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Housing market creates the ‘Goldilocks environment’ and it’s just right

Fri May 31, 2013 on Blog

Housing market creates

Housing market creates the Goldilocks environment – not too hot, not too cold; but, just right.

In 2012, the headlines were all about how the real estate and housing market was still struggling and that there was no recovery in sight.

What a difference a year makes. It seems like a Goldilocks environment – not too hot, not too cold; but, just right. This week, the headlines are heralding a new day.

The latest Case-Shiller real estate index shows property values shooting up 11 percent in South Florida from a year ago. That’s a big turn around from when property values began their descent in 2007 and just kept going down into what has come to be known as a “negative feedback loop,” a term referring to the relentless spate of bad economic news, which in turn triggers a wave of pessimism that feeds on itself.

During the past few years, it was like a tornado spinning in reverse and out of control. But little by little, that negativity cycle has eased; people are starting to feel better about the economy. Just this week, the Conference Board reported that consumer confidence strengthened in May to its highest level in five years!

That’s having a trickle down effect on the rest of the economy. The stock market, which is considered a leading economic indicator, has been reacting positively too.

As people feel better about their own financial situation and about the economy in general, they are dipping their toes back into the home buying market. At Weston Title & Escrow, business is booming and it’s become a seller’s market again.

Challenges, however, remain. While buyers are ready to plop down money for new homes, getting accurate appraisals remains difficult. Appraisers are still using old data, because fresh data isn’t yet readily available. So, even if both the buyer and seller agree on a price, the deal could still fall through as a result of an under-appraisal.

Key to a sale is pricing the home right because although everyone else is feeling good, banks have kept a tight hold on lending making it difficult for potential buyers to get the loans they need. The good news though is that’s also starting to change, according to a recent report from the Federal Reserve Board.

All of the aforementioned are having a real positive impact on what I like to call the real estate industrial complex – that is, those businesses not directly related to the real estate market, but which are impacted by it.

You are starting to see increase sales at home improvement outlets. Just this Memorial Day Weekend I visited my local Lowes, which was packed with customers looking to spruce up their homes both inside and out.

Furniture companies, movers, hurricane shutters and fence installers – all are starting to recognize the benefits of this turn around. And, as they become busy, they will need more people and begin to hire, which in turn results in more spending and of course an improved economy.

Even state governments are starting to loosen their purse strings. After years of cuts, states, including Florida, are starting to increase their budgets.

So, what we have right now is what I call a “Goldilocks environment” for the foreseeable future: It’s not too hot and not too cold, at least not until there is some sort of exogenous event that knocks everyone’s socks off once again.

Real estate attorney and foreclosure defense attorney, Roy Oppenheim left Wall Street for Main Street, founding Oppenheim Law along with his wife Ellen in 1989 in Fort Lauderdale, Florida, and is vice president of Weston Title and creator of the South Florida Law Blog, named the best business and technology blog by the South Florida Sun-Sentinel. Follow Roy on Twitter at @OpLaw or like Oppenheim Law on Facebook.