Charlotte Homes: What Is Causing Buyers To Finally "Get Off The Fence"?

I think we may all look back by this time next year, and agree that the "bottom-bottom" was in Sept/Oct, 2010.    Can't discount currency insecurity and inflationary pressures, as other reasons for a return to quality hard asset investments.

I hesitate to make any predictions and you never know what may happen tomorrow, but I do think a lot of buyers are just tired of sitting on the sidelines for the past two years and are ready to buy again with the mortgage rates still low (and creeping up). And, I think some people realize that you can't live in fear. We just sold our own home this past summer and we built a new home...we couldn't live in fear and not buy for fear that hubby could lose job or what have you. That could happen no matter what kind of economy we are in. BUT, we did reduce the amount of our home purchase. We spent less than what we would have years ago) I think people are getting more educated and are ready to put that education to work!

As a real estate investor I'm trying to better understand what is causing this as well b/c I do not want to purchase a rehab and have it sit b/c this is a short term surge.

First buyers were experiencing the "deer in the headlights" phenomenom and were paralyzed and unwilling to act. 

Next, the extreme value investors apppeared and began to pick off the lowest hanging fruit.

Now the general population..at least those who are still employed and are somewhat secure in their financial situation...are recognizing the opportunity that exists with the synergy of lower prices/extremely low rates and the fact that this combination of events will not last forever.  

Real estate continues to be a "local" issue and there is still wide variation from market to market and even in the sub-markets (neighborhoods, price range etc) within any particular area.

For the investor, remember that the only time you will ever see a market bottom is in the rear view mirror.

I agree with you!  Here in Atlanta, its about the same!  Lot of inventory but, not enought buyers.  I work with a National Bank on Foreclosures and yes they are holding back properties, I wanted what that will do to the current pricing as it has to have a impact on lower prices when they do hit the market.

I was wondering the same thing.  Here in the Metro Atlanta area there seems to have been a surge of activity since January.  I have had several sales already and this year is looking bright so far!  I'd have to guess that it must be a combination of all the factors you mentioned.

Li - thanks for the comment.  Most agents in our office would agree that Sept. 2010 seems to have been the bottom and that we are now on the upswing.  It is very likely that we will go down in the short term once the high number of foreclosures hit the market.

Shannon - thanks for your story.  I too bought my house in this down market but people have to live somewhere and I still believe it is much better to own than to rent.

Wade - the investors I have worked for in the past 12 months have been very picky about the houses that they will offer on.  The house has to be priced very agressive, willing to take a low ball offer, and must be a gauranteed flip within 3-4 months or they will not take the risk

Howard and Susan - I believe you are correct when you say that the market is local.  There are some neighborhoods that have not really felt the crunch of the market and others that can't seem to pull out of it.

Jim - I have a couple buyers who are watching the interest rates very closesly and they understand that buying at today's price with a lower interest rate could be better than a higher interest rate but lower purchase price.  I think 2011 is going to be a year that we sell a lot of units...maybe not as much volume...but hopefully by the end of 2011 we can all agree that we are heading in the right direction.

Tim - thanks for your insite

Dawn - keep up the good work...I am glad to hear that things are also picking up in ATL.

Brandon - great post and good discussions.  I agree with your comments.  In the Phoenix Metro Area we are seeing similar statistics.  Unfortunately, we are one of the worst areas hit hard with foreclosures and price declines.  Our bottom may have been a few months before Sept/Oct 2010.  I'm guessing that buyers are interested in interest rates and don't want to pay higher rates at the expense of prices.  

Out here in rural Georgia - about an hour east of metro Atlanta - we are experiencing a small boom, with pendings up 25% in the past 30 days.  2010 closed volume was just over 20% up versus 2009.

However, inventory is still in excess of 2 yrs supply in most categories, so it will take a sustained increase in volume before price pressure is off sellers.

What I hear most from buyers is that they are responding to low prices and low interest rates, combined with great selection and an area that they believe in.

We are all holding our breath here in Houston, during the past 8 weeks we have seen an uptick in the number of homes that have gone pending.  I went to make appointments to show 8 houses on Saturday (my buyers had been watching) 4 of the 8 had contracts before the end of the week. Every one of these was a listing that had been sitting and was repriced agressively during January.

