Why the Real Estate Market Scare??

Surmised article by Ken Fears (Manager, MRIS Regional Economics), "Jekyll and Hyde...A Market with Two Faces"

"Buyers have been bombarded with horror stories lately. Sales have fallen sharply, foreclosures have risen, inventories are near record levels, and homes are sitting on the market longer. Finally, out right price declines are being reported at the national level and in many local markets. But isn't this a good thing for buyers? Yes, and they are beginning to take note.

For months now, the media has been portraying the downside of the transition of this housing market from a sellers' to a buyers market. But for every loser there is a winner and now it's the buyers' time to reap the benefits.

Despite what many pundits have argued for a year or more, it has not been a buyers' market. Home sales slowed and days on market rose, but buyers were not buying...and they shouldn't have. Prices were flat or rising in the face of mortgage rates that were climbing. Consequently, many would-be buyers chose to forgo buying rather than get stuck with risky loans. "

Now, however, loans are at historical lows. It seems that it is the perfect time to buy--but why aren't they?

Article surmised from Lawrence Yun, NAR Chief Economist, "Spinning the Wheels"

"A lack of buyers pushes up inventory. High inventory depresses home price. Falling home prices raises foreclosures. Higher foreclosures lead to further pessimism among potential buyers. The cycle starts again.

This situation is driven by lack of buyer confidence. Why are buyers hesitant? Anticipated lower home prices are holding back many people from buying a home now. Anticipating lower interest rates are also restraining potential buyers. Risky subprime lending has virtually disappeared since August, 2007. It had comprised about 20% of all mortgage originations. We now have a stricter and sounder regulatory environment, with proper pricing of risk. "

In the nation:
National economic and housing market statistics show that in 2007 the existing single-family sales (in thousands) was 5,652. It is projected that it will continue to tall to 5,380 in 2008, but rise again in 2009 to 5,595. To show you this drastic fall, the existing-home price changes from the previous year was -12.8% in 2007. However, only a -4.8% drop is expected in 2008, and another -4.0% in 2009.

What does this mean? With home prices dropping and financing rates at historic lows, NOW is the time to buy.