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Cincinnati Real Estate Market Conditions

From a home owners point of view, it doesn't matter until either you lose your job or get a pay cut,  have major health issues to pay for, or get divorced and can't pay your mortgage. Or you run out of space and want to move. Then you will find out exactly how bad the real estate market is in Cincinnati.

My belief is that the lack of financial safety nets are the root cause of the financial crisis. Because people knew that they could buy real estate with no money down, saving money was not a high priority. Even paying bills on time and building good credit ceased to be a high priority. Many times I hear about credit reports even now, with a judgement against them and all they have to do is pay it off and everything is fine, and they can get a loan to borrow thousands of dollars.

It is true that there were many people who were lured into buying homes with no money down, and bad money habits resulting in bad credit. They got high interest and high fee loans and paid too much for their homes because they heaped all the loan fees and the down payment assistance on top of the purchase price. Sometimes I and my colleagues would look at these offers that we got and wonder whether this was a good idea but there was always the feeling that everyone should at least have a chance at home ownership.

There were often requirements with these loans that the buyers do classes in home ownership and many of these buyers had never lived in a home that the family owned. They mostly had grown up in rental houses, where the landlord did the repairs if ever. So they had very little first hand experience with the regular maintenance of a home and often didn't see the signs of deterioration that could have been fixed cheaply but grew to be an expensive fix when ignored. The classes probably helped but with the glow of success on their faces, these people had no experience for building the knowledge from these classes into a good experience.  In retrospect it would have been better if these loans had required an annual home inspection and a repair fund so that they could first hand understand what home maintenance really should be.

And if the bad stuff mentioned above hadn't happened, they would probably have been fine.  The real estate market would have continued to slowly improve and the home owners would have slowly built equity and may have even learned how to save.

However it didn't. The economy slowed down, people lost their jobs or overtime was cut back, they had to pay for housing repairs which they were ill equiped to manage and eventually these homes started to come back on the market. As soon as the ball started to roll, it got harder and harder to get these people out of their houses without dealing with a short sale at the bank and in the beginning the banks were playing hard ball with these short sales and often refused to do them.

As the economy slowed down, consumer confidence decreased. People who would normally buy a house with confidence, would only buy if they got a really good deal, would rent for longer, would fix up an existing home instead of looking for something bigger and better and so the median sale price started to come down. Buyers would try and buy at a price that would preempt the market. They would try to cover themselves in case they needed to find a job out of town and when they did that,  they set a new lower benchmark for the neighborhood which helped the median sale price to start trending down even faster.

Now there are great deals on the market, but if you want to sell your home in order to buy up, it needs to be in perfect shape and it needs to be priced agressively. In fact it needs to be a great deal.

We still get multiple offers, houses still sell quickly, people still get excited and rush to buy but the prices are a lot lower! That is the real difference. There is also a feeling of not quite knowing where the purchase price on a house will end up.

The market is still going down and there are more sub prime loans that will adjust next year and refinancing them will still be a problem because they probably won't appraise. So next year probably won't be the turn around year but it will probably be the beginning of the turn around. You can keep up on this as we post the market statistics at the beginning of each month and we have the trend lines on the bar graphs so that you can see a turn around when it starts!

One of the problems that is still looming is the issue of who is going to buy up all the inventory. We have seen a lot of investors buying up the distressed property, foreclosures and short sales. However the number of non occupier mortgages that a person may have going forward has been cut from 10 to 4. Right now investors are not fixing up and flipping their properties, they are fixing up and renting. I am sure that if the real estate market here in Cincinnati was stronger they would flip them but it isn't. So they are accumulating properties and if not already, they are going to reach their limit. Obviously this positive part of the market is also going to dry up. This change in the mortgage market, at this time is a huge problem in my opinion. I think that right now, the investment loans should be encouraged since the investors are the only part of this market that has the know-how and the money to keep the market going. They can still get non occupier loans after they reach their magic number 4 but they are adjustable and higher rates than the Fannie Mae, Freddie Mac loans and this will also impact the price that they will pay. 

Back in the 70's and 80's families would buy homes and fix them up but those days are gone. We rarely see families doing this. Now both parents in a family have full time jobs and don't want to take on another career fixing up a home, so it is left to the investors to do this. I think we should encourage them.

So stay tuned! It is still a great time to trade up! Patience and understanding is going to get us all through this! Then when prices start going up we can start complaining about the new market all over again!