Buyers Market...Means BUY!

What does the term "Buyers Market" mean? This is a term that has been used alot when discussing Real Estate recently. The best way for me to describe it is to explain why the term is so prevalent right now. The media loves to talk about how the Real Estate market has burst it's bubble. Now, I am not familiar with other parts of the country, but I can say that the Chicago Real Estate Market, has not experienced a burst. Why do I say that the Chicago Real Estate Market has not experienced a burst, well if you live, work or visit this city you can see that there is still new Condo construction happening. Condos are still going on the market and selling. I will agree that there has been a slow down in the amount of time that it is taking to sell a Condo, but they are still selling.

Now what is the cause for the slow down? The media loves to point to the interest rates as the main reason why (just a side note, I don't have anything against the media. I just keep hearing the same thing over and over, but is not true). I do not claim to know the reason for the slow down, but I have an idea. Which, leads me to the definition of "Buyers Market". "Buyers Market" to me means that prospective buyers should buy. Sounds simple enough right. But, what we are finding is that prospective buyers are so influenced by all the hype about interest rates being so high, that they are staying away from buying. Prospective buyers have been conditioned to believe that the interest rates are the highest they have been in years and therefore Real Estate is a risky investment. Is this correct? Yes...but what the masses fail to tell you is that the interest rates have risen a grand total of... 1 point from the days of the housing boom (2003). (see for yourself. Mortgage Rates). If you look at height of the housing boom which was in 2003. The best prime rate (30 years) was 5.23 which was in June, 2003. Today the current prime rate is 6.3. One year ago (10/2005) the prime rate was 6.07, and a month later (11/2005) the prime rate was 6.33, which is higher then todays current prime rate. Ask anybody who bought a house in the 1980's what there interest rate was (can we say double digits). The whole start of the boom was not because of the prime rate, but because of the Adjustable Rate Mortgages (ARMs) that were being offered in 2003. You could get an ARM for as low as 4%. Of course the ARMs were only good for 1, 3 or 5 years, and then you would have to refinance.

Todays Real Estate Market is slow, but by no means has there been a bust.