Is the Real Estate Market Up or Down?

Break down the numbers and decide where today's real estate market is heading.

Recently I read in an opinion piece from another realtor stating the market has been moving up slightly and that things were slowly but surely moving in the right direction. Later in the week I saw some data that showed the immediate trend could give people a false sense of security in terms of the direction of the real estate market.

After looking at the data, here is what I discovered. As we know, the beginning of the downward slide began in the early part of 2007. Each year since has seen price declines. However, each year since then has shown a small spike during the summer selling season. The graph included shows how the overall trend since 2007 is down, but notice the slight bump in 2007, 2008, 2009 and 2010. So, historically speaking our slumping real estate market has always had an increase reported right after Labor Day. This year is no different. So don’t be fooled if you hear about a slight rebound in real estate.

It is my opinion, based on historical data, that 2011 is no different. The market had good activity through the spring and summer. Lower prices along with historic interest rates have created opportunities for anyone that wanted to purchase a home. In the end however, as we enter the fall and winter of 2011, I suspect continuing downward trending. The banks are still holding a large number foreclosed properties. The banks know that if they flood the market, it could drive prices much further down and much faster. So for now, they are releasing these foreclosures in a strategic and timely manner.

So, what is your house worth today? The next chart shows how much appreciation your home may have gained between 1991 and 2009. It also takes that increase into consideration and shows the net value drop in today’s market. As an example, take a home that was purchased in 2007 for $250,000. It is estimated that it has lost 24.9 percent of its value. That means that home would be on the market today for $187,750. That number alone creates a potential foreclosure or short sale situation.

As a realtor, I see more tough times ahead if you are a seller, and incredible opportunities, considering prices and interest rates, if you are a buyer. It may be anywhere between 2 -5 years before a “normal” market is established. I am not certain if we will see 2006 and 2007 homes prices for many many years. So if you are considering buying or selling, make sure you work with a realtor so that you can minimize mistakes and maximize opportunities. That could make all the difference in this crazy market.


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