Home Buying in Union City>Question Details

shiu227, Home Buyer in Hayward, CA

Shouldn't buyers wait for home prices to fall back down? Home prices are acting like the stock market. So, why not wait? Examples are Earthquake.

Asked by shiu227, Hayward, CA Sat Nov 9, 2013

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You have a few questions:

Q: Shouldn't buyers wait for home prices to fall back down?
A: Maybe. Maybe not. When will prices actually decrease? The market now is nothing like it was in 2005 – then it was built on faulty lending practices which subsequently collapsed. The current market, especially in the San Francisco Bay Area, has been built on loans buyers actually qualified for and a very high percentage of cash offers. This market will not collapse like the previous market. It has been slowing down in some quarters as we’ve seen the percentage of cash offers decline – we’ve crossed over the threshold where it makes sense for investors to purchase, so they are now pouring their money elsewhere. It appears that monthly double-digit gains will slow to moderate gains for 2014 … so, if you are waiting for prices to start declining – you may have a wait a few years yet.

There will always be corrections, but the question is how much? Currently, we’re seeing small corrections in varied areas from individual houses here and there that have been optimistically priced too high (including some new homes) – but we are not seeing overall market retractions – and I don’t believe we will anytime soon.

So my question to you is simple – “How long do you want to wait?” A second question is, "What will happen while you are waiting?" People wait because they are trying to "time" the market - it's a risky business and few get it right - here is a post that may be helpful:

Here is a post that may be helpful:

How Good Is YOUR Timing? 3 Important Reasons NOT to Time the Market
http://www.trulia.com/blog/carl_medford/2009/02/how_good_is_…

Q: Home prices are acting like the stock market.
A: They always have and always will – we operate in a free market system driven by supply and demand and overarching market metrics.

Q: So, why not wait?
A: Again I ask, “For how long?” Trying to time the market is risky business – both in the stock market AND the housing market. Very few people manage to hit it right. Normal, historic corrections in the housing market have been approximately 10%, with the exception of this past market collapse, which I do not believe we will see again in our lifetimes.

So imagine that you’d been wise enough to successfully time the market and bought a home at the very bottom back in February/March of 2012. The average sales price for a single family home in Union City was $375,000.00. That same house would have cost you $592,000 in October of 2013 – an increase of 57.87% over a 19 month period of time.

Even if the market corrects 10% in the next year and you home is only worth $532,800 – a downward correction of 10% - you would have still realized approximately $157,800 in equity IN ADDITION TO the considerable tax benefits that come as a result of home ownership. Even with a market correction, you’d still be WAY ahead.

So let’s imaging you buy today at $592,000. There are currently only 34 single family homes on the market in Union City, so there is still a limited supply compared to 2 years ago, when there were over 120. Limited supply means there will still be upward pressure on pricing – the average days on the market are still under 30 days compared to well over an average of 70 days 2 years ago. We’re assuming the market will increase approximately 10% this next year as we believe we are going to see a gentle return to a normal market for the first time in many years. So, if we see an increase of 8-10% over the next 12 months and increases of perhaps 6-8% the year after that, we’re still ahead by 14-18%. That means your investment of $592,000 could be worth between $674,880-$698,560 at the end of 2015.

Even if the market corrects 10% at the end of 2015, your investment of $592,000 will be in the neighborhood of $618,000 PLUS the money you saved by owning your own home.

Bottom line, you’ll be ahead. So … you tell me … Shouldn't buyers wait for home prices to fall back down?

Q: Examples are Earthquake.
A: Earthquakes cause momentary disruptions, like the fire in the Oakland hills a few years ago. And then prices rebound higher than before. In reality, the rebuilt homes are worth way more than their predecessors.
2 votes Thank Flag Link Sun Nov 10, 2013
Don't bother waiting for an earthquake to level properties and lower their prices. Buying a primary residence is nothing like playing in the stock market. Your primary goal is to secure a desirable and affordable home in a desirable location. Every property is unique and one never knows when the ideal property will come on the market.

If you want to be in the market and are qualified, you should be looking. Prices are already sagging from the Spring in many areas. Review your budget and if you find a great place that you can afford, that is the signal to go for it!

