Real Estate Slow Down Hits Local Builders!

The real estate market started to slowdown in the summer of 2006 and then even more so in the spring of 2007 when the sub-prime lenders crumbled. The media is reporting all of the national news and our local market in turn has people sitting on the fence waiting for prices to fall and fall. Meanwhile local builder’s inventory is stacking up. The recent rate cut of one half of a percent by the FED is much needed relief but will it be enough?

The Puget Sound region along with New York City are the 2 markets nationally that continue to rise in value. Our region is still up 8.6% this year. The lender meltdown has weeded out the non-qualifying buyers and prices have corrected and are more in line with the 8.6% trend. Buyers who purchased homes on adjustable rates or interest only loans are scrambling to qualify for a fixed rate refinance to save their homes from foreclosure. Local builders are still sitting on inventory with construction loans at generally prime plus 1% so their average rate on a loan is around 9%. The home builder doesn’t have the luxury of deciding to pull their homes off the market until it recovers as do most home owners. Some builders are refinancing a few homes and keeping them as rentals but still have the overhead of their company to contend with. New projects that are currently being built are allowing new draw money to flow and help keep the standing inventory from going back to the bank. We have seen outrageous buyer bonuses and selling office commissions to entice people into these homes. The bottom line is the price may have to drop just a little more to move those homes.

The big question is why is this happening here when our market is supposed to be in an upswing? I believe the media covering the national home market news is the main culprit here. Our region has some of the best job growth in the country right now. Boeing, Microsoft, Starbucks and many other big players in the job market are still looking for workers. If someone doesn’t have a job right now they either don’t want one or are unable to work; unemployment is at one of the lowest levels ever in our region.

I think the bottom is near! Stop listening to the media; things are great here in the Pacific Northwest. Go out and see your lender and get pre-qualified for a home loan and go out and shop for a house. We have it a lot better here in our region than most of the country and we need to remember that.