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Something's Shakin' on Shakedown Street

I was sitting in my kitchen on yet another snowy morning when, from the other room, I heard familiar sounds coming from my aspiring guitarist's instrument. The opening notes to Shakedown Street (which for those of you who are not familiar (shame on you!) is a Grateful Dead song from the early 80s). Hearing my son playing Shakedown brought a big smile to my face, and also got me thinking.

The opening line to the chorus (and my guitarist's IM "away" message) is "Nothing's shaking on Shakedown Street". Looking back on some of my real estate posts from two years ago, the line was dead-on accurate. Back then I argued activity levels would need to moderate, prices would have to drop, and psychology would need to change before we would have a meaningful recovery in the housing markets. I alsoconfessed I had no idea how the government's intervention into the markets would effect the normal cycle. So, what's happened?

Activity has dropped, check. Prices have dropped, check. Psychology? Not quite sure its swung to where it needs to be but has definitely improved. Add it all up and it leads me to the conclusion that for the first time since late 2008, we are approaching stabilization of the real estate market. Does this mean we will return to the rollicking times of 2005-2007? No. But I think it indicates we are approaching a comfortable equilibrium between buyers and sellers. Some encouraging signs I am seeing:

  1. Banks are lending. Underwriting standards are much tougher, but qualified borrower's are getting loans.
  2. Prices have stabilized. I am starting to see properties appraise for at least, if not more than, they were purchased for a year ago.
  3. Cash buyers-i.e. individuals who were fortunate or prescient enough to sell at the top-are now coming back into the market. And,
  4. A recent run of short sales (where the price of the house is less than the outstanding mortgage). While this may not seem positive, I think it is a sign the bad loans are finally being worked through the system. This will stabilize bank balance sheets (good for the economy), reduce inventory levels, and provide support to prices.

I am still not sure how all the government money will effect things long term. Short term it has reinflated the banks, and, I think, helped the employment situation in the financial services industry, both of which are good for real estate in my neck of the woods. Despite the long term uncertainty, I do feel we have started the process of moving from Shakedown Street to dancing in the street.

Categories: Real Estate

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Bayer & Black, P.C. - Fairfield County Attorney

Wilton Office

195 Danbury Road, Suite 160
Wilton, CT 06897

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153 White Street
Danbury, Connecticut 06810

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195 Danbury Rd., Suite 160 P.O. Box 459 Wilton, CT 06897