This has been one of the most difficult years for the housing market in a couple of decades, no question.  By the way, last year was no picnic, either.  Homeowners have struggled with rising adjustable rate mortgage payments that, in too many cases, have resulted in foreclosures.  Home sellers have wrestled with declining prices in large part fueled by those same foreclosures and distress sales.  Potential homebuyers (and there is a growing pool of them) have faced more stringent mortgage standards and a fear of buying while prices are falling.  Much of the current news still tends to emphasize the negatives of the market (and there certainly are enough of them).  But we have begun to hear from Realtors on the front lines of the market that there has been a noticeable pickup in buyer interest in a number of metropolitan areas.  Too, there are many other areas that have weathered the national slowdown without any significant price erosion and march to their own drum.  And recently we have started to see some tangible developments that bode well for the future.  Make room Muldar and Scully; we, too, want to believe!   For one thing, home sales numbers have shown an uptick.  The National Association of Realtors reported that pending sales of existing homes (based on contracts signed but not yet closed) rose more than 5% in June.  The overall level is down over 12% from June 2007, but the directional shift is a welcome one. 

The enactment of the Housing and Economic Recovery, if not delivering all it might have or as promptly as we would have liked, will be a significant net positive for the housing market now that it is finally a reality.  With a $7,500 first-time homebuyer tax credit, permanently higher maximums for Fannie Mae and Freddie Mac conforming loans and a new mortgage relief program through FHA, the measure will provide a B-12 shot to the housing market.  The decision to back Fannie Mae and Freddie Mac that was incorporated into the housing bill, think what you may about whether it constitutes a government bailout or was the best course of action to take, will keep the most reliable sources of mortgage funds in the game at a time when their presence is vital. 

However, Fannie and Freddie, under fire for having insufficient capital for the loans they have already made, have announced they are reducing the amount of loans they will be purchasing.  And the Federal Reserve recently reported that commercial banks have tightened standards further for mortgages across the board.  It is in the context of such mixed news that we search for encouraging signs that the housing market is stabilizing.  It seems that just when we think we can start to smell the flowers, we catch a whiff of something less pleasing.  The fact that for just about every bit of good news there is a discouraging counterpart makes sense, though, given that the market is, at best, still in a period of roiling adjustment. 

As to the overall state of the fall housing market, it shouldn’t be a surprise that it is definitely still a buyers market in most parts of the country.  One reason is that being a buyer is so much tougher these days.  It’s not just about having the will and the courage to buy in a market that seems uncertain, it’s about meeting the ever more demanding financing requirements of lenders.  So, even in those housing markets that have suffered little, if at all, from the current slowdown and price declines, buyers with a rock solid mortgage pre-approval (as much as such a thing can truly be said to exist these days) are in a commanding position.  

If inflation picks up, rates could climb further.  The inventory of homes is starting to decline a bit, with some sellers putting off a sale for now, rather than compete in an overstuffed market.   However, the supply is ample enough to provide a wide range of choices and enough motivated sellers to satisfy.  Those who need to sell for whatever reason should benefit from a decline in inventories.

In most areas, the market remains highly competitive, so be willing to consider as many options as possible to facilitate a sale.  Lease-option agreements are sometimes being offered by or requested of those sellers who have some financial flexibility.  Understand that these must be scrupulously constructed to pass muster with lenders later on.  Some sellers, especially those with resort properties, are agreeing to “sleepovers” by serious buyers to give them a better idea about what they can expect from their prospective purchase.  If you think that experiencing what life in your home would be like is a positive, then by all means consider it.  Of course, there is the potential risk of damage or theft (a check with your insurer is in order).  And if a negative, such as party-happy renters in the adjoining condo, might be exposed, then it probably is not a good idea.  Perhaps allowing buyers to spend an extended period in the home, even if not an overnight, might work better.