It seems that Realtors always say, “Its a great time to buy!”, but I like to think about it from a logical, rational perspective. Historically, real estate is cyclical, and the recovery is imminent. Throughout this downward cycle, buyers have been “on the fence”, waiting for the market to turn. There is a tremendous amount of pent-up demand from those buyers waiting in the marketplace. Buying before the market fully recovers is better than buying when prices start back up, and housing inventory is in short supply.
Already, many markets in the Westside of Los Angeles are showing 3-6 month runs of decreased inventory, increased demand, higher prices, and multiple offers.
No one was complaining when rates were 6.5%. not long ago, but a 30 year fixed rate mortgage was 4.875% on Friday at close of business. Because of mortgage rates alone, the average home buyer in our market can afford a home priced $150,000 to $200,000 more and still have virtually the same payment! (Don’t forget that taxes and insurance will need to be factored into your equation, and that a higher purchase price will affect your tax deductions as well.)
Because of mortgage rates, first time home buyers can look up to $600,000 instead of $450,000, and that certainly opens up more possibilities. Add to that the various stimulus tax credits available, and 2010 could prove to be one of the best times for first time purchasers in 25 years. A move up buyer can look up to $1,700,000 instead of $1,500,000. The difference could be getting a house instead of a townhome, that slightly better neighborhood or school district, those granite counter tops and family room that you always wanted, or getting the home with the 2 car garage and pool now instead of waiting until your next move.
When did the ball bounce? It bounces when it hits bottom and starts back up. Can one ever time the bounce to see the exact bottom? Unfortunately, no. So then what is the buyer’s strategy for building wealth in a turbulent market? The old saying of “buy low, sell high” is a tried and true method of creating wealth. The expression is not, “buy bottom, sell top” for a reason- it’s not possible to time the bounce.
We never know when the bottom, nor the top, is. So the best advice for buyers is, aim low. Consult with your Realtor, who will help you weigh all the facts, including interest rates, inventory, personal need, and what you can afford. Then get off the fence and buy. Don’t listen to pundits or peers at the water cooler. Have confidence that the decisions you make will be wealth- building in the long run. And remember that the right market to buy is the market that suits your timing, and not anyone else’s.
If my 33 years in the business have taught me one thing, it is this: there will be a lot of people in a few years who will be wailing, “I wish I had bought that house in 2010, when it was only $$$$. And when I could get a great tax credit to boot!” I’ve seen it before, and I’ll see it again. Don’t let itt be you. Jump in now, before that ball bounces!