I read a story today in one of our local papers (the only one that delivers 7 days a week anymore) that the folks in the state equalization boards who are charged with trying to keep property assessments in line with the prevailing market values now see 2013 as the turn around year for the current property value slide. Wow. Move the finish line again.
I recall that in 2008 I opined in my local real estate blog that it would be 2011 before we saw the bottom of the value decline and started a turn around. At the time that seemed like a long time to wait and a long time for things to continue to decline. We are already down between 35-45% from the 2005/6 highs in our market, with some hard hit areas well below 50%. The article forecast two more years of near 10% declines for property values.
Of course, these pundits could be wrong. They rely on computer models and inputs from the real estate organizations about what's going on in the market. There is certainly contrary evidence to be found in some of the reports from real estate companies of improving sales levels in our area. There also appear to be a few new build projects getting back off the ground; however, there is also still a huge overhang of distressed properties on the market and more looming in the future.
The moratorium on foreclosures late last year gave our market what I would call a "false positive" set of data for a few months. The median home values of sales being reporting shot up as if the recession was over and many articles were written about the market having reached the bottom and starting back. In fact, if you take most of the distressed homes off the market and out of the data, of course things will look better; and, that's what happened. When the banks resumed foreclosing and putting those homes back into the mix, we got a "double dip" effect in the data and on the sales charts. Once again the sky was falling in Michigan!
So, now we are told that instead of things turning around in 2011, we have to look out to 2013 before we see the bottom and a return to some small level of positive appreciation in our local real estate4 market. The story went on to say that the models were projected out to 2020 and that they still see values of homes to be below where they were in 2004/5 when they hit the peak locally. That does square with the advice that I'm giving would be sellers that trying to wait out the return of value is a losing and long-term strategy.
Older homeowners who need to sell or who really want to sell, in order to get on with life, need to just bite the bullet and take what is left out of the equity in their homes. Many of them own their homes outright and are clearly disappointed in the current value of their "nest egg" investment. Unfortunately the conventional wisdom that home values always go up proved to be as wrong as many other pieces of conventional wisdom that have proven to be false over time. As Dr. Phil might say - "Get over it and move on." For many there is another finish line looming and you may not want to wait to see which one you reach first.