Why is the realestate market so slow now?

Answer 1

Mostly because people are believe they'll be able to buy the same thing for less before long.

They don't consider that the reason this may be so is that the interest rates will be higher, and so will the payments. Right now is when you have the most power to make sellers do what you want them to, if only you get out there. Limit yourself to fully amortized loans that will not adjust for a minimum of five years and you will be very happy.

Answer 2

When interest rates were extremely and historically low, a lot of people moved into the home ownership class. There were more houses sold than normal. Many of those houses were too costly or too big and once rates started up again, the sales cooled off because the customer base dried up. It is cyclical and right now we are in a flat cycle. That will drive prices down to a more reasonable level and at some point again bring the buyers back.

Answer 3

2 reasons;
Because recent rates had priced many buyers out of the market especially with the recent surge in prices and because their is a glut of inventory on the market right now. Supply and demand always affects prices of any product. Interest rates are back down for now, as low as they've been in the last 5 years but because of the inflated prices and the glut of inventory, buyers are waiting to see if prices will go down.

Answer 4

Low interest rates fueled the market. People were willing to pay more because they could finance so cheaply. As interest rates level off and start to rise, people are less willing to may more up front. Lots of properties are overvalued, so demand decreases and supply increases as houses sit on the market and new ones are built.

Answer 5

How to value a property during market downturn?

Housing market continues to slump. Now we can calculate true value of a property easily. As price decline, we don't need to guess and factor in the potential price appreciation while calculating home value. Without the guesswork, figures are more accurate.

Let's use following example:

Today, a typical 15 years old, two bedrooms condo/townhouse is priced around $500,000 and $550,000 in Sunnyvale, California. Rent for similar condo/townhouse is $2000/month.

If you are a home owner, $2,000/month in rent means $20,000 a year in profit ($24,000 per year in rent, minus $4,000 maintenance costs). A $20,000 income is equilevant of owning $400,000 bonds or CDs, because current yield of 30 Years U.S. treasuries are 5% (5% of $400,000 is $20,000). Bank CDs have similiar yields.

In our example, the two bedrooms condo/townhouse is 20% to 25% overpriced. They should be priced at $400,000.

It is interesting to note that if we redo the calculation from buyer's perspective instead of seller's perspective, the figures are even more shocking.

Mortgage payment consists of two parts: mortgage interests and mortgage principal. The interests portion is similar to rent. If you pay interest, it disappears and doesn't add equity to the property. To fully simulate characteristics of renting, we assume buyer will apply for a zero down, interest-only loan.

It turns out that rent of $2000/month is equivelant to mortgage payment of a $340,000 loan at 7.0% APR. And comparing $340,000 loan to $500,000 or $550,000 price tag, from buyer's view, the two bedrooms condo/townhouse is 30% to 35% overpriced.

One may ask, why is there a discrepancy between two perspectives of the buyer and owner?

The discrepancy is a result of 2% differences in interest rate that buyer borrow comparing to yields of bonds and CDs that owners would get. We understand that buyer would always pay more. That is the premium of buying to own. However, looking from home owner's perspective, current housing market is probably 20% to 25% overpriced. We recommand investors to wait for a better entry point.

Answer 6

because everyone who could afford to buy has already bought! there are many people in this country scraping by, we sure aren't out buying land or houses. and, new lots were built up on speculation and now they are selling cheap because people over anticipated the "boom"

Answer 7

In Fla., it's high property taxes & high insurance premiums.