It appears to be a buyer’s market out there. As we wrote a few weeks ago, the current state of the real estate market appears to benefit buyers. Although this may not be the case all over, it certainly is in Manhattan. As the paradigm of a recovering real estate market, Manhattan saw a significant increase in sales for spring. Could it be the nice weather convincing everyone to move to the city and purchase property, or are other factors involved?

With real estate, few move because of the weather – even if it’s to Florida. And, then there are those moving away because of hurricanes and the Gulf oil spill. In New York, particularly for apartments, low mortgage rates are enticing buyers to purchase property. Coupled with the tax credits, this factor makes now the best time to buy in Manhattan.

The mortgages rates have been flat or seen very slight increases over the past year in New York and the rest of the country. But, as far as sales are concerned, spring 2010 saw an increase of 42 percent, compared to sales from a year ago.

Nevertheless, the properties being bought up aren’t average priced condos and apartments. Rather, these fall within the higher end of the housing market, and those purchasing them are those who can afford a one million-plus dollar apartment. However, as far as the market is concerned, the state of Manhattan reflects improvements that real estate over all should see. Buyers should be – and are, in certain areas – enticed by lower prices and, as a result, start purchasing a home or condo when the time is right. Maybe Manhattan is the start of a trend that will pick up in other parts of the country: those with money to spend will go after higher end pieces of real estate and push the market further into recovery.

To follow up on the last post, the real estate market isn’t in as great of shape now as many of predicted. Yes, 2009 and the first quarter of 2010 have seen a few improvements, but periods of stagnancy have also characterized these past two years. Additionally, while home sales have also increased at points, where are these figures coming from? Are people actually buying new homes, or, instead, are foreclosures taking up a large portion of the market?

According to a recent article on Boston.com, the latter might be more accurate. Figures released recently by RealtyTrac indicate that 30 percent of home sales in the first quarter of 2010 were foreclosures. In Massachusetts, more specifically, the sale of “distressed” homes – any foreclosed or short sale properties – conuted as 42 percent all off homes sold during this time period.

So, with such a significant percentage of home sales associated with foreclosures, is the real estate market really in a state of recovery? The answer at this time might be one of uncertainty. While foreclosures came in large quantities back in 2007, they appeared to have lessened over the past three years. At the time, however, the sudden abundance of foreclosures was more of a shock than the properties being sold.

In the present, it appears that the amount of individuals filing for foreclosure or short sale has lessened (although this can’t be said for commercial real estate), but, perhaps, the foreclosed properties from a few years ago are still on the market. Buying foreclosures does have a significant advantage in the current market. Rather than worrying about tax credits expiring, buyers can purchase a home that is 27 percent less than the median home price. Assuming the property is in good shape (and this can vary with foreclosures), the buyer might actually be getting a good deal on a new home.

Which came first – the recession or the crash of the real estate market? For most, this scenario isn’t exactly a chicken-and-egg association. The crash of the real estate market began in 2007, and the recession was declared official in 2008, although signs pointed to it as far back as late 2007. So, in essence, the timing was perfect – if, by perfect, you mean real estate and job markets that are wallowing at the bottom together.

A recent article discusses the relationship between these two, particularly how the state of the real estate market may be keeping the recession from improving. What are some of the factors it cites?

• The number of buyers who signed contracts to purchase homes dropped off in May. The author hypothesizes that this could be the result of the expired tax credits and cancellations resulting from those wanting to buy – as long as they could get a tax credit. Additionally, figures for homes sold at this time were adjusted for April and March.
• The real estate market has no safety net. Past market crashes – the tech crash in 2000 and the real estate crash in 2005 – had solid markets to fall back on. This time, the real estate market crashed first and, in a year, so did the job market.
• Buyers finding their homes are worth less than what their mortgages are worth.
• 2010 has seen an increase in foreclosures and short sales.
• Homeowners with modified mortgages are now falling behind on their payments.

Could 2010 be a repeat of 2007? Although the real estate market may never get to pre-crash levels, the market may not yet be in a period of recovery. As the unemployment rate is still about 10 percent, many who had purchased homes prior to 2007 may no longer be able to pay their mortgages. Going into foreclosure ruins their credit. Without credit, in some cases, an individual may not be able to obtain a job – and afford a home later. Perhaps the job market should start on improvements first, and then the real estate market will follow.

A few weeks ago, we discussed an article in which commercial real estate might be on the way up. The article talked about more properties being purchased for industrial purposes in Minneapolis. But, perhaps, Minneapolis is only a positive snapshot in a subset of real estate that still hasn’t reached the bottom yet.

According to a recent article, the state of commercial real estate has deteriorated significantly over the past 18 months. In 2007, as the article mentions, the market was in excellent shape. Although with too much spending and taking out too many loans, is this a true assessment? However, the article mentions that even when the residential subprime market declined sharply in 2007, the commercial real estate market was unaffected and, instead, the year saw the highest number of transactions for the entire decade.

Considering the amount of subprime lending and dishonest practices seen in 2007 for residential properties, similar practices extending to commercial real estate might be expected. Up to 2007, banks were increasing their commercial lending and, by the end of the year, 36 percent of their assets were in commercial real estate loans.

However, as the article explains, the economy tanking in 2009 didn’t mean a decrease in commercial real estate – at least on the surface. Companies, it appeared, held on to this real estate in 2009, and now they may be paying the price. April 2010 saw a seven percent delinquency rate, and 17.1 percent of commercial real estate loans were 30 days delinquent. Additionally, the issues go beyond delinquent loans. Businesses may have loans in the process of foreclosure and owners may be under pressure to or have already declared bankruptcy.

None of these are positive signs for the commercial real estate market over all. But, does this look like the bottom or just part of the market’s descent?