The National Association of Home Builders (NAHB) recently held their semiannual spring construction forecast conference in Washington, D.C. As alluded to in the title of the conference, the purpose was to discuss the future of the home building industry.
RealEstateJournal.com, an offshoot of The Wall Street Journal, has an article covering the Home Builders’ findings. The long story short: “It will be a general cooling process, not a thud,” says NAHB Chief Economist Dave Seiders.
He predicts that the rate of home-price appreciation will fall to 4% by the end of 2006 and that existing home sales will fall nearly 6% by the first quarter of 2007. With an increase in interest rates, and rising energy costs consumers will soon see a reduction in consumer’s buying power.
But What About Michigan?
Here in Michigan, we’ve been experiencing exactly what the NAHB is predicting will happen. For easily the last year, we have seen an increase in inventory, a slowing rate of appreciation and a slow decline in the number of existing home sales.
Michigan is kind of like the canary in the mine. With our state’s economy heavily reliant on the auto industry and labor in general, we were and are more susceptible to changes in the economy than the coasts. While the nation as a whole is just now realizing that the housing market is cooling off, we have seen this coming and been in the middle of it for the last year. I wouldn’t be surprised if Michigan was one of the first states to pull out of the decline.
When will it turn around? That is the twentyfour dollar question! If we knew that, we could hedge our bets accordingly.
The important things to remember:
Sellers – Homes are still selling. Especially well priced, value laden homes. Look at your active competition, assess your home’s strengths and weaknesses, and then take a sharp pencil to your list price. If you are priced at or below the average sale price for the last three months among similar homes, you will sell your home. If you are priced below the average list price of your active competition, you will ensure that your competition will help sell your home.
Buyers – You’ve got a lot of homes to choose from! Get pre-approved, make a list of what you need in a home, make a list of what you want in a home, then find a home that meets the most of what you need and want in your next home. And when you find that well-priced, value-laden home, don’t get greedy. Chances are you are not the only ones to recognize the value.