Wednesday, October 27, 2010
Depending on what happens at the polls next month, a number of regulatory and tax proposals could be removed from consideration — creating the kind of confidence that will get our economy moving again.
Did anyone else notice the irony of news of the deepwater drilling moratorium being lifted and rescue of the trapped Chilean Miners breaking on the same day? What I found ironic was the similarities in these stories, but difference in their reception. Both were seemingly inevitable and greatly anticipated. However, the rescue was received with joy and triumph, but the end of the moratorium — not so much.
While good news for our area, lifting of the moratorium is far from the resolution that the miners and their families have in Chile.
Midterm elections in just a couple of weeks will be the next signal changer. No matter your political views, I’m fairly certain we will have a more divided government in Washington. That’s good news because businesses and the people who control and create wealth in our country, and our area, hate uncertainty.
It is my belief that uncertainty is the main reason our national economy has been painfully slow to recover. Stir everything up and propose numerous new rules and regulations in practically every industry, and you’ll have a bunch of highly productive companies and individuals sitting around waiting for the dust to settle. Depending on what happens at the polls next month, any number of regulatory and tax proposals could be removed from consideration. I am hoping that will signal some stability to the companies and people in our economy who have the wherewithal to stimulate activity.
Here at home, in the trenches of the local real estate market, activity is about where it was at this time in 2009 and 2008. The first half of the year was marked by the now expired homebuyer tax credit, which ramped up sales on properties closed before June 30. The following lull is just now starting to subside as we return to a sales pace more predictable and seasonal.
The other big difference this year is improvement in the new construction market. While new home projects are almost all in the $200,000 or less range, the number of new homes sold this year is up by 20 percent. New construction proved to be very appealing to first-time buyers who took advantage of the homebuyer tax credit. Add in local builders doing a good job of meeting this demand with affordable, smartly designed homes and you have the resulting success we are seeing.
Dragging in our market is excess inventory, due to the uncertainty previously mentioned and strict financing guidelines. We saw an increase in new listings as many sellers put their homes for sale in hopes of grabbing a buyer with a tax credit in hand. As new homes on the market exceeded the number of buyers and the tax credit expired, way too many remain. At the end of the third quarter, there were 1,324 homes on the market in Lafayette Parish. That’s 200 more than a year ago and about 300 more than what would be considered healthy.
The last couple of months, fewer homes have been put on the market and many are expiring or being taken off, resulting in the first significant decline in active listings this year. This may be the beginning of a nice signal of recovery.
Buyers and sellers are still at loggerheads in our market though. Sellers are not nearly as desperate as their counterparts in other states and with values holding and employment healthy, they can hold on or just stay.
On the other hand, buyers are emboldened by the horrible national economic news of unemployment and foreclosures and are certain that local sellers are under the same pressure. While there are certainly some cases, low offers being accepted and huge discounts are not the rule of the day.
The mortgage market mess that left the national economy in shambles did bring us very stringent financing regulations. While the process may seem a bit more onerous to buyers, the basics remain. If you have a steady income, a few bucks to put down and good credit, you will be able to get a loan.
For almost three years now our real estate market has been very stable. Sellers are certainly willing, but buyers lack the urgency, and until they do, we can expect little change. What’s necessary to break out of this pattern? A believable improvement in our national economy, more certainty in the local oil and gas industry and a signal that real estate prices have stabilized and are on the way up. With those signals aligned, the hunt will be on, and buyers will be pulling the trigger with new enthusiasm. Until then, we’ll continue in a holding pattern and wait and see if next month’s elections signal change. Steven Hebert has been in real estate and construction all of his life, having begun cleanup work on his father’s construction sites at age 6. He is now the COO of Coldwell Banker Pelican Real Estate, a nationally franchised, full service real estate firm.