Rising Fuel Costs and Home Sellers
In many reports you read the national housing market is cooling. Here in Springfield, IL. another record was set during the first quarter. The Capital Area Association of Realtors MLS shows 864 home sales. Not bad for a mid-size market, and during the slowest quarter of the year.
The good news of a record number of homes selling was offset by a record number of homes being listed for sale. In fact I just returned from a vacation in Florida where a Realtor in Naples reported similar market activity; sales still strong, inventory up. This agent said there were 3000 residential listings in his MLS in April of 2005, with April 2006, a whopping 8000 residential listings. Sounds like the flipper investors are dumping on the market, which should lead to a drop in prices.
Home sellers this 2006 have plenty of concerns, more competition, rising interest rates, and now rising fuel costs. Let's look at the impact upon home sellers by each of these market conditions.
First, increased competition. Having served as a Realtor since 1987, increased competition should be a concern. Why? Because it will take longer to sell, and usually at a lower price. However in rising, level, or falling markets people still need a place to live. Homes that are in good locations, good condition, and priced fairly will always sell. If you paid too much for your home in a rising market, you probably won't recover your initial investment, however you should recover most of it.
Second, rising interest rates. Yes rates have increased over the past 12 months from a fixed 30 year mortgage of 5.75% to today's 6.75%. Get a grip folks, that's still historically cheap money. Interest rates are the least of a home sellers concerns, when considering the 20 year average is 8% for 30 year mortgages . The market remains 1.25% below average, which isn't bad! Look at the bright side, folks on fixed incomes are finally getting some relief.
Finally, rising fuel costs. In my opinion rising gas prices are more of a psychological negative than a real one. Why? The press loves negative stories, and they will drive this story through everyone's skull. I'm not saying rising gas prices are good, or fun, or not causing financial pain, I'm saying it's not as bad as the press makes out. The home seller that needs to be concerned are those who own homes where the commute to work will be a factor. The silver lining for sellers of existing homes is the cost of new construction will continue to rise, supporting existing home prices, as a result of petroleum based building materials increasing in cost.
So overall things are still pretty good in the housing market. Yes you have more competition. You can overcome that by hiring an agent that will tell you the truth, and not what you want to hear. Yes interest rates are rising, however not to the point it has drastically affected the purchasing power of home buyers. And yes fuel costs have increased, and you won't forget it due to the press coverage.
My advice? The glass is half full and rising. Don't listen to the glass is half empty crowd, and above all; avoid the mainstream media negativity.
The good news of a record number of homes selling was offset by a record number of homes being listed for sale. In fact I just returned from a vacation in Florida where a Realtor in Naples reported similar market activity; sales still strong, inventory up. This agent said there were 3000 residential listings in his MLS in April of 2005, with April 2006, a whopping 8000 residential listings. Sounds like the flipper investors are dumping on the market, which should lead to a drop in prices.
Home sellers this 2006 have plenty of concerns, more competition, rising interest rates, and now rising fuel costs. Let's look at the impact upon home sellers by each of these market conditions.
First, increased competition. Having served as a Realtor since 1987, increased competition should be a concern. Why? Because it will take longer to sell, and usually at a lower price. However in rising, level, or falling markets people still need a place to live. Homes that are in good locations, good condition, and priced fairly will always sell. If you paid too much for your home in a rising market, you probably won't recover your initial investment, however you should recover most of it.
Second, rising interest rates. Yes rates have increased over the past 12 months from a fixed 30 year mortgage of 5.75% to today's 6.75%. Get a grip folks, that's still historically cheap money. Interest rates are the least of a home sellers concerns, when considering the 20 year average is 8% for 30 year mortgages . The market remains 1.25% below average, which isn't bad! Look at the bright side, folks on fixed incomes are finally getting some relief.
Finally, rising fuel costs. In my opinion rising gas prices are more of a psychological negative than a real one. Why? The press loves negative stories, and they will drive this story through everyone's skull. I'm not saying rising gas prices are good, or fun, or not causing financial pain, I'm saying it's not as bad as the press makes out. The home seller that needs to be concerned are those who own homes where the commute to work will be a factor. The silver lining for sellers of existing homes is the cost of new construction will continue to rise, supporting existing home prices, as a result of petroleum based building materials increasing in cost.
So overall things are still pretty good in the housing market. Yes you have more competition. You can overcome that by hiring an agent that will tell you the truth, and not what you want to hear. Yes interest rates are rising, however not to the point it has drastically affected the purchasing power of home buyers. And yes fuel costs have increased, and you won't forget it due to the press coverage.
My advice? The glass is half full and rising. Don't listen to the glass is half empty crowd, and above all; avoid the mainstream media negativity.
