Real Estate Recap

2008 was an interesting year, to say the least. The presidential campaign made history. Some real estate markets around the country suffered. The stock market seemed to be on equal parts of uppers and downers. The auto industry was right at the edge (I guess we’ll have to wait to see how that unfolds.) The financial markets needed a life preserver. And as a result of all of the foregoing, employment rates took it on the chin. WOW! That would have been a lot in a decade, let alone a year.

So what’s the good news, if there is any? Well, for starters, as I am writing this, mortgage interest rates have dipped below 6 percent for the first time in several years and currently stand at about 5.5 percent. Predictions are that they will go lower. Contrary to popular myth, mortgage funds haven’t dried up locally, with mortgage money readily available for those who qualify.

Now qualifying may be somewhat more difficult for those with marginal means or poor credit scores, but I submit to you that this is a good thing. It was the providing of mortgages to those of questionable qualifications that got us into this mess. As my good friend, John Anhreim, of one of western Pennsylvania’s largest mortgage banking firms said to me recently, “In order to make responsible lending decisions, the borrower must have some skin in the game.” That is to say that people who have no down payment and seller paid settlement costs have nothing to lose by walking away when things get difficult.

In addition, although the national unemployment rate recently moved up from 6.7 percent to 7.2 percent, unemployment in Pennsylvania is still hovering around 6 percent, with western Pennsylvania less than that. Butler County’s last reported unemployment rate was 4.4 percent.

Did the local housing industry have a troubled 2008? You bet. But you’ve heard me state over and over that this was the result of the national media sensationalizing problems in isolated large markets around the country and local consumers not looking into the truth of these assertions as they apply to our local real estate markets. Soon all the national negativity became a self-fulfilling prophesy – our consumers became timid, based upon fears that had no basis in fact for our markets. Trying to counteract that fear and reestablishing consumer confidence is a herculean task. What is required is for people to think for themselves, do their own research and make decisions that best suit their own needs. At long last, the local media has recognized the damage being done to the western Pennsylvania economy by these misleading national reports and have offered numerous positive stories on the realities of our market.

So what will 2009 look like? That will depend on our behavior. No doubt there will be real estate markets around the country that will have serious challenges. When you are in a locality where what you owe exceeds the value of what you own, you have a serious problem. Fortunately, in southwestern Pennsylvania, this isn’t the situation. Our values are unbelievably stable.

Each Sunday in the real estate section of the local newspaper, you will find an article that breaks down neighborhood real estate markets and compares this year to last year in terms of median price and number of sales. Each community is broken down into about 10 smaller districts, and invariably, the year-over-year market value goes up 80 percent of the time. The number of sales may be down, but the values are holding stable or increasing.

So how is 2009 shaping up? As I have told you many times before, the criteria for a boom market are low interest rates, plentiful mortgage funds, stable employment and adequate housing inventory. This year I’m adding a new one – confident consumers!

In 2009, we will have extremely low interest rates and mortgage funds will be easily available. I would be remiss if I didn’t mention that low down payment mortgages will remain available through the FHA, requiring only 3.5 percent down and still allowing seller assistance toward the buyer’s closing costs. As I’ve said, employment here is still stable and if the sluggish market of 2008 did nothing else, it increased the buyer’s pool of available home choices.

So the lone remaining variable that will determine success for the coming year is one that only you can control – consumer confidence. Perhaps these incredible interest rates will be enough to slap us back into consciousness and open our eyes to the fabulous opportunities before us. Instead of watching the stock market do what it has been doing, wouldn’t it be more comforting to see your money in a pile of bricks rather than a pile of paper?

Gary Straub is an independent real estate consultant who has been a real estate professional for 36 years.