Good Friday Morning Everyone,
I hope this find Spring morning finds everyone well. It has been a busy week for me and for our Company. As of this morning we are now in our new location in the Torreon Subdivision in Show Low, AZ.
I wanted to address a subject that has really been at the top of everyone's minds, declining real estate values. Whether we like it or not the trend is going to continue until the Banks finally deplete their backlog of inventory of foreclosure properties.
Not good news, I know. It truly breaks my heart to visit with someone who wants to sell only to burst their bubble when they see what the value of their property is in today's market. As hard as it is to accept, the boom is over and we are now enduring the bust market as a result of the economic melt-down. Wishes and prayers are not going to change that. Unrealistic hopes when it comes to selling is not going to change what is.
My personal theory is it is time for the banks to just "let go" of that inventory and let the market bottom out. This constant trickle effect is prolonging something that should have been over and done with by now. Dropping a home here and a piece of property there is only causing a constant drain on property values. In the past nine months in the White Mountains we have seen a larger decline in values than we had over the past three years.
Part if it is because of the foreclosures but part of it is because when a bank is considering lending on a property, no matter what the current comparisons say, they want to see that appraised value come in below the agreed upon price. They know because of their back inventory of foreclosures values are going to continue to fall so they are punishing the sellers on the front side to minimize their own risk on the backside.
It seems to be a vicious circle and it is. Until this shadow inventory of foreclosures goes away, values are going to continue to plummet. I'm not sure where it will all end up. Maybe we are in for years of this kind of market. All I know is that the consumer is ultimately the one to pay the price because whatever the value on a home is today, it is going to be less a month from now and on and on it goes.
Gloomy, yes it is. But consider something else. On the positive side of things if property had appreciated at a typical rates, say 3% a year and we had not had the boom market in the mid-2000's, values on property today is about where it would have been had we not had a boom. It isn't as bad as you think. Before the boom, if a seller walked away from a sale with their costs covered, a bit of cash in their pocket to put down on another home, and no deficiencies, they were thrilled. Because of the boom market we all got caught up in the thought process that our homes were our retirement funds. They were our piggy banks. Property lost it's identity as a place to live and raise our families, suddenly it was supposed to be a profitable short term investment.
We have to get past the thought process that if we can't make a huge profit on our homes when we sell then than they aren't worth anything. We have to change our thinking and get past this, otherwise this negative trend is going to drag us and the economy down forever.
Something to think about anyway, have a great weekend. Until next time....
Sandra Paulow, Associate Broker, GRI, SFR, REALTOR® (928) 242-0300