Q: We are in our early 60s. We have owned and managed rental properties in an area north of Seattle for the past 20 years.
We are now ready to sell off our rentals and retire. Since the real estate market is slow in our area, I suppose this is bad timing on our part.
If we hold on to these for a few more years, do you think the housing market will come back? What about that book that said the housing market was going to crash forever in 2007?
Thanks. We’d love your thoughts on this.
A: Here’s the short answer to your question: Yes, I think the market will come back. But the caveat is that the market may come back stronger in some places than others.
What we’re seeing nationwide is that home prices are declining by a few percentage points this year. But the number of homeowners who are in trouble is far higher in some places than others.
Overall, Seattle has been a relatively strong housing market and has experienced tremendous growth in a few short years, both in the number of homes being built, the number of people moving to the area, and the amount of home value appreciation homeowners have enjoyed.
That said, you’d be hard-pressed to find an area, even one that has experienced such strong growth, that isn’t taking a breather at the moment. The big exception is New York City, for which the party continues.
Unfortunately, I think it’s going to take some time for the quirks in the housing market to shake out. Interest rates will drop some this year, and it’s becoming increasingly likely that the Federal Reserve will lower the federal funds rate before the end of the year to stave off a recession.
But there are still millions of homeowners with adjustable rate mortgages that will adjust and some of these won’t be able to afford the increase. Look for the number of people who are delinquent with their mortgage payments and who have had foreclosure proceedings brought against them, to rise through 2008 (and we’re already at a record high).
Once we get through the Presidential election, and into 2009, we will probably start to see the housing market pick up. If you can wait to sell until at least 2009, I think you’ll find a much better seller’s market.