How do you know when it's time to buy?
Josh Alexander asks:
Should I buy real estate in a down market? Our area has seen a drop in home prices, so is now the time to buy?
Frequent commenter Kevin R, meanwhile, writes in response to the "asking price" poll:
I'm a renter looking to buy. I was convinced that home prices would continue to drop this year and in to next year and decided to hold off buying. Wouldn't you know it, a great home with a close to reasonable price came on the market. In spite of my previous decision to wait, I put in what I thought was a fair offer on the home only to be outbid by someone offering more than listing price.While I said "yes" to answer this poll (as did half of voters), seeing the growing number of "Under Contracts" makes me wonder if asking prices are indeed too high. People are buying these homes right? Granted, I can't know what the contract price is until the home actually closes, but the point is that it looks like the market is moving. Am I missing the boat? I'd be interested to hear what other buyers on the sidelines are thinking and seeing out there.
Normally, the answer to "is it time to buy a home" is "it all depends on you" -- meaning, are you financially ready. Real estate professionals like to say you can't time the housing market. But it's not hard to see why some folks are worrying that prices will continue dropping if they do buy and start rising if they don't.
I've seen a lot of conflicting answers to Josh and Kevin's question. What do you all think?
Categories: Housing market experiences
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Comments
After Japan's housing bubble burst in the 80's - home prices went down for 15 straight years...with cities such as Tokyo experiencing 75-80% total price declines. Can anyone/someone tell me why that will not happen here? The government has tried to prop up prices with low mortgage rates, 1st time buyer incentives, mortgage modifications and writedowns. What on earth would make housing prices go up?
Whoever would bid more than the asking price for a house must have been an Orioles talent evaluator. Don't worry Kevin R
Posted by: Paul Plainview | June 8, 2009 9:00 PM
My opinion - when nominal prices are at least at 1997 (i.e. pre-bubble) levels. I will make offers only for a home that I really like and at 1997 prices - although even this may be offering too much. Here is a nice link showing how low prices can go.
http://theautomaticearth.blogspot.com/2009/06/june-7-2009-it-wont-stop-where-you.html
Posted by: Darwin Rules | June 9, 2009 10:21 AM
After quite a bit of extensive research, I believe that home prices will only fall another 10-14% and not reach the pre-bubble prices of 1997. It is much more likely for prices to bottom out at levels equivalent to the prices seen in 2001 (after the dot com bust): http://remarkablehomes.blogspot.com/2009/06/2-year-analysis-of-nashville-home.html
So is now the time to buy? Not if you're not getting a deal equivalent to prices in 2001 or unless the property is unique in its location, construction or circumstance. BUT, remember that each market in the U.S. is unique and that these broad generalities do not always apply to your specific market.
Posted by: Nashville Homes | June 9, 2009 12:12 PM
A Realtor advising me not to buy? Now I've seen everything.
Also, thanks to Jamie for giving me a soapbox to stand on and ask my question. The Internet is truly a wonderful thing.
Posted by: Kevin R | June 9, 2009 2:14 PM
I'm one of those people.
I've been renting up to now because of personal and family issues but I'm tired of unhappily sitting on that big 'ol pile of cash and actually wanting to settle in somewhere.
As I write this though I'm not in Baltimore or even in Maryland. I'm looking through Virginia and North Carolina (parallel to the Blue Ridge Parkway).
But when I do make an offer it will be based on a very rational (what else, right?) approach that researches the historical values (as far back as I can manage), acknowledges objective changes in the area (good and bad), objective repairs and structural and mechanical upkeep to an individual property (as opposed to the la de dah and superficial), and measuring those factors against a modest annual (3-5%) rise in value over the period.
Yeah I know it sounds grand but...
when I actually compile one on a prospect I'll send you a copy. ;)
Posted by: MrRational | June 10, 2009 9:50 AM
What's that old axiom, buy low and sell high? Or is it a mish-mash of that and the Warren Buffett approach (buy when everyone else is selling an sell when everyone else is buying)? The trick is in predicting when we'll hit the floor, and folks who've already posted here have different ideas about when that will be.
Posted by: Pete | June 10, 2009 11:48 AM