What Will It Take?

Tonight a client asked me what I thought it would take to get the market moving again in this area. Here is my list of what it will take to change current market conditions.

1. Lower gas prices

Gas prices are clearly playing a role. They played a dramatic role in slowing the market, initially and they're still a drag. The vast majority of people who are moving into this area are commuting into Northern VA and DC. If gas prices suddenly dropped by, say, 25 cents, I'd be willing to bet you'd see a jump in activity almost immediately! Unfortunately, I have to say I don't see that happening any time soon.

2. Lower interest rates

While interest rates are already historically low, an additional drop would likely move some fence sitters to jump in now. If enough of them jump you get a lot of other buyers who were waiting for a sign that it's the right time. I don't see any interest rate cuts in our future, but I'd bet on this before I'd bet on lower gas prices!

3. Large reduction in inventory

I believe this one will occur, it just won't happen overnight. Over the course of the next six months, you'll see inventory fall. The faster it falls, the better for the overall market. But there are still way too many people with houses for sale who don't really need to sell now. If you've got no reason to sell this year rather than next...wait!

4. Large price drop

If sellers drop their prices enough, buyers will start to jump on the bargains. Right now we've got a standoff going on. Buyers still think prices are too high and sellers have dug in their heels and declared their not going any lower. In this kind of standoff, in my opinion, sellers always ultimately lose. That may not be true on an individual basis, but if you look at the larger market over time, it's true. Generally, sellers need to sell more than buyers need to buy.

5. A huge influx of new buyers

I don't know where they might be hiding, but this would definitely jump start the market. If you saw a major employer announce 100 new, high paying jobs locally, I believe it would have a pretty quick influence on the local real estate market.

I've given you some of my impressions of how likely I think these things are. What do you think? What other factors do you see that could change the market that I've missed?