In the long run, a property's value should appreciate, given appropriate care. The short run does not matter when you are enjoying life in a special home you love.
2 votes Thank Flag Link Sat Nov 9, 2013
Hi Shiu227,

You have good answers below; here are few more thoughts on the subject matter:

"Shouldn't buyers wait for home prices to fall back down?"

Each home is different! We're not talking about commodities like corn and wheat prices here. There can be wide differences between all of the housing you are now qualified to buy (that is, assuming you have completed this process: http://www.Steven-Anthony.com/GettingStarted ) Now, throw in the normal variables of age, current property condition, quality of construction, location, schools and API, work commute, local services, etc. to vet and you have a situation of the "early bird" gets the best property. Real Estate is a "contact sport" and you have to be in the game!

Price is always important; however, do not forget that interest rates and loan underwriting also plays a key role. Case in point:

"The Top 4 Challenges Buyers & Sellers will face in 2014! " http://tinyurl.com/lg2n2v5

If I were you, I would be canvassing your potential opportunities.

-Steve
1 vote Thank Flag Link Sun Nov 10, 2013
Yes. We have seen the real estate market go up and down and level off. We've seen a lot in that last several years. Now we seem to be in the leveling off stage. But my opinion is we may see another increase in pricing & activity first part of 2014. So now would be a good time to start the process.

Sit down with your broker and discuss the market and see if the time is right for you.

If you wait you will likely see higher interest rates (which will make a big difference in your buying power) and higher property values. So waiting can cost you thousands.

Good luck.
1 vote Thank Flag Link Sat Nov 9, 2013
If you are waiting until the next massive earthquake to buy a home I wonder when you think that will happen. Maybe tomorrow? Maybe next month, next year…ten years from now?

And when that earthquake happens and you buy a house how will you be certain that another earthquake will not follow soon afterwards?

The point is…you do not know when the real estate market will go through a correction.

In addition, a price correction may see a decline in prices but to what degree and for how long. On a long-term basis, real estate prices have gone up and will continue to go up. Just ask you grandparents what they paid for their first house.

By the way…The current price of homes in the Bay Area is higher than it was at the time to the Loma Prieta earthquake.
1 vote Thank Flag Link Sat Nov 9, 2013
You obviously haven an opinion about this and are asking a rhetorical question. People buy homes during all types of markets, both high and low. More often than not, the timing of when to purchase is based on a family decision or change of lifestyle.
1 vote Thank Flag Link Sat Nov 9, 2013
It's all about supply and demand. Also it depands on how long you can wait. Even the price falls back down a bit, the sale price might be more than your target price under multiple~offer situation. I don't think the price will go down a lot. Good luck.
1 vote Thank Flag Link Sat Nov 9, 2013
You aren't very bright...multiple offers reflect the market price! Multiple offers do not send the price higher than the market price.
Flag Tue Jan 7, 2014
It depends on the market and the individuals situation. In San Francisco rents are so high that buying often makes sense as the rent is more than the mortgage. One thing is for sure, though - prices will go down at some point and if you can wait it's probably a good idea.
1 vote Thank Flag Link Sat Nov 9, 2013
I would say it definitely depends on the market. In a market with a growing economy where new jobs are being created, for example here in Denver where I live, I don't think prices will go down much... If anything they will level off. In other markets where the economy isn't as good I'm sure things will cool down a bit.
1 vote Thank Flag Link Sat Nov 9, 2013
Prices have gone up a lot but buyers are still buying. I think it is important to note that Interest rates are still low. If you can still capitalize on a lower interest rate and buy a property with the intention of holding for a period of 7 years, you should come out very strong. It is really hard to see which way the market is heading. A lot of trends, hickups in the stock market but seems like real estate is on the boom.
0 votes Thank Flag Link Sat Feb 8, 2014
>>You are asking the wrong crowd this question. The real estate agents will NEVER say that it isn't a good time to buy.


