Unless you have been out to sea crawfishing without a radio or living in Bens Cave at The National Park you must know by now that the US is in the middle of a very serious Financial Meltdown. The U.S. Federal Reserve Board chairman Ben Bernanke and Treasury Secretary Henry Paulson have begged the US Congress for a $700-billion cheque to buy up bad mortgage debts to avert a crisis that could be as big as the Great Depression of 1929.   

That’s pretty bad news.   Our slow economy in Freeport from lack of tourism “ain’t nothing” compared to this crisis but we live in a global community and we are affected by everything that happens in the US like it or not.  We are a tourist based economy and if people in the US and around the world are worried about their finances they are not going to travel and certainly will be extremely cautious when it comes to making a real estate investment abroad.   We need foreigners and foreign investment to stimulate our economy and that is a fact.   

Over the last few years banks have been lending money to bad credit risks or making subprime loans.   Well the US banks decided to lend lots of money to bad risks and guess what? These people lived up to their reputation and can’t pay their mortgages.    The scale of the losses that have hit Wall Street banks has probably approached a trillion dollars as large numbers of sub-prime loans have gone bad and thousands of homes are being repossessed as we speak. The US sub-prime crisis is leading to a wave of foreclosures across the US that is having a devastating effect on the US housing market.

At the root of the problem is the breakdown of the new model of mortgage lending, when instead of giving mortgages directly to their customers, banks borrowed money from credit markets to fund a growing volume of mortgages. So now not only are people losing their homes but Large Institutions like Lehman Brothers are out of business and Insurance Giant AIG, and mortgage lenders Fannie Mae and Freddie Mac have been bailed out by the US government. Things sound pretty bad I agree but hopefully this great $700 billion dollar Bailout will save the sinking ship.

Ok so now I’m sure you are convinced that the US is in a crisis again but what will happen to our prices in the Bahamas and specifically on Grand Bahama is what is on most people’s minds who read Let’s Talk Real Estate!

This past week has been a very interesting week as most potential buyers foreign and local have sat on the sidelines waiting to see what happens to the US Stock Market. Like a deer caught in a cars headlights the buyers have become frozen waiting to see how the $700 Billion Dollar bail out effects the US economy and who wins the US elections in less than 6 weeks. So the market is very very slow right now based on demand and uncertainty.   Uncertainty is not good in any economy but that is the reality of the situation.

Houses prices have dropped all over the world partly due to the Financial Crisis and the general state of the world economy. Locally, the actual prices that sellers are getting in Grand Bahama have dropped as well though you don’t see the list prices or asking price going down.   I know this will change very soon because if anyone wants to sell their property in today’s market they have to be realistic with the price.   I know that many sellers do not want to hear me say this but our list prices are too high on Grand Bahama and do NOT match the actual sales comparables. There has been a correction in our property values because value is determined by what similar properties have SOLD for, not what similar properties are listed for. There has been a correction in value of property due to basic economic principles of supply and demand and current market conditions.  Based on an analysis of the Bahama MLS and all the Grand Bahama Real Estate Brokers web sites many list prices are about 15% - 18% too high based on actual comp sales.   It is time for sellers to get real with the prices and become real seller’s not just For Sale listers.   This will ultimately help the entire economy and stimulate greater volume of sales.    Of course it’s a buyers market and savvy buyers are making aggressive offers and deals are being made in spite of overpriced property.  The Real Estate Brokers are partly to blame for not standing up to sellers and telling them what the house is really worth in today’s market. So I encourage sellers and brokers to get real with the pricing that reflects comp sales and world economics and you will sell your property. It is time to reduce prices.

The good news is that The Bahamas is still considered a great second home destination and people from all over the world are discovering that Grand Bahama Island is the perfect second home or retirement home in the sun. We still have a rare combination of tropical beauty, pristine waters, clean modern roads, reliable utilities, state of the art communications, a property tax free environment, no capital gains and close proximity to the United States.    In short Grand Bahama has it all which means it is still a desirable location and a great place to buy property.

When the dust settles many North Americans and Europeans are going to get out of the risky stock market and invest their money in the best historical investment… that’s Real Estate of course. It is a good time to buy and a good time to sell if you are realistic with the price.   Until Next week!

Contact James at Coldwell Banker - James Sarles Realty  james@sarlesrealty.com