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The Winds Of Change: 2006 Real Estate Market Trends

The Winds Of Change: 2006 Real Estate Market Trends

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Elaine VonCannon, ABR, SRES, Associate Broker, Notary Public, Team Manager

As the month of January comes to a close there has been much speculation about the state of the real estate market, both nationally and locally. As we prepare for the future, we must take many factors into consideration. Change is the natural progression of life, for humans, our Universe and even the real estate market. As home buyers, sellers and real estate professionals, we must be attentive and knowledgeable in order to make the best investment decisions. In this article I will share my views on the current local and national real estate markets. I will also discuss the views of some influential people in the real estate industry.

The National Market Adjustment

Recently, Frank Nothaft, Freddie Mac vice president and chief economist, stated "Our outlook for the housing industry continues to be that mortgage rates will remain affordable for the rest of the year at least, keeping the industry alive and well into the foreseeable future." This bodes well for real estate professionals and consumers throughout the country, even in regions where the market seems to be slowing down considerably. According to Blanche Evans, writer and editor of Realty Times, in her article "Realty Times Outlook - What's Normal" the National Association of Realtors believes in 2006 housing markets will "return to normal". "In 2006," Evans states, "experts are calling for more balance in the rate of price growth, says the NAR, as well as more balance between buyers and sellers in local markets."

David Lereah, NAR's chief economist, says "more modest gains are healthy." "We don't need to break a record every year for the housing market to be good," Lereah continues, "in fact, cooling sales are necessary for the long-term health of this vital sector. A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization. That will help to bring balance between home buyers and sellers, yet sales will remain historically strong." As the market becomes more balanced during 2006 buyers will begin to recover some of the advantages they have sacrificed over the last few years, such as more time to evaluate different properties and to make offers. Nontraditional mortgages such as 80/20's or ARM's will become less popular and 30-year fixed rate mortgages will be the preferred option.

Hampton Roads and the Tidewater Region of Virginia

As the national market continues to evolve it is important to pay attention to our regional real estate market trends as well. Location is an incredibly important part of analyzing and predicting real estate market changes. At the end of 2005 the Virginia Association of REALTORS® (VAR) reported that in November "seasonal factors and higher mortgage interest rates were responsible for moderating sales." The year-to-date number of closings had increased from 124,381 home sales in 2004 to 126,325 home sales in 2005. The number of home sales closed during just the month of November had dropped from 10,129 closings in 2004 to 9,648 closings in November of 2005. VAR President Kit Hale of Roanoke stated that "The good news is that housing inventory levels are improving and buyers are in a better position to not only have a better selection, but to negotiate the best price as well."

In her January 20, 2006 article "Real Estate Roundup: What Slow Down? Industry Leaders Predict Cooler But Solid Market" Margaret Morton talks specifically with real estate professionals about the Virginia real estate market as well, one of the most vocal people she interviews is Tom Jewell, president of Carter Braxton Real Estate and the most recent former president of the VAR. "What slow down?" was the first question Jewell asked. "The market is better than a year ago and prices are higher than a year ago," Jewell said, "When people say it's tanked, I say 'find me one property that's selling for less than a year ago.' Has anyone lost money?" There has "definitely been a cooling off in the market," Jewell admitted, but "We're returning to a more normal market-the other was abnormal." So what are all of these debates and discussions telling us about the upcoming real estate market trends? I believe we are seeing an adjustment that has been a long time coming. The balance between a buyers and a sellers market is essential to the continued success of the real estate market across the nation.