
depreciating. Appreciation is still
continuing, just at a slower pace. I
expect home prices to continue rising in 2019.
The number of
homes sold dropped dramatically beginning in 2008. Comparing 2018 to 2019, we again have
experienced a drop in lakefront home and condominium sales here at the
lake. This is not due to a lack of
interest or ability on the part of buyers but rather a lack of inventory
available to purchase.
Lack of inventory
is down to a couple of things. First,
homeowners not putting their property on the market. Some homeowners are unable to sell due to the
amount owed on the mortgage. Other
owners have been unwilling to sell until home values returned to at least the
amount they originally paid. Low
inventory itself is another cause; owners are holding off putting their home on
the market until they find another home to purchase. Some owners are hesitant to move into a
larger home and mortgage after previously going through the market crash.
The second major
cause is down to lack of new construction.
Again, this cause has several subsets.
I don’t have specific market numbers available to me, but based on my
experience of the market, there are fewer spec homes and new condos being built
than I’ve seen since the early 1980’s. I
am seeing an increase in both since mid-2018.
Builders have also been wary of starting a new venture after
experiencing the 2007 downturn where many got caught short. The construction industry has a major labor
shortage across the country. Building
material prices have escalated making it difficult to compete with even a
limited existing home market.
In response to
the last housing bubble, lending requirements became much more stringent. While there are still many great mortgage
programs available, they are based on much tighter guidelines which will help
prevent buyers from overextending themselves.
This shows up in the low foreclosure rate mentioned above. The economy and job market are also very
healthy, unlike 10 years ago, which increases loan repayment rates. Foreclosures really take a toll on the
overall real estate market and that’s not happening or likely to happen any
time soon.
These are the
main factors I point to in saying that today’s slight easing in the market is
nothing like what we saw occurring in 2007.
Michael Elliott
has been selling real estate at the Lake of the Ozarks since 1981. He is one of the most respected brokers in
the area. If you would like to work with
Michael in the sale or purchase of property, or have interest in a career in
real estate, contact him at 573.365.SOLD or cme@yourlake.com or stop by C. Michael Elliott &
Associates, 3738 Osage Beach Parkway.
View thousands of lake area listings at www.YourLake.com. You can also view each months’ article, ask
questions and offer your opinion on Michael’s real estate blog, www.AsTheLakeChurns.com
