Housing Market Comeback?

The Sequim and Port Angeles housing market has not suffered like the national market or many localities around the country, but the recession and the depressed state of the national real estate market have certainly taken a toll on Clallam County.  Lot sales are so rare, you could almost say lots are not selling at all.  The same could be said of new construction.

Sales of existing homes continues at a snail’s pace.  Sequim and Port Angeles are highly dependent upon buyers from California, Arizona, Nevada, Texas, and Montana, as well as a few other states.  When the market collapsed in these other states, buyers for homes and land in Clallam County also slowed dramatically.

When the national market begins to come back, Sequim and Port Angeles will again see more buyers and more construction.  So what is the state of the national market?  Have we reached bottom, and how soon is the return going to be evident?

Harvard University’s Joint Center for Housing Studies has some insight on the return of the market.

In the worst housing construction cycle since the 1940s, depressed demand is making it difficult for the market to work off excess vacant units. Restoring demand to more normal levels will take time since so many owners are in financial distress or trapped in homes worth less than their mortgages. The recession has also dampened both immigration and new household formation.  But once new home sales rebound and the economy begins to pick up, the aging of the echo boomers—the largest generation to reach adulthood in the nation’s history—should reinvigorate the housing market.

A recent Federal Reserve report estimates that of the trillions of dollars in real home equity cashed out between 2001 and 2007, homeowners used $874 billion to pay off non-mortgage debt—in effect rolling consumer debt into their home loans. Unlike consumer debt, mortgage debt cannot be discharged through personal bankruptcy. This is no small matter, given that personal bankruptcies nearly doubled from 600,000 in 2006 to 1.1 million in 2008. Furthermore, a total of about 3.2 million homeowners entered foreclosure in 2007 and 2008.

While it is too soon to tell whether housing markets will stabilize in 2009, conditions that could support a recovery are taking shape.  Based on today’s median prices, conservative lending standards, and a conventional 30-year fixed-rate mortgage, affordability for homebuyers has returned at the national level and in many metro.  Meanwhile, housing production has dropped so dramatically that long-run supply and demand are now approaching balance. In the short run, however, demand is also remarkably low. Indeed, the numbers of vacant housing units for rent, sale, or being held off the market are at record highs despite the improvement in some underlying conditions.  Read the full Executive Summary.

There are signs of strength in the housing market in key places in the country, particularly southern California, which has often been a trend setter or an early indication of the state of the national economy.  There has been a boost in buyer activity in Sequim and Port Angeles, and while that is often true of the spring and early summer months, these buyers are also strong buyers.

Many who are at the retirement mark are still moving forward with their plans to retire in Sequim, and many of these retirees are qualified buyers who do not need to first sell another home.

There are signs of recovery on the horizon, and we’re not far from seeing the effects of the recovery filter down and through our local economy.  In a complicated economy it will take some time to see balance return, but it will return before we recognize it.  At some point in the months ahead, we will look back and realize we already are on the path to recovery and growth.

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