Four Steps to Recovery

The Four Step Prescription for Recovery

Possibly the most important ingredient in the 2009 real estate correction is the fact that real estate makes up 20% of the Gross Domestic Product in this country and regardless of which side of the political fence you fall on, our country cannot be fixed without first fixing the housing sector.

Real estate should be gaining a great deal of attention over the next several months, particularly by our new administration.

With this important information in tow, it is important to point out that we currently have several key indicators that may position our country for a real estate recovery in 2009:

1. Dropping Interest Rates—According to NAR’s December 17, 2008 article entitled Fed Action Creates Best Interest Rates in 50 Years, Realtors® Report, “Mortgage rates which had averaged 6.3 percent in the third quarter, have recently fallen into the 4 percent range in some parts of the country.” The article went on to report, “NAR has estimated that a one percentage point decrease in mortgage rates will increase home sales by more than 500,000 homes.”

2. Improving Affordability—According to statistics released by the National Association of Home Builders, housing is becoming increasingly affordable for Utah residents. Statistics released by the organization, following the third quarter of 2008 found that Ogden-Clearfield ranked 80 out of 223 metropolitan statistical areas for housing affordability, followed by Salt Lake at 136, Provo-Orem at 160 and the St. George area at 204. According to the index, 67 percent of homes sold in the Ogden-Clearifled area during the third quarter of 2008, were affordable to families earning the area’s median household income of $65,000. In Salt Lake City, 55.3 of homes were affordable to families making the median household income of $65,300. In Provo-Orem, 48.2 percent of homes were affordable to families making the median household income of $60,000. In the St. George area, the least affordable market in the metro, 33.8% of homes were affordable to families earning the median household income of $55,100.

3. Government Intervention—As we noted before, with real estate making up 20% of the Gross Domestic Production in this country, it is imperative that the government take action to correct the housing sector. We need to move through the current financial crisis and restore the flow of credit so that qualified buyers are able to take advantage of improved affordability and successfully purchase homes. To respond to this, the government is currently looking at a number of corrector options including tax benefits, home ownership credits, subsidies or interest rate stabilization, to name a few. President-elect Obama and his economic team are in the process of developing an economic recovery plan designed to help Main Street and Wall Street with an ultimate goal of creating at least 2.5 million jobs while rebuilding our infrastructure, improving our schools, reducing our dependence on oil and saving billions of dollars. According to CNNMoney.com’s December 23, 2008 article Obama Closing in on Stimulus Plan, Vice-President-elect Joe Biden was quoted saying, “While our short-term goal is to start creating jobs as quickly as possible, we plan to invest in areas that will produce long-term benefits for the long-term health of our economy.”

4. Slowing of Distressed Properties—The timing of our price recovery may depend on how quickly the government takes steps to mitigate foreclosures. We expect sales of distressed properties to peak in early 2009—a critical factor in the housing market that directly impacts the timeframe for stabilization in the median price. NAR reported in its December 17, 2008 article entitled Fed Action Creates Best Interest Rates in 50 Years, Realtors® Report, “To boost the economy, it is critical to stem the rising tide of foreclosures and boost home buyer confidence in the housing market,” McMillan said. “Lower interest rates coupled with increased foreclosure mitigation are the key ingredients to stabilizing the housing market and preserving communities and homeownership.”

Looking forward to 2009, many experts agree that the financial system will begin to show signs of stabilization in early 2009 and we may begin to see a real estate turnaround by the summer. If you are considering buying, this should serve as a good indicator that now may very well be the time to purchase real estate.

If you are considering selling, possibly more so than ever, you need a qualified Realtor® who can assist you in selling your home. It is usually not enough to simply post your home on the MLS and post a For Sale sign in the yard. You need someone like myself who understands the intricacies, inventory and challenges of your local market and someone who knows how to properly position your home so it stands out among the sea of listings currently available.

If you are considering buying or selling your home in 2009, I have the resources, knowledge and experience to properly represent you in today’s market. Contact me today for the representation you deserve.