What To Make Out Of The 2007 Housing Market(This has the potential of literally being a million dollar question: What will happen to the housing market in 2007?)
Numerous investors and industry experts have been speculating about the market’s imminent future since the correction began just about a year ago (the end of 2005 to the beginning of 2006).
The end of the housing boom (2000 to 2005) had been a long time coming but its abrupt end seemed to come as a surprise to just about everyone. Now, no one seems to exactly know what to expect from the immediate future of the market. After all, the correction was expected to just slow down sales and lessen the rate of price increases. Now we are discussing record-breaking sales declines and price decreases.
Everyday an article or two is released that stipulates one thing or another is going to happen to the market, only to see a contradicting report the next day. But this latest report conducted by a well noted economic forecasting company may truly provide some insight into the market’s future, as described in Broderick Perkins’ article, “2007 Housing Market 'Won't Be A Standout',” published November 15, 2006 in Realty Times.
Industry experts and economists, especially those who earn a living investing in the market, have been struggling to find ways to put a positive spin on the housing sector’s future as the year winds down.
“According to the 28th edition of a survey of 600 real estate industry experts, 2007 will remain loaded with uncertainty for the housing market as prices continue to shake out, financing costs grow and more potential buyers find a spot on the fence.”
“‘Let's just say, 2007 won't be a standout for the housing sector. Odds favor pricing declines or, at best, stagnant markets,’ according to the Urban Land Institute's ‘Emerging Trends In Real Estate 2007.’”
There are several notable points to the academic forecast that may have investors and experts alike not relaxing as much as they would prefer during the holiday season.
The forecast predicts the change in the market throughout the next year will feel more like a Willy Wonka elevator that moves sideways and slightly down rather than “up, up, up.”
“Hardest hit will be late-comer speculators, recent buyers forced to sell soon and others who are still playing the real estate game like it's 2005.”
However, existing home owners with 10 years or more of equity cushion should continue to fair well and remain comfortable providing the higher property taxes, insurance premium increases and poor loan web decisions do not pull them under to become another negative statistic.
“Too much supply in markets dominated by investors will continue to give new home buyers the edge, but bailing investors and loan web defaults could worsen the so-called ‘correction.’”
The slowing second home market will also spill over to affect the overall housing market. When prices boomed to unfathomable prices, second homes spiked as well which defeats the purpose of a cheaper vacation or investment home.
“‘Welcome back to reality. Some recent vintage 'priced to perfection' deals could struggle in the future under negative leverage and increasing expenses from high energy costs, rising taxes, and pricey insurance premiums, not adequately factored into 'optimistic' pro formats,’ the report says.”
The bottom line is that the market will continue to struggle as all the amateur investors and home owners who were in no position to buy and took out “exotic” refinance feel the heat and are forced to foreclose on properties. Once the bad owners and investors begin to be weeded out, the market should stabilize once again.
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