Those knowledgeable about the real estate market have been nervously watching numbers over the last couple of quarters.  The uptick seen in the residential market this year has been met with cautious optimism that the worst may be over but the true measure would be fourth quarter activity as the real estate season slows and the major impact of the First Time Home Buyer Credit has passed.  Additionally,...

the extension of the tax credit will expire in April and the Fed is scheduled to end its purchases of mortgage-backed securities by the end of March; the housing market recovery faces the true test of the market’s ability to sustain a recovery without limited government aid. 

The numbers released this week that sent tremors through the markets because they were worse than expected include:

• October new home starts are 10.6% off September's numbers looking more like numbers seen in March and April.
• 3.4% of homeowners are 120 or more days delinquent in mortgage payment (a 1.5% increase over the numbers seen one year) forecasting a continued supply of foreclosures over the next few years.
• Nationwide, there were 3.63 million homes for sale in the U.S. with an expected absorption rate of 8 months; over 6 months makes it a buyers market holding prices down.
• Unemployment numbers rose in over 30 states.
• Several analysts revised their fourth quarter GDP projections downward approximately 0.2% taking this and other market news into consideration.

SpringsBlog advises readers to look at these numbers in context.  First, residential real estate is a seasonal business and it a good thing that we are seeing a normal seasonal decline in activity.  Forecasters were too zealous in expecting a quick recovery; we have been urging cautious optimism as we see the market slowly stabilizing. As the market enters spring 2010, we will seasonal activity increase.  Second, we don't want to see any national industry suffer including home building, but a seasonal decrease in inventory is necessary because the continued influx of foreclosures will dangerously saturate the market.   The busy homebuilders that because their clients can truly afford the new homes; another good sign for long term stability.  An artificially propped up real estate market, will just fall again.  Third, while unemployment numbers rose in some states, they actually fell in others.   Finally, the greatest challenge will continue to be suppression of value since foreclosures will be a part of the market for several years.  The Colorado Springs real estate market is holding its own and being recognized nationally for its ability to weather this economic storm. Locally, we are poised for success.

 If you are considering buying or selling a home in the next couple of years, keep in mind that the credit markets will remain tight forcing lenders to impose some of the tightest restrictions seen in decades.  In order to qualify for a loan, buyers will need to be able to demonstrate three things which include two plus years of employment, low debt ratios and great credit scores.  It is imperative to get your financial house in order to get the best mortgage rates possible.  The next five years will be a time for long term investment because home prices will take some time to recover.