Has the Real Estate Market Hit Its Sweet Spot???
My husband John is a high-school baseball coach and former pro-baseballer. Of course, to me, everything is about real estate, so lately I’ve been mixing the two subjects in my brain – baseball and real estate – pretty frequently. So when the California Association of Realtors reported that statewide, prices dropped 3 percent but the number of sales rose 15 percent in April 2008 (when compared to March), the first thought that came to mind was – the market might have just hit its sweet spot.
What I mean is that sellers have been sufficiently chastened by market forces into reducing prices to that perfect place where buyers are motivated to emerge from the Witness Protection-style hiding they’ve been in and take advantage of the buyer’s market, while it lasts. What’s sweet about this? Well, for sellers, the rising number of transactions backs up many Realtors’ anecdotal observations that buyers are out there in rapidly growing numbers, and are actually buying, so their homes have a better chance of selling. For buyers, the prices drops make things more affordable and come at a time when real estate and mortgage professionals have a much better grasp on where to find mortgage money in the post sub-prime market meltdown than we did 3 or 4 months ago.
Three important things we can learn from this “sweet spot” data:
1) Real estate data and markets are local, so get local advice. As striking as they were, the California data was even less extreme than Bay Area data, which showed a 22 percent increase in sales, comparing March to April 2008. Depreciation results were similarly localized – statewide, April prices were down 22 percent over last year; Bay Area prices were only down 17.9 percent, and if you exclude the recently-built-out, hard-to-commute “slumburbs” of the far Bay Area and a couple of the inner-city areas, some Bay Area zip codes are slightly up year-over-year in appreciation.
The moral of the story: don’t take your homebuying (or selling) advice from the national real estate news. Get local information, ideally from a local
professional, and use that to fuel your personal decision-making.
2) You can’t perfectly time the bottom of the market. Listen, I would be a billionaire if I could predict the day, date and time of the absolute lowest prices of the market, sell all my clients homes in that moment, and then see the values of their homes start to skyrocket the very next hour after they get their keys. NO ONE can predict the bottom of the market with that level of precision, not even you. What happens to those who try to time the market is they end up paralyzed with the fear that their home’s value might decline in the months just after they buy, so they don’t buy until they realize that prices are headed back up. The problem is, in some markets, once the buyer’s market conditions are gone, those at the entry level are priced all the way out by having to overbid in order to compete against 10 other offers on every listing.
Don’t take my word for it; Money Magazine’s 5 New Rules for Home Buyers came to the same conclusion.
The moral of the story: Get educated about what sort of bargains or incentives the current market dynamics make available to buyers in your local area, and be an aggressive negotiator, but don’t kid yourself into waiting for the bottom unless you are willing to miss out on the best buyer’s market since World War II.
3) Buy when it makes sense for your life, plan to hold your home long term, and buy soon (if you’re in the market, of course).
Don’t let the market dictate when you buy or even when you sell. Do so when it makes sense for you life, as when you have income you need to offset for tax purposes, when your job moves, when you’ve finally got the job you’ve been working toward, or when your family grows or shrinks. If you are buying now, so long as you plan to hold your home at least 5 years (fewer in hotter real estate markets), you should at least be able to ride out this current market trough. But read #2, above – don’t wait until prices are already on the upswing before you make a move. Most people I’ve talked to with real estate regrets lament not buying sooner, not vice versa.
The moral: Buy if you need to buy, sell if you need to sell. But if you need to buy, do it without too much further ado, and hold for the long-term.
