How many of us have said, "If I had only sold two years ago"? But, you didn't. It's the type of hindsight that could give many homeowners and investors sleepless nights. It's important for many homeowners who find themselves in those situations to focus on what they've gained since their initial purchase and not the "theoretical" loss they feel from what has happened in the market since.
According to statistics, on average, in the majority of major metropolitan markets, there has been anywhere from a five to 15 percent compounding average annual rate of real estate appreciation, before inflation, since 1998. Yes, if you had sold in 2004 at the higher price, you would have seen a greater rate of return, but you didn't. Does that mean you lost money?
The latest readings from the National Association of Realtors showed that the over-supply of existing homes on the market last month jumped to a 16-year high. Sales fell last month, and the median price of a home fell from a year earlier for the 12th straight month.
But as frightening as those numbers might seem, one could argue that this is as good a time as we have seen in the past three or four years (if not longer) for those who want to get into the market. Home prices in many other markets would allow someone to trade up to a bigger home in a way they could not when sales were strong and prices were rising.
The National Association of Realtors' sales report stated that some potential buyers are having trouble making purchases, given the upheaval in the mortgage market that has caused lenders to tighten credit and qualifying standards.
Some economists are saying most sellers aren't as willing to take the view of being satisfied with today's lower value compared to a few months ago and have a stubborn desire to hold out for the price their home used to be worth. This is one of the issues causing the inventory numbers we are seeing in the current real estate market. There are simply a number of overpriced homes on the market because of unrealistic or unreasonable sellers.
It is definitely an easier marketplace as a buyer now than in 2006 or 2005 when it comes to inventory and bargaining, even with the greater prices over, say, 2004 and before. The question is, does one wait and see if it will be even easier a year or two from now, or does one take advantage of this correction now before prices start to climb again?
There are an equal number of supposed "experts" recommending both course of action. I tend to think the downturn in values in many markets has at least until the last half of next year to run, and perhaps into 2009. . .more due to the mortgage meltdown than any other single factor.
