Working as a Metrowest Massachusetts Realtor one of the questions I am asked most often is when I think the market will turn around? While I don't pretend to have a crystal ball or a magic hat and certainly am not an economist, it is easy for me to see that the Real Estate market in Metrowest Massachusetts will not be changing all that much in the next year.
Let me say that this is not about being a pessimist or being negative. This is about being very realistic and honest. Over the last six months I have gone on a number of listing interviews where the seller has decided not to sell their home because they want to wait "till the market comes back". One of the things that I find amusing is the belief by many that the market is going to come back overnight.
Here in Metrowest Massachusetts the Real Estate market peaked in the Spring of 2005. The years prior to 2005 were marked by a run up in home values like we had never seen before. There were years during this time where property values increased by over 10%. These values were not sustainable much like other areas around the country.
Depending on what town you are located in values have dropped by around 20-25% since the peak. Are we near the bottom? That is anybody's guess at this point but if I were a betting man my money would not be on a recovery this year.
One of the things that I find most fascinating about the decision process is a sellers unwillingness to part with the lost equity on their current home, even though they will be turning around and purchasing another home under the same conditions.
In the article I wrote selling your home in a buyers market this concept is explained in greater detail. It seems that people get so caught up in their loss that they forget that when they go ahead and buy another home that property would have also dropped in value.
Another way to rationalize the Real Estate market and what kind of appreciation is necessary to get back to where we were at the market peak is to look at stocks.
Lets say you purchase a stock for $100 dollars and it goes down by 25%. The stock is now worth $75 dollars. Many would incorrectly assume that if the stock goes back up by 25% it would be worth $100 again. WRONG - it would be worth $93.75. The stock needs to appreciate around 33.5% just to get back to break even! It works the same way with housing folks but on a larger scale.
If you owned a home worth $500,000 in the Spring of 2005 and it has dropped by 25% it is now worth $375,000. Well guess what if the market goes up 25% the home will be worth $468,750. Still a long way off from $500,000.
Most economists predict that once we do finally hit bottom we will only see a more historical norm of 2-3% yearly appreciation on our homes. Do the math - with this kind of reality check it is very easy to see why it is going to take a very long time to get to the levels were were at prior to the Real Estate correction.
Some food for thought. As of this writing interest rates are outstanding hovering near 5%. There is talk that due to the massive influx of capital into the credit system that interest rates could be headed to 4.5%!!
If you have wanted to sell your home for whatever reason and are not because you don't want to lose the equity you once had then you could be making a huge mistake.
Interest rates are at a once in a life time level. When the economy does finally improve interest rates this low will not last. Interest rates should be a big X factor in your decision making process.
Seriously folks it could be 5-10 years before we get back to the levels of 2005. What are the chances that interest rates will be where they are when that finally happens? When your home finally does get back to 2005 levels so will all the other homes in the area.
Stop worrying about lost equity if you really want to move.
About the Author: The above Real Estate information on the Metrowest Massachusetts Real Estate Market what does the future hold was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at email@example.com or by phone at 508-435-5356.
Have a home to sell in Metrowest Mass? I have a passion for Real Estate and love to share my marketing expertise!
I service the following towns in Metrowest Massachusetts: Hopkinton, Milford, Upton, Southboro, Westboro, Ashland, Holliston, Mendon, Hopedale, Medway, Grafton, Northbridge, Uxbridge, Franklin, Douglas, and Framingham MA.
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