Here we are – the conditions in real estate market are as close to normal as they have been for a couple of years.  The recent changes:

1. The Fed stopped buying MBS, and mortgage rates are on their own.

2. The federal and state housing-tax-credit offerings for resales are complete.  If a buyer isn’t in escrow by now, with closing planning for sometime in the next 3-4 weeks, they will likely miss out on the state credit. 

3. HAFA has been underway for a month, with no noticeable benefits reported.

4. No major foreclosure moratoriums in effect.


But most everyone would agree that we haven’t seen a true normal market since 1997-1998. 

THE NEW NORMAL – the market conditions that will stick around to prevent us from ever being normal again (or at least for a long time to come):

A.  Government support of mortgage market – good or bad, it’ll be with us forever. 

The low-down-payment benefit doesn’t affect much of the North SD County Coastal market though, only 8% of this year’s purchases have been FHA or VA. 

Fannie/Freddie conventional loans are very popular, but they require 20% down payment and full qualifying, unless a PMI company is willing to take a chance on you.  Hopefully those requirements ensure that today’s buyers are solid, and less likely to default.

The government’s support looks like it’s here to stay, and part of the new normal.

B.  Low Sales – The supply and demand curve wrestles with low inventory of quality homes at decent prices.  Buyers wonder if they should wait, but the stagnation doesn’t seem to be getting much better – and many appear to be taking the plunge:

The new normal includes ready, willing, and able buyers completing a purchase in spite of not having all the answers, and wondering if there will be further erosion.  It used to be a safe bet that real estate always went up, but we may never believe that one again.

C.  Low foreclosures – Since 1/1/09, there have been 422 North SD Couth Coastal SFRs that have been successfully auctioned on the court house steps, or about 26 per month.  In a fairly affluent area with population of approximately 225,000 people and low sales in general, I guess we can call it part of the new normal that the market will absorb 25-50 foreclosures per month. 

D.  Fraud and Deceit – There appears to be no changing the fraud and deceit being inflicted upon the marketplace by realtors.  Having to deal with it, is part of the new normal.

E.  Break from Fundamentals – Mr. Umpteenth keeps banging the wage-inflation drum as the only way prices could sustain, but the trend of buyers using big money continues.  Having ample funds offsets the need for a high-paying job to afford a house.

Last year there were 17% of the detached buyers in NSD County Coastal region that paid all-cash, in 2010 they are 22% of the total.  Where all the big money is coming from, and the likelihood of it drying up could be a whole other post, but because the trend is continuing makes it part of the new normal – for now.

F. Partial Transparency – the MLS is out in the open, but it is only part of the marketplace.  There are 25-50 trustee sales every month of SFRs to which most buyers don’t have access, and the short-sale scammers who put together their own deals without being on the open market are limiting the supply to buyers. 

G.  Lots of Non-Payers – There are only 401 SFRs in North SD County Coastal that are on the auction list, but you get the feeling that many more are riding the free-rent program.  Unless servicers add more staff to handle the load, it’ll be part of the new normal that people will be able to live in their houses for months or years without making mortgage payments.


The new normal is likely to produce more of the same results we’ve seen; frustrating inventories, lack of clarity, and data scattered everywhere. 

The wild, wild west is the new normal! 

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