How long will it take to start seeing upward trends in home prices?

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How long will it take to start seeing upward trends in home prices? We asked Ken Bennett Vice President / Regional Manager Watson Realty Corp. for his real estate view.

It's difficult to address a question about housing price increases, or decreases for that matter, because real estate activity and corresponding home values are driven more from a regional than national perspective.

Although real estate investors and practitioners in Florida, Arizona, California, and Nevada have become somewhat jaded due to the downturn in real estate values over the last two years, states such as West Virginia (+4.2%), Texas (+3.6%), South Dakota (+3.6%), Montana (+2.6%), Mississippi (+1.7%), Utah (+1.5%), and New Mexico (+1.3%) have all shown housing price increases during 2008. So what sets those states apart from the areas that are currently in decline?

These states didn't experience the tremendous boom or surge in housing market value that the now 'troubled' states did. The valuation explosion that was experienced in Florida, Arizona, California, and Nevada simply was far too aggressive to be supported by the local demographics of those states. There were too many investors taking advantage of ridiculously liberal lending guidelines... and far too many unqualified and under capitalized home buyers... and a Federal Government who was, rightly or wrongly, pushing to increase the overall percentage of home ownership across the nation.

The combination of increased demand due to the easing and lessening of credit restrictions, lead us to the place that we now find ourselves. A place where the supply of housing is far too great to be absorbed by normal market conditions, and the prices being asked by a majority of homeowners are still at inflated levels. This predicament combined with an overall erosion in consumer confidence, suggests that it is going to take some time for us to get back to a normal balance between supply and demand.

The good news is that we are now starting to see in Central Florida, some sustained signs that investors and home buyers are starting to 'nibble around the edges' of our local market, and they are buying those properties that represent the best on the market in terms of location, condition, and value. Further, our number of unit sales in January, 2009, is up considerably from January, 2008, and we feel that this trend is going to continue throughout the year and that our number of unit transactions will be up by about 25% - 30% by the end of 2009.

So, if you're sitting on a fence waiting for prices to go down, don't sit too long. You may wind up missing out on the home of your dreams!


Related Florida real estate views:

Why overpricing your home will not work

I am not going to give my home away!

Why would anyone offer to buy a home at list price or above in this market?