Time Sure Flies…

It seems like just last week I was writing the summary of 2006 and preview of 2007 and now here I am writing the 2007/2008 article. Well, never mind; I recognized long ago the older I got the faster everything else moved.

So let’s recall the highlights of 2007 and do some forecasting for 2008.

2007 has been a very interesting year. I think we all became so spoiled by the fabulously booming real estate market here, that when things slowed down we weren’t sure how to cope. Once again it was a year of incredibly reasonable interest rates with rates fluctuating between 6% and 6.5%, extraordinarily affordable mortgage pricing, but then we began to hear rumblings of a bursting bubble in real estate values and of course the “money crunch,” whatever that was supposed to mean. As I pointed out in previous articles, historically a money crunch is brought on by the absence of money to be lent. This is certainly not what we faced. What we had going on here was probably more aptly called a mortgage crisis, brought about by, excuse me, not so smart lending practices. We had just passed through a decade or more of lending insanity. Programs were developed to suit every likely negative lending scenario – bad credit, no down payment, no job, whatever. Amazingly, it was realized that if you lent money to people who couldn’t afford to pay it back they probably wouldn’t. And so the foreclosure frenzy ensued and that isn’t over yet. So to recap, I guess it would be correct to say that the perception was that the good news far outweighed the bad. I say perception, because the low rates were a tangible good thing, whereas the negatives merely served to frighten the average potential home buyer or seller, with the gloomy prospects of lost value and potentially reduced mortgage availability.

The fact is, there are no significant effects of these things on our local market, although we can still benefit in a major way from the low rate. Yes, of course, nationally there are markets where values plunged, but they were overvalued to begin with. And yes, there will be those who will find it hard to obtain a loan, but these are the folks who 15 years ago would not have had a prayer for a mortgage.

The average borrower in our local markets will have no difficulty obtaining a mortgage, and they will find these markets to be incredibly stable vis-á- vis property values. In fact, although the national media recently reported that the national real estate market was off 8% over last year, a quick review of our MLS data revealed to me that North Allegheny, North Hills and Northgate School districts were actually up 5%, 5% and 10% respectively, once again proving there is no national real estate market, ONLY local markets!

So what are we in for next year? Well it appears that will be up to you and what you do with the information at hand. There is really no need for those of us who live in Southwestern PA to panic; we have always had a very stable market. That may be boring, but it is safe.

Look for rates to stay very much as they are right now in the neighborhood of 6.25%; with the “mortgage crisis” not getting any worse, the government will see to that. Already you see the Federal Reserve manipulating the interest markets, while the President floats a plan to save homeowners from the negative impact of their subprime and adjustable rate mortgages. A high foreclosure rate is likely to continue, as there is still more fallout there; however, it will not be significant enough to impact property values.

The supply of available property will be good for the homebuyer, with ample product from which to choose. This being the case, it appears we will continue to see a buyer’s market over the next 12 months.

Although the fringe mortgage products will no longer be available, there will still be a sufficient number of varied mortgage products available to provide a program for most creditworthy borrowers.

With the infusion of new jobs into the market, from employers like Westinghouse and others, the employment picture looks healthy. Remember the key components to a good real estate market are: stable employment, adequate supply of available homes at affordable prices and low rates. It appears that this coming year will have all these elements; therefore, we should be expecting another good year, perhaps not as staggeringly fabulous as some of those we’ve seen recently, but in historical perspective, far better than average.

Gary Straub is an independent real estate consultant and real estate professional for 36 years.