Okay, okay, it has been a while since I’ve written this column. Some of you may think it was because things are so bad in the real estate market that I was too depressed to write about it. Others may have guessed I had sunk under the weight of my own poor investments and had returned, tail between my legs, to whatever cave I came from. Happily, neither is true. The market is still alive, the undertakers have not been called yet, and as for me, I just needed a few months off from telling you all how bad the market is—which you already knew already.

Enough of me, and this over-indulgent clap-trap, how is the market really doing?

Let’s take it in four stages.

1. Money: Can you get it and is it cheap? The answer to the first question is that the credit crunch is still with us, but some are saying it is beginning to ease. First time home-buyer loans are fairly easy to secure, especially in Jefferson County, where the income ceiling for West Virginia bond loans is now $92,680 for a family of three.

Sub-prime loans are still tough to get, but people with nasty variable ARMs or high interest rates (11, 12, even 13 percent), are having some luck calling their lenders and threatening them with a stand-off, the argument going something like this: “If you don’t reduce your rates, we won’t be able to make our payments. And you will be forced to put your home into foreclosure, which you don’t want to do, because you won’t be able to sell the house because the market is so bad.”
Good credit customers are having little trouble getting loans, and as the interest rates are still fantastically low both in historic and recent timeframes, many people have refinanced their debt, especially those with short-term ARMs and variable second mortgages.

Until recently, if a buyer needed a loan for more than $417,000 they were required to get a “jumbo loan.” Now, under the economic stimulus package recently passed by Congress, people can borrow “conforming rate” money up to $729,750 in Jefferson County before needing a Jumbo loan. This has eased the credit squeeze at the top of the market. The downside is that this allowance is only available for loans that close by December 31, 2008.

2. Inventory: Okay, this news is still bad. In Jefferson County there are over 600 homes on the market. Yes it is below the crazy levels (mid 700s) we saw late last year, but we really need to be back in the 500s, especially with all the new-construction homes that are still on the market—and are not included in these figures. With only some 40 homes selling each month, it would take over 15 months to clear all the inventory on the books. This is three times longer than in 2004 and 2005, when it would have taken six or seven months. See table below.

3. Gas prices: “Ahhh!” you yell. But if I am to, as Randy Jackson would say on American Idol, keep it real, I’ve got to talk about gas prices. The problem with high gas prices for the Jefferson County housing market is that so much of the bubble of 2004 and 2005 relied on young families moving to the area who were prepared to commute to D.C. and Northern Virginia. Until prices come down, or fuel efficiency goes up, or hydrogen fuel cells become standard, or the MARC lays on more trains during the day, high gas prices are going to continue to have a depressing impact on the housing market.

4. Confidence: This one is more nebulous. I had two buyers last week tell me to write up offers on $600,000 houses in the Shepherdstown area. Both were steals in my opinion, fabulous homes that were about to be bought at rock bottom prices. The people who owned the properties were cutting their losses, happy just to get the debt paid down. Neither of the buyers signed the contracts, and therefore the offers weren’t made. Why? I would say simply the buyers were not confident that the market wasn’t going to get worse. They both had houses they had to sell in order to make the purchase, and worried they wouldn’t be able to sell their homes. I asked my broker when I’d know that the confidence was back in the market. He said, without pausing, “When you see people writing contracts again.” In other words, watch this space.