Memphis Market After the Housing Bubble

Everyone is hearing about America's "housing bubble" predicted by some major investment Gurus, like Jack Templeton, founder of the Templeton Funds. While this is a reality, there are some things for people to realize if they're seriously considering making a purchase in Memphis or selling their home there now to downsize or move up in scale to accommodate a growing family.

The housing bubble has, indeed, taken its toll on coastal and vacation areas like much of coastal Florida, South Carolina coastal areas and almost all of California. Condo's have been especially hard hit. Generally speaking, the over-inflation of pricing has extended to the outer suburbs of major cities, places that have recently suffered the most abrupt market correction. Boston and New York have seen the bubble's damage in particular. Building sprees and buyer's binges played a major role in this overindulgence in real estate. Of course, new construction companies and mortgage lenders jumped right into the deal as well to make money off the insane price appreciations everyone assumed would last for ever. Everyone making the most money from this over-inflation helped to make the bubble a growing reality and is responsible for the damage that is being felt now in many sections of the country. Nationwide housing pending sales were down by around 16% from the end of 2005 to the end of 2006. As people have overpaid for homes and made absolutely foolish choices on getting tricky and dangerous loans, or when many just couldn't make the payments because of swiftly rising property taxes or other factors, foreclosures have risen to record levels, a disturbing number of them right here in Memphis.

Now here's the next part of the story. Many areas in the country's midsection and quite a few places in the Southeast and Southwest have remained pretty stable, with housing costs rising at the historically predictable levels. Memphis is certainly one of those places. Several factors have played a role in keeping housing prices within a reasonable range of escalation year over year. One of them is that the market of buyers in Memphis is on the lower income range. The city just does not have the money to support huge home prices. While it's true that some areas like Southwinds and River Oaks have listings that would gag most purchasers, these areas do attract that small pool of qualified buyers who can afford the notes and taxes that these half-million dollar and up homes demand. The same is true of some of the downtown area. Ironically, the very upper-end homes seem to sell quite well and in reasonable time-frames. It is the homes that are in the $150,000-$200,000 price range that are experiencing the longest times on the market. But even that depends on their location and on the condition of the home.

http://www.realestatejournal.com/columnists/livingthere/20051012-livingthere.html
This is what one writer in Real Estate Journal said of the Memphis market in the burst of the housing bubble. "Memphis also had the dubious distinction of being the seventh most undervalued housing market in the country in the second quarter, according to a study of 299 housing markets, conducted by Richard DeKaser, chief economist for National City Corp. The study found that Memphis homes were about 13% below fair market value. . .Like many areas of the South, the Memphis housing market is a steal compared to sizzling housing markets in other regions of the country." In general, the city has not seen the enormous pricing jumps that many major cities and attractive coastal areas have experienced for the 8 or so years from 1997-2005 when this "bubble" started throughout parts of the country.

Memphis is not even homogenous in regards to pricing. When I was in real estate here I saw prices rising to absurd levels in the popular High Point area north of Walnut Grove. These, for the most part, are fairly modest homes with most having 3 bedrooms and 2 baths. It had been attracting buyers who wanted to go in, fix up and expand a home, then sell it for a profit. Some just saw it as a beautiful place to live and raise their children. But from the late 90s up to 2005, pricing there had gone up way more than it had in other neighborhoods like Central Gardens. The Cooper-Young and Lenox School areas of midtown were, in my opinion, vastly overpriced for the amount of home and quality of the construction people were getting. Many of the homes listed there are now stagnating or showing lowered prices in the listings. In general, Central Gardens and some sections of east Memphis north of Walnut Grove and east of Perkins remain good places to purchase homes at fair prices. South of Park and east of Cherry there are still some very good values. I never sold Germantown or beyond because I specialized in housing in the immediate Memphis area. It's just up to realtors to look at the locations and make their own conclusions on whether homes are overvalued in a particular micro-neighborhood of an area.

The only thing that feeds a bubble is when buyers concede to extravagant asking prices. Sellers will and do eventually reduce prices if they want to sell. Real estate professionals do and will make money faster if they sell homes for reasonable asking prices and work to convince a seller that it's in his or her best interests to price the home fairly. To avoid the damage from a bubble burst, purchase a home to live in and not to "flip" for a quick profit. Plan on living in that house for at least 5 years, if possible, and do not take out an interest-only or type of dangerous ARM. Get a conventional loan at the best rate from a good lender and pay every 4 weeks, instead of monthly. It will build equity faster. Memphis is a great place to build equity because of the low cost of living here and the mild climate. Don't be afraid to purchase a home just because of the horror stories that we hear about these days on the foreclosures and crashes in some local markets. Be sensible when purchasing and your home will remain a great investment and a wonderful place to live.