Tri-Cities Washington Real Estate News & Blog

Trying to figure out where the Tri City Wa Real Estate market will head is always a dubious process. Economists of every view and persuasion can provide entirely opposite explanations to “prove” that the market will move up, down or sideways. For instance, Speaking of September existing home sales, David Lereah, chief economist with the National Association of Realtors said stabilizing sales should build confidence in the housing market. “Considering that existing-home sales are based on closed transactions, this is a lagging indicator and the worst is behind us as far as a market correction — this is likely the trough for sales.”

“When consumers recognize that home sales are stabilizing,” he said, “we’ll see the buyers who’ve been on the sidelines get back into the market, and sales will be at more normal levels in the wake of the unsustainable boom that we saw last year.”

Tri City Wa Real Estate ~ Well, perhaps not.

According to a report from Moody’s Economy.com entitled Housing at the Turning Point, “nearly 20 of the nation’s metro areas will experience a crash in house prices; a double-digit peak-to-trough decline in house prices.”

Economy.com also says that “with over 100 metro areas representing nearly one-half of the nation’s housing stock experiencing or about to experience price declines, national house prices are also set to decline. Indeed, odds are high that national house prices will decline in 2007; the first decline in nominal national house prices since the Great Depression.”

My conclusion after seeing a variety of predictions and forecasts is that I have no idea who’s right. What I do know is this:

Tri City Wa Real Estate ~ Marketplace Realities Count

I am amazed at the number of homes that have been for sale at the same price for months on end even as local unit volume and sale prices decline. The probability of selling these homes at their long-stated asking prices is just about zero. Meanwhile, with each passing month owners pay tax, utility and mortgage costs that effectively discount asking prices.

Tri City Wa Real Estate ~ The Economy Could Falter

According to the Bureau of Labor Statistics unemployment dipped to 4.4 percent in October. This means that 6.7 million people were unemployed versus 7.4 million a year earlier. In addition, 1.5 million people were unemployed, but since they had not looked for work in the preceding four weeks they were not counted in the final unemployment tally.

But while employment looks good, several other measures are troubling. As examples, the national debt increased $1.5 trillion in the past five years. Our balance of payments in the first six months of 2006 showed a $432 billion shortfall. In comparison, the shortfall for all of 2001 was $415 billion.

The fact that we grossly import more than we export should be upsetting. The day may come when our creditors — including a variety of foreign states — either will no longer lend to us or will only lend to us in exchange for higher levels of interest. In either case, the results would be damaging.

Tri City Wa Real Estate ~ Interest Rates Could Go Higher

Interest rates are currently around 6.3 percent, but because of the growing national debt and trade imbalance rates could go higher. However, if rates go higher huge numbers of borrowers with adjustable financing will be impacted. More importantly, some number of borrowers — particularly those with interest-only and option ARMs — will be unable to afford monthly payments. These troubled owners will either be forced to sell as quickly as possible or they will be foreclosed. The additional sales represented by these sellers will increase supply and thus dampen home prices.

Tri City Wa Real Estate ~ The Government Is Changing

The mid-term elections of 2006 were plainly dominated by the war in Iraq. However, voters also showed a substantial concern regarding economic issues.

According to CNN, “the exit polls showed that 42 percent of voters called corruption an extremely important issue in their choices at the polls, followed by terrorism at 40 percent, the economy at 39 percent and the war in Iraq at 37 percent.”

One by-product of the 2006 election may well be changes in the tax code. While the wholesale elimination of the mortgage interest tax deduction is off the table — it’s politically impossible to revoke — tweaks here and there are surely possible, especially for the taxes of those making $200,000 or more. Such changes to the tax code would impact home sales in high-cost areas.

Tri City Wa Real Estate ~ The Bottom Line

We’re entering a period of change and uncertainty. Real estate sales in most markets have plainly slowed, values are being challenged and there is no sure way to predict when home prices will once-again turn up.

In such a marketplace it makes sense to take several actions:

First, interest rates are low. Not at the record lows seen in 2003, but remarkably low by the standards of the past 50 years. If you’re thinking of purchasing or refinancing at this time you have the benefit of a buyer’s market in most communities as well as low mortgage rates. In many areas this is an excellent time to buy a first home or move up.

Second, if you have interest-only financing or an option-ARM look carefully at monthly costs. Are you now making low payments that will soar once the “start” period ends? If so, now is the time to refinance, to lock in low-cost interest levels with fixed-rate financing.

Third, it pays to reduce consumer debt. If you pay $500 a month for car payments, credit cards and such, remember that consumer debt is paid with after-tax dollars. If you pay state and federal income taxes that place you in a combined 35 percent bracket, it takes income worth $769 to cover $500 in credit payments. Paying off consumer debt in this case is the equivalent of a $769 raise, you’ll have additional cash each month plus your credit standing will improve.

Consider Tri City Wa Real Estate Today!

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