for the Bottom of the South Bay Real Estate Market.
You Try to Time the Market?
I meet and work with are interested in waiting to buy at the
bottom of the market. It is certainly natural to want to purchase
a home, perhaps the largest and most significant purchase
in one's life, when you are confident that the price will
not go down any further and when investment opportunities
are at their highest. With the South Bay real estate market
slowing down and some area housing markets getting hit on
a number of fronts, including an over abundance of inventory,
increasing foreclosures, higher interest rates, and more restrictive
lending practices, whether to wait, and for how long, is a
very important question.
Business Cycle and Buying a Home
are times when the economy is brisk and everyone feels confident
about his or her prospects for the future. As a result, they
spend money. People eat out more, buy new cars, and....
for one reason or another, the economy slows down. Companies
lay off employees and consumers are more careful about where
they spend money, perhaps saving more than usual. As a result,
the economy decelerates even further. If it slows enough,
we have a recession. Although that's not the current situation
in Southern California, the various pressures on the market
are creating a similar situation.
such a time, fewer people are buying homes. Even so, some
homeowners find themselves in a situation where they must
sell. Families grow beyond the capacity of the home, employees
get relocated, and some may even find themselves unable to
make their mortgage payment.
supply of available houses is greater than the supply of buyers,
appreciation may slow and prices may even fall, as happened
in the early eighties and the early to mid-nineties.
are lucky enough to purchase a home during a slow period,
you can be reasonably certain the economy will begin to show
strength again. At times, real estate values may even surge
the goal is always to maximize your investment by purchasing
when prices are more affordable, trying to time the market
is nearly impossible. Keep in mind that there are very few
that get "lucky" and time the market.....most either
buy on the way down, or when the housing market is on the
way back up. One problem with attempting to time your purchase
to the bottom of the market is that no one can accurately
predict the future.
You Should Not Necessarily Wait
home buying environment generally works best for first-time
buyers. People who already have a home usually need to sell
it in order to buy their next one. If a "move-up"
buyer wants to buy a home during a depressed market, that
means they usually have to sell one during the slow market,
too. If a seller wants to sell his home to take advantage
of a "hot" market when prices are fairly high, they
generally have to buy their next home during that same hot
benefit to homebuyers in this current market is that they
have negotiating power. Unlike the early 2000s in which the
frenzy of homebuying created inflated prices, bidding wars,
and an unsustainable increase in price, todays market offers
homebuyers the ability to negotiate price and terms and find
the right home, without the same degree of competing buyers.
to my clients in this market is twofold. First, it is important
to consider your situation carefully. If you are planning
on owning a home for a while, price fluctuations are not quite
as important and you'll have the ability to ride out any downturn.
In the meantime the money saved on rent over the next few
years can be significant, as well as the tax breatk. Secondly,
the current market offers buyers the opportunity to search
for homes price well below market value and with a built in
tends to equal out.
the business cycle can change over time. Since 1983, we have
had two fairly long expansions with only a slight recession
in between each. You would not want to wait nine years to
buy a home, would you? You could miss out on a substantial
amount of appreciation by waiting, and end up paying much