This is an interview with Judy Minister of Minister Realty, who provides services for the neighborhoods in central Columbus, Ohio. Not only has she been in real estate since 1984—becoming a top agent in the local office of a national brokerage within a decade—she has run her own small specialty office since 1995.
But her insights into the housing market are not limited to those in the Columbus area. Judy’s experience through three decades of market fluctuations give her special understanding of the current housing slump. I recently interviewed Judy to find out more about what we can expect from this housing market:
How has the most recent housing slump compared to others you have seen?
I started my real estate career in 1984, with mortgage interest rates at 13.5%. The market was definitely in a slump when I started my career, but it was recovering from several years of interest rates in the 15-18% range.
That slump, which grew to an end in 1986, was the only precarious time I experienced in the housing market until the 2007 subprime loan crises snowballed us into the crisis we now have.
That 1980s slump was fueled by high interest rates, while the current slump is a product of two major factors: the huge number of foreclosed and neglected homes being marketed at below market “as-is” prices, and the poor economy. [Emphasis Judy’s]. Lenient lending standards, no down payment loans, and cash out re-finances all contributed to the huge number of foreclosures.
Even back in the slow 1980s market, property values saw continuing modest increases. For decades, foreclosed homes averaged 2.5% of the total market.
Fast forward to 2011, and foreclosed or lender-mitigated homes (homes where the bank has worked out a deal with the homeowner to avoid foreclosure) comprised 35% of the real estate market in central Ohio. Yes, 35%. [Emphasis Judy’s].
Fortunately, the fourth quarter of 2011 shows an active lender mitigated inventory down to under 2400 homes, which is about the 2007 levels. It’s still much too high, but it’s below the foreclosure peak in 2010. We hope this downward trend of foreclosure inventory will continue.
What advice would you give to buyers or sellers in 2012?
For sellers: The last half of 2011 showed five consecutive months of sales growth over 2010 sales. Prices in many markets are not ready to go up, but properties are going into contract even during the traditionally slow winter market.
Sellers who can sell with a gain should do so, and those who would sell for a loss and can afford to wait for a recovery should just sit tight until that time. If you do need to sell this year, start in the spring, which is peak buying season.
For buyers: Interest rates are at the lowest point in 60 years. If you buy a home or an investment property, buy for the long term. 10 years from now, you’ll likely be happy that you did.
What are some indicators that a particular market is starting to recover?
Two indicators will help you know if your market is recovering. First, seeing lender mitigated inventory declining in a given market is a good sign. This will vary from market to market, but it will be helped as lenders nationally work on creating repayment plans for distressed homeowners who wish to stay in their homes.
The other indicator is the unemployment numbers for your state. As statewide unemployment decreases, fewer owners will fall into distress.
What trends in real estate do you see emerging in 2012 and beyond?
The economy: As the economy improves, home sales will improve, foreclosures will lessen, and property values will begin to rise again.
Lending practices: Lenders should and likely will continue the return to the more cautious lending standards they exercised pre-1998. Cautious lending includes requiring a down payment, verifying stable employment, and restoring the requirement for a history of good credit from the buyer.
Fewer foreclosures: With low interest rates, a down payment stake in a property, and affordable mortgage payments, fewer new homeowners will experience distress, meaning fewer new homeowners will abandon their homes and mortgages.
Return to stability: From 1984 to 2007, I had no home sellers who sold their homes for less than their purchase price. In addition to the rising property values, these homeowners benefited from the opportunity to be a part of a neighborhood, from the tax advantage of home ownership, and from the tangible pride of ownership.
I hope that we can experience that stability again with a return to normalcy.
Image by JefferyTurner