Not sure what it all means for the long run but we have not experienced the foreclosure and short sale epidemic that most cities have and most particularly had none or very little inside the 610 Loop, but I believe the buyers are realizing that Houston prices have stabilized and that they are not going to have another "Home Buyer Credit".  Some portion of them feel they should get on with it before the interest rates rise.

Linda Jamail Marshall, Broker/Owner

Houston Texas, Innerloop Specialists

Buyers want to wait for the "bottom of the market", and there are too many "experts" guiding them nowadays...  Timing the bottom of the market is one of those things that cannot actually be predicted (truthfully) by anyone.  Unofrtunately, we will all know the market has hit bottom AFTER it has happened, not before.

New years resolutions? Just kidding but in my business I am always looking at rates and the recent increase is getting the fence sitters to move. And I think that is the pick up we have witnessed. But will the rates alone bring more people to the fence? I agree with Jim that we need to see employment increase if we want the buyers pool to re-populate.

This always seems to vary location to location. Some markets will pick up, yet 30 minutes away anpther market hasn't changed. I'm sure there are a varity of reasons, and each area will have it's own set of reasons for demand picking up.

Excellent comments by everyone.I HAVE BEEN THROUGH 3 OR 4 previous recessions including 1981 when prime hit 22%.

Anybody that is complaining about selling homes ought to try selling land right now. The water is fine " just come on in.".

I do believe that the shadow inventory will appear in 2011 and it will be late 2012 before we get by it so everybody keep a positive attitude and party more than ever.

Our market in Bay County Florida is still 'a severly declining market'  Unemployment, loss of the F15 program at Tyndall, foreclosures and a large shadow inventory, and the BP oil spill all have impacted our local real estate market.  We are praying that we can start to improve by 2012.  But what we need most of all is jobs.  Many of the foreclosures on the market now have nothing to do with the mortgage mess prior to 06 but rather folks loosing their jobs and being unable to pay the mortgage.  But from being around awhile - I know, in time, this too shall pass.

Summer 2010 suffered from the tax credit hangover. Fall 2010 suffered from the uncertainty of the elections. All that's behind us and the market picked up a bit.

However, gas prices are rising. The cost of FHA loans is rising. Both of those factors reduce the amount of monthly money buyers can dedicate to mortgage payments, thus further reducing house prices. This will cause more sellers into foreclosure or short sale, especially the gas prices.

Great topic, I'm glad AR featured it.

We are seeing an increase in buyers due to a number of factors including low rates and the fear of rates increasing.  We still have those "bottom feeders" just trying to see how low they can buy.  My thought is to just be ready to roll and take advantage of the buyers when they are there! 

Buyers in our market are still very uptight in a way.  They are not really all jumping off the fence yet.  Many pending listings are foreclosures.  I think we will see more short sales this year in our market, we have picked up 7 new short sale listings just in the first 2 months.  Our problem is still trying to get a buyer who can get a loan without problem, that is like finding a needle in the hay here.

I think its a tale of two markets.  The wealthy are buying and those who have less than  a six figure income are sitting things out.  This could be a local issue though.  People have been hoodwinked into thinking that prices MUST go down untl an avereage middle class person can afford a nice house.  Uh.....NO!!!!  I live 20 miles outside of NYC where the area is mature and the building spree was limited.  Its supply and demand.  NY will always be expensive.  It is a lot less expensive  than it was -but the tristate area will always be a tight squeeze for anyone but the very wealthy.

The fact that the well -heeled are buying says that they think things are about as good as it gets...

The big caveat - all real estate is local!!!

In my neck of the woods, I'd have to say it's the rise in interest rates that is causing this.

Brandon--I'd have to say my crystal ball is pretty foggy and I can't predict what's next!

It's all Local. Ask me how's business? "I'm Glad I live In Washington DC"

Here along the Southern California coast we are still slow because there is an inventory shortage and everyone is waiting for that 'phantom inventory.'  Most of the buyers will miss the bottom due to greed.

Brandon - I'm with you that it's anyone's guess.  I do see buyers starting to move though and in our area we are seeing a lot of cash buyers.  I think we are at least seeing somewhat of a leveling in our statistics. Home prices are one third if not more less than they were in 2006 and that is a huge deal. They may get lower sure but right now they are still a great deal. 

