Good Thing You're In Oklahoma
Real estate is a highly localized market. However, all we see on the news are the national trends. I thought it would be a great idea to look specifically at the real estate market in the greater Oklahoma City area. We actually are facing two important facts that have affected real estate everywhere.
The first impact was the "bursting bubble" when the property values had finally appreciated beyond what the market would bear. In the coastal cities, this was a huge factor with home prices dropping quickly nearly overnight. Some prices have even dropped as much as 20%-30% in these markets. While home prices did appreciate at a fairly quick pace in Oklahoma, we didn't see near the appreciation the coastal markets did, such as in California and Florida. Therefore, when the bubble burst, we didn't see near the correction. We really had more a situation where there were buyers ready, willing, and able to purchase homes, they just weren't willing to pay the prices at that point. Once sellers adjusted their prices by a minor (2-5% correction), homes started selling again quickly. And most owners still had appreciated over the price they paid originally for their homes, unless they had purchased in the past year or so. This really occured back in 2006. Additionally, that impact really hit us for a relatively short period of time, and after a small correction, our market really balanced back out and we have already started seeing a steadly climb in home values in Oklahoma and I expect that to continue.
The second, and probably more significant impact in the real estate market was the bust of all the "sub-prime" mortgage companies and the tightening of lending standards. In the early 2000's, especially by 2005 through mid-2007, nearly anyone could get qualified for a mortgage if they were willing to pay a higher interest rate and if they were willing to accept an adjustable rate mortgage (ARM). Even worse, most of these loans were 100% loans often times with closing costs rolled in so that most buyers were able to move in for $500 or even less. Once the rates adjusted and the payments increased, these loans started defaulting. This caused many of these lenders to simply go out of business and the domino effect caused the remaining lenders to really tighten their standards and made it more difficult for buyers to qualify for a mortgage loan. So, the effect is that we have houses prices rising and we have fewer buyers eligible for financing.
Now the good news for Okies! Though we do still have to contend with fewer buyers in the market looking for a home right now, those that are eligible are still able to get a great rate, with mortgage rates hovering near 6% and even lower. Home prices have remained relatively stable and we are actually seeing appreciation again.
According to Wilson Research Strategies in a report just released, two key factors for Oklahoma are:
Despite the downturn in the national market, the Oklahoma City market has been incredibly stable, with no more than a 4% month-to-month change in price.
The Oklahoma City market also saw a 7% price increase in December 2007, indicating its strength despite national economic difficulties.