According to an article by the National Association of Realtors Chief Economist, David Lereah, pricing will be the key to the turn around he's predicted for the first quarter of 2007.
Lereah believes that today's market is an anomaly, created by nervous consumers, due to rapidly increasing home values and affordable issues. In the past downturns were caused by increases in interest rates and economic slowdows, which isn't the case with today's market. Once home prices are reduced to more affordable levels, homebuyers and investors will get back into the market - which might not be too much longer.
He cites that price growth was negative in the West and Northeast in July and nationally in August. If that continues, he believes that the market may have bottomed out in July. It looks like others may agree - ABC Radio news reported on Friday that new home sales were up nationally by 10% in September, fueled by lower than expected national price increases.
So that's why pricing is key. In this market, sellers need to be realistic about the value of their home. A 5 to 10% price reduction shouldn't wipe out the majority of gains that most homeowners have enjoyed in appreciation over the past few years.
Once the pricing adjustment period has taken place, sales will pick up, dropping housing inventories which should place upward pressure on home prices again, renewing the real estate cycle of life as Lereah puts it.
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