I talk to agents across the country, and the biggest complaint I hear is that their buyers can't get loans. Much of that comes back to the banks and their activities over the past couple of years.

Even people who had good credit suddenly had marginal credit - because the credit card issuers slashed their credit lines down to what they owed - costing them points on their FICO score.

I think those who are buying now are watching the news and thinking that interest rates may rise. Even 1% can make a huge difference in monthly payments, and those who are smart will buy now while they can get a payment they can make while still having a little money left for other things.

In the market around me, as much as I hate to say it I think folks are looking to grab something before hard inflation skyrockets the prices. Jumbo loans are almost nonexistant out there so it's not really a rate issue, maybe in the conforming market it is.

Also, I think many are more than willing to buy just after the bottom is hit and want to be sure they don't buy before that.

Thanks for all the comments...I am glad to hear that things are starting to move in many different areas of the country.

I still think it boils down to basic economics.  When you can buy a house and service the debt with an income stream you have the solid base of a strong market.  Investors are seeing opportunity which is why we have so many properties with multiple offers.

Brandon - great analysis of what is happening in your market. While all markets are local, you described my market exactly! We are just 2 1/2 hours from San Francisco in the foothills of the Sierra Nevada mountains. We have seen an increase in buyer activity in recent months but still have over 12% unemployment. We are also seeing a backlog of foreclosure properties that have yet to hit the market. The foreclosures we are seeing now are tied to unemployment, illness or divorce. I do believe a rise in interest rates is enough to move some buyers off the fence and that may account for the recent flurry of activity.

I don't know what's stirring the pot, but my business is good!  At least for a few of my clients, they finally have it (financing, credit score, downpayment saved up) all together.  When I was buying, it took me at least 8 months before our ducks were in a row.  I was excited about looking, and didn't know where to start to be ready to buy.  The stimulus got the ball rolling for some, but they weren't ready before it expired.  That didn't mean that they quit working on readying themselves, though.

You can see pockets of recovery, yet many pockets remain deeply depressed. The economy has been deteriorating since January 2007 and the forecast doesn't look good with inflation on the horizon.

Amazing how the Congress of the US since January 2007 until January 2011 was totally controlled by the Democrats, and we'll see if discipline and conservatism can change the direction of our economy. We can speculate into the future but without jobs and wealth, only essential staples will be purchased, so let's hope for national leadership to boost our economy.

Let's see. 4 years of sliding values, interest rates that have no where to go but up, Fannie and Freddie phasing out, and deals so good that I can hardly stand it sometimes. One more - pent up demand. Buyers have been sitting on the fence for 4 years, waiting for bottom. I guess enough of them have figured out the interest rate vs. house cost and know that this is a great time to buy.

We have had a surge in the past month that has been better than the past year!

Here in Southern California we saw frenzied buying by first time home buyers in the first half of last year, after the tax credits ended things quieted down. In the months coming up to the elections the politians and news media scared everyone from making any home buying decisions with their forcasts of economic doom and gloom 24/7. Then we had the holidays and people came out and made the retailers happy with their purchases. Then January rolled around and buyers started looking again, and making offers. I believe because these buyers missed out on the 4% rates in the fall, they don't want to wait until rates go up higher and they lose more of their buying power. Whatever the reason, I'm glad they're back!

Great string of responses here to your post. I like #4 but see many great ideas. LOCAL is a word that stands out among the replies. Our market in Park City, UT is seeng more potential buyers, but fewer great deals. Most sales here are second homes and luxury vacation resort properties. The fact that we are seeing more potetial buyers is a positive sign. 

There are too many variables to predict.  But prices and interest rates are good.  Know one is waiting for the bottom anymore.  If they can afford it and/or get credit they are buying. 

Interest rates are starting to thaw out the cold buyers.

Well put Dennis! I think it's a combination of interest rates edging up and people have been watching it go down for long enough that the mentality is that it won't go much lower even if it does go lower. We're definitely busier in northern AZ!

Interesting post Dennis, and it was great to see other agents' perspectives on this.

This year so far is far busier for me than the fourth quarter of 2010.   I believe buyers in our market are getting off the fence because homes are affordable compared to rentals, and they've seen interest rates starting to go back up.   We're closely tied to the fortunes of the Silicon Valley, which seems to be creating more jobs.