Are We There Yet?

As kids, do you remember asking this question when on a trip, ‘Are we there yet?’ I’m actually hearing a good number of adults asking this same question today – but they are referring to the current real estate ‘road trip’. Are we there yet? Have we hit the ‘bottom’ in the real estate market?

It is a good question – and a fair question. The challenge in answering the question is the ‘bottom’ is a relative point. It is relative to the pre-existing downturn and also to the identifiable, and sustained, uptick. To put it another way, it is only possible to identify the bottom in hindsight. I’ve had people recently share with me that we will hit the ‘bottom’ in June of 2008. The truth of the matter is we won’t know for certain if the bottom occurs in June until November – or even later.

As I had shared in an earlier post, I believe the region of West Central Minnesota was largely insulated from the brunt of the national downturn in the housing market. We were fortunate. There are probably a number of reasons for this but here are three that seem to make sense to me. First, a significant component of our local economy is based on agriculture and farming and this segment had a good year. Second, our property values are attractive in comparison to other areas of the country. Third, the ‘Baby Boomers’ are coming. They are very interested in our area lakes and communities as they plan and prepare for their retirement dreams. Without a doubt, the counties of Otter Tail and Douglas are on their radar!

There has been some very encouraging news in recent days that would suggest the local housing market is making positive movement. Recent statistics on foreclosures in Otter Tail County are suggesting an improvement over the last two years. Otter Tail county reported three fewer foreclosures in 2007 than were reported in 2006. This is great news!

In addition, interest rates remain historically low. This, in combination with a very favorable inventory and selection of properties currently on the market, and with new offerings arriving daily, is generating excitement amongst buyers. In fact, the last couple of weeks have shown increased buyer activity and interest.

So, are we there yet? I think we are very close, but here is the point that begs consideration: If we are just in front of the ‘bottom’, or just beyond it, the market will basically be priced at the same level. However, now may still be the best time to make the purchase because now there is both certainty in interest rates and the established pricing levels as many currently listed properties have been priced to reflect little market appreciation. Rest assured, current inventory holds a number of very, very attractive values.

As future properties are priced in a market of greater confidence, sellers may be more likely to reflect a measure of sustainable market appreciation in their pricing. As for interest rates, only time will tell. The latest information I have from one of our local lenders is mortgage rates have been on a mini-rollercoaster – but remaining in a very favorable range.

There you have it - perhaps some of the best free advice out there. As always, your actual mileage may vary. I hope you stop again to review the latest posts on My REAL Blog – REAL Information for REAL People!

Jon Drews

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