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April
23
23
The Real Estate Market Is Back!
NEWS RELEASE APRIL 21, 2009 Contact: Caroline Ruhl, President CarolineRuhl@RuhlHomes.com After six months of wondering if we would ever sell another house, the real estate market is back! Hallelujah! The regional real estate market slowed dramatically during the fourth quarter of 2008 and the first quarter of 2009. Real estate pending sales were down as much as 50% compared to the prior year during some months. Prospective buyers were paralyzed with fear due to the troubled economy, and concerns about whether or not they would have a job. This downturn is reflected in the 2009 Regional Real Estate Trends chart on page 2. As shown, first quarter sales volume was up 32% in Dubuque, but down in all of our other markets, with the drop from first quarter 2008 as follows: Cedar Rapids -17% Clinton -53% DeWitt -69% Dubuque +32% Illinois Quad Cities -19% Iowa Quad Cities -28% Iowa City -20% Maquoketa/Preston/Bellevue -43% Muscatine -19% In most markets the percent drop in number of properties sold is less than the percent drop in sales volume because sales in upper price ranges have been more negatively impacted by market conditions than sales in lower price ranges. First time buyers, motivated by historically low interest rates and the First Time Buyer Tax Credit, are able to buy without waiting for their current homes to sell, which is part of the hold up for move up buyers. Housing Turnaround Began in March Our regional market began to improve in March. At Ruhl&Ruhl, our new sales pending in March were only down 0.8% from March of 2008. And the first two weeks of April have been up 43% over the same weeks in 2008. In fact, nationally March results also showed for the first time that housing sales started to gain traction in all regions of the country. Positive Factors Causing Better Real Estate Sales Many factors are contributing to the improving real estate market:
- Mortgage Interest Rates at Record Low - interest rates are at their lowest level since 1947. In the 1980's we said "if interest rates would just get below 12%, we can sell homes again..." Now interest rates are below 5%.
- Housing Affordability is at an All Time High - housing affordability is at its highest level since the government started measuring it in the 1970's.
- First Time Buyer Tax Credit Programs - of 2008 and 2009, offering up to $7,500 and $8,000 incentives to first time buyers, identified as persons who have not owned a principle residence in the three years prior to purchase.
- Positive News in the Media - this has been as much a "fear session" as a recession, with negative press coverage eroding buyer confidence. Many economic conditions were worse in the 1980's, but we only had the news on TV at 7:00 a.m. and 5:30 p.m. Now the public is bombarded with bad news 24/7 on TV and the internet. Thankfully some in the media are beginning to localize their news and even running some positive stories.
- FHA Loans Easier and Affordable - the loosening of underwriting guidelines for FHA loans and their requirement for only a 3.5% downpayment has made mortgages feasible for many buyers. Other benefits of FHA loans include easy loan modifications for borrowers who fall behind, easy refinancing plans if rates decline, and low interest rates overall - which don't increase if the borrower has a low credit score. There are no income restrictions on FHA loans, so even borrowers with high incomes may find them attractive. Plus the loan limit in our markets is $271,050, making it high enough to use on the vast majority of our home sales. Ruhl&Ruhl's sister company, 1862 Mortgage, is doing 60% of our business as FHA loans. FHA loans still require an inspection of the home, but the process is much easier than it used to be.
- Economic Stimulus Programs - the government's massive spending via the stimulus plans will have a positive effect on the housing market, giving a shot in the arm to the economy and creating jobs and/or reducing job losses - all leading to better buyer confidence.
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