US economic growth has finally resumed  The gross national product for the 4th quarter will show an increase of 5 percent, the third Quarter was up by 2.2 percent.  This comes after 4 quarters of contraction.     So the economy seems to be getting better but it  is still very fragile.

However today’s release of the Consumer Price report for 2009 will mark the first annual decline in consumer prices in  54 years. With high unemployment keeping a lid on wages, manufacturing at  70% of capacity and  virtually no inflation. Those that are banking on the Federal Bank to reverse it‘s lending rate policy  may be disappointed. The Feds will be fearful of raising interest rates too soon and could keep them at near zero this year and maybe for 2011 as well.  Thus the dollars value is not going anywhere soon.  

So this bodes well for the home buyer.  Two things will happen this spring, the home buyer credit will go away  and the  government will stop buying mortgages.   However  the Fed will continue to keep interest rates low  and  this will help keep the  affordability of home ownership relatively high. 

In Morris Plains and in the surrounding area homeowners that wish to sell their homes will see an increasing number of buyers.  Competition for homes in good condition , that are in a good location and are well priced  will be high.  Those home owners that bought at the height of the market will not be able to sell because of the loss they will take in this declining market.  These are mostly newer homes with all the bells and whistles or older homes that have been updated and their owners took second mortgages or refinanced to pay for the improvements.   We have already seen this in the number of homes that have been withdrawn from the market at the end of 2009.  These homes will not be part of the market and  thus not be part of the home selling pool. 

The other unseen factor is that the banks are artificially holding back additional inventory thus competition by their long drawn out process of approving short sales and foreclosed sales.  Although at first the temptation to a buyer is great to buy one of these homes, the process is difficult and time consuming to many of them and they end up going to a more traditional home buying route.  Short sales and foreclosures are for those stout hearted buyers that, first have the cash to invest, secondly can afford the time to wait  for a banks approval.   Many of the pundits are fearful of the foreclosed homes hitting the market and driving the prices down.  Home Owners in Morris County NJ really don’t need to fear the foreclosure market.

A foreclosed home requires a specific type of buyer to purchase the home.  The vast majority of home buyers in the market are ill equipped to take on the challenges of buying one of these homes.  If a foreclosed home comes on the market and is in good condition the competition among buyers is fierce and could result in multiple offers and even a bidding war.  99 percent of the buyers of homes today do not have the stomach to last very long looking for a home this way. 

Typically a foreclosed home is in need of a ton of work.  Yes it could sell for well below the market but it will  need  so much refurbishing that the cost to bring it up to standards would bring the value  to the current market.  Those buyers that can afford to buy a foreclosed home, put the time and money into it, then sell it again don’t sell it a discount to the market they sell it at the market or they live in it.  The banks in a sense are recreating the buy and flip market of 4 to 5 years ago.

The other thing is to take into consideration is that foreclosed homes still represent a value to a bank.  One may think that they would want to get these properties off the the balance sheet asap.  The truth is that they have already written down these properties and they are not in the mood to write them down further.  Banks are corporations and answer to stock holders as long as they can keep a property on the books valued at “X” they will.  Stock holders are funny they don’t like to see losses.  It is not in the bank’s best interests in flooding the market with unsold inventory.  They will do their best to keep the market from sliding further. They will be very careful and controlled as the  as they sell off this inventory.  Plus with the interest rate so low it costs the banks very little to hold this inventory and these costs can be written off.

So all in all the home market in Morris Plains and in Morris County has bottomed out.  Well priced homes in good condition and in good location will sell in a relativelyshort time.  Home sellers need to know that if you bought a home 4 or 5 years a go that home is worth about 15 to 25 percent less depending on the town it is in.  Those home owners that bought 10 years ago have seen the value of their home go up in value from 140 to 170 percent in that  time period.  These are the people that will make out in this market.  They can take the equity they have earned in their home and invest in a larger home that is now priced 20 percent less than it was 4 or 5 years ago.

Thanks for reading Morris Plains Homes.  Here is the Quote: “Out of clutter, find simplicity. From discord, find harmony. In the middle of difficulty, lies opportunity.”  Albert Einstein

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