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On Real Estate: When Will We See Market Bottom?

Many market forces are at play.

Have Ridgefield home prices hit bottom yet? I sure hope so! But the reality is that nobody really knows. Lots of homeowners hoping, many pundits predicting and you… well, you don't know what to think.

Just this week America's foreclosure scorekeeper, Realty Trac Inc., reported record US foreclosure filings for the second quarter: 269,962. It's now expected that 2010 will see the most foreclosures ever. In Connecticut, Fairfield County is only second to New Haven County in current foreclosure filings. And if you think this is bad, 2011 could be worse, as another wave of repossessions is expected to hit the market.

Although many New England towns like Ridgefield lagged behind much of the country in feeling the pain of shifting real estate markets, we're feeling it now, as home prices have been falling since 2005.

These were subtle changes at first but then they increased in intensity. Right now more than 8 percent of Ridgefield's real estate market is distressed, meaning the properties are in foreclosure or short sale, where the sale amount is less than the balance owed on the property loan. This 8 percent figure is just slightly higher for Fairfield County as a whole. Distress sales drive market prices down. Since we lagged in feeling the pain, we will likely lag in feeling relief.

But there are also factors that would point to a stabilizing market. The last quarter saw a pickup in sales (due mostly to the homebuyer tax credit), and it looks like prices could be flattening out a bit. Most experts agree that the tax credit helped, but many of the buyers were going to buy a house anyway. Overall, I think the credit has had a positive affect.

Another factor that our economic policy-makers are counting to help bolster prices is crazy-low mortgage rates. Historic low rates should be fueling demand and price stabilization (and at some point, appreciation). Flip side: borrowers are finding it more difficult to get credit because the credit reporting industry has been updating scoring models and overall credit scores have been falling.

Another trend: today's buyers are not just evaluating their ability to buy a house—the old standard—but also making certain that they'll be able to afford to stay in their new home for the long run. Folks are feeling less confident about the long haul, and fewer buyers equals less demand.

So the bottom line is there are many forces working simultaneously in today's real estate market. Some are supporting prices and some are continuing the downward pressure. When the market forces cancel each other out, we'll see the pricing bottom. But nobody can really say when that will happen. I hope it's soon!

Rob Gutman is a real estate agent at Keller Williams Realty and also writes the blog Real Estate Chocolate. You can contact him directly at rgutman@gmail.com.

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