Thursday, July 27, 2006
I think what is really going on in some of these markets is that for years, real incomes having been decreasing.
Second-level factors are the increase in mortgage rates and the increase in fuel costs. These factors are too small to have a great impact on inflated areas, but in areas that haven't seen the big run ups in pricing they do exert an effect. As one commenter on the linked post wrote:
Maybe it wasn’t a bubble in the Cincinnati, but that doesn’t mean that the drying up of credit won’t impact prices there too. Mortgage markets, moreso than the houses themselves, are national. The credit markets will tend to have more effect in markets that that had housing bubbles. But nearly every house transaction is, at least in part, financed by credit, and so, therefore, every house price has at least in part been affected by the mortgage finance bubble. Even in markets far removed from the insanity of the coasts there will be ripples in pricing as the credit markets adjust to the new market conditions.And then there are the demographics of some areas, in which there are just more retirement-aged people ready to sell out than there are young people who can afford to buy in. In any case, once everyone gets nervous appraisals become more cautious and underwriting standards tighten. The qualifying loan sizes for the buyers in the market drop, and all of these factors combine to slow real estate sales.
I cannot even see any one of these factors shifting direction in the near future, so I would expect the sellers' market in your area to continue to slow over the next year and a half.
I was just coming over here to link you on this topic. Your reporting on this is truly a public service.
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