I agree...sort of. Yes, many agents will say "it's always a good time to buy." But some of us will be more realistic in our answers. If you compare investing in a home purchase vs. other things buying a home is usually less risky. That being said, if you look at the past several years you will see, like the stock market, that property values did drop, but it appears they are on the way back up. IMO, we have hit bottom so now probably IS the time to buy. Factor in rising interest rates and I am certain that this is the best time to buy in the last five years.
0 votes Thank Flag Link Wed Jan 8, 2014
Do your homework and you'll see that interest rates will likely continue to rise. You'll see that in 1985 a starter home was $90,000 (in Fremont), now that home is $400k+/-
0 votes Thank Flag Link Wed Jan 8, 2014
You are asking the wrong crowd this question. The real estate agents will NEVER say that it isn't a good time to buy. They only make money if people buy/sell houses. What do you think there answer will be? Be smart and do your own homework.
0 votes Thank Flag Link Tue Jan 7, 2014
For the record, I've advised many buyers to hold off from buying and have also counseled a number of sellers to sit tight. It's not all about the money - it has to do with the buyer/seller's specific needs at the moment. Sorry you seem to think we are all motivated by money alone. It's like finding a good dentist - the good ones will never recommend extensive work when it's not needed just because they have overhead to meet. It's all about integrity. I suspect you did not read my response below?
Flag Fri Jan 10, 2014
Interest rates are down. If you wait you may pay less for a home in terms of the price but you may end up paying more overall in interest. The only reason someone should wait is if they are paying cash.

J.R. Thrasher
http://www.SanDiegoRealEstateVeterans.com
619-929-0105
0 votes Thank Flag Link Tue Nov 12, 2013
Hey, Shui, tell me exactly when that is going to happen?

That's what I thought.

People don't always buy homes like they buy stocks. And the real estate market acts differently from the stock market.

It all depends on your goals and your motivation for buying in the first place. In some cases people can't wait until the prices drop.
0 votes Thank Flag Link Mon Nov 11, 2013
Now on your comment about "Examples are Earthquakes". I'm not quite sure about what you are referring to. If you are worried about purchasing a home in an earthquake zone then you may want to think about the Sacramento and/or San Jauquin Central Inland area as it is one of the few places in the state of California that is not classified as a "Zone 4 Seismic" area which means:

The UBC Zones
Within the United States, there are six seismic zones: 0, 1, 2A, 2B, 3 and 4. Zone 0 represents minimum seismic risk with higher numbers showing increasing risk up to Zone 4, the maximum seismic risk zone. Zone 2 is subdivided into two different zones, 2A and 2B. The distinction between these two zones is that zone 2A is associated with unknown geologic conditions, whereas zone 2B is associated with known crustal faults.

Hope this helps.
0 votes Thank Flag Link Mon Nov 11, 2013
Lot's of very astute answers from several RE Professionals whose opinions and thoughts I've long respected. However, a few questions I always ask on threads like this is:

1. What are your long and short term goals?
2. Are you a newbie investor looking to FIX & FLIP or as they say TURN & BURN?
3. Or are you looking for a home to BUY & HOLD as a rental in your rent/lease portfolio.
4. Or are you looking for a home to own and live in for an extended period of time.

If your intentions are # 3 & 4 then, unless we're in the beginning stages of a total RE meltdown to the likes of which we experienced in '07, '89-'93 and '79-'82, it's a great time to buy. However, if it's # 2 then depending on what market you're interested in the boat has already left the dock. Were you on it?
0 votes Thank Flag Link Mon Nov 11, 2013
Just like anything else, what goes up must come down. In some areas in the East Bay, we are already seeing price adjustments. Refinance and mortgage applications slowed down. The government shutdown had an impact on consumer confidence.

If you are buying a primary residence, it's always a good time to buy a home than renting. Real estate is still a good investment long term. Interest rates are it's lowest level. You might be passing on an opportunity by waiting. You are more at risk in driving a car than an earthquake.
0 votes Thank Flag Link Sat Nov 9, 2013
Belina, I must take issue with your notion that "It's 'ALWAYS' a good time to buy a home rather than renting". I continually counsel my clients on that exact subject. A lot just plain depends on short/long term goals, age, income, etc. Not everyone is destined nor should they always feel like "OWINING" real estate is "ALWAYS" better than "RENTING".
Flag Mon Nov 11, 2013
Depends on the location. Though the overall market does tend to move at the same rate as others, different areas have higher and lower end markets.
0 votes Thank Flag Link Sat Nov 9, 2013
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