Market Conditions in 56308>Question Details

Suzy Lee, Re…, Real Estate Pro in 56308

Are today's Buyers afraid of trying?

Asked by Suzy Lee, Realtor, 56308 Wed Apr 23, 2008

or are they just waiting for better deals as the media continues to paint a declinging picture of the local markets? As a Real Estate Professional - I'd like to hear from some potential Buyers.

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My husband and I have been looking for something worth getting into for the past two or three years. We pay low rent - just lucky, I guess, and in California, it has been impossible to find a home with a mortgage that isn't three times what we're paying in rent right now. It has been heartbreaking speaking with mortgage consultants when we find out what the monthly mortgage would be. We don't want to struggle - right now, we can afford the rent and anything else we want to purchase, including small vacations, clothes and toys for the children etc. I'm terrified that if we finally do purchase a home that costs, now down to, twice the amount of rent we're paying, we'll be strapped for cash and our quality of life will greatly suffer. We actually are looking at a home right now, and our rent will double (although, of course, it will be our Mortgage) and will go even higher after the first year's interest and property taxes aren't taken out of escrow. We can do it, but will we end up upside down if we jump in now?

The long and short of it is, maybe if we wait a few more months to a year, the prices will come down to where we can COMFORTABLY afford the mortgage payment while still enjoying the freedom to buy the things we want and need when we want them.
3 votes Thank Flag Link Wed Apr 23, 2008
Let me preface this by saying that I am not "Today's Buyer"; I am "Tomorrow's Buyer", and since you asked the question I'll tell you why.

I will almost certainly buy in 1-2 years. I am not waiting because the media tells me that things are bad; I am waiting for several reasons, one of which is that I have every reason to believe that prices will decrease in the next year. I have the internet and I can, and do, research my areas of interest on my own. I have to do a little digging, but between Zillow, Trulia, and my county's property site, I can generally see what is for sale & what has sold- and most importantly, the price at which a given property sold.

In other words, please don't assume that buyers are sitting this time out only because of media "gloom and doomers". It is very easy (although a little time consuming) to be a well-educated buyer. I can see a trend line in my area indicating that sale prices are decreasing.

Also, I know from reading up that in most real estate cycles, prices bottom then stay flat for a while. So I am not at all worried about "missing" the bottom. I also know that an increase in interest rates is quite likely, but that chances are good that prices will adjust accordingly (e.g., prices decrease when interest rates increase, providing that overall housing prices are in line with affordability ratios- and this entire correction seems to be settling near the prices lines of affordability).

Right now, I am content to rent and continue to save up money for a downpayment. I am not concerned about throwing my money away on rent *at this time* because my observation is that prices are going down and my savings are going up. (Also, prices are only one reason I am renting- I am also starting a new job/career path, and I think it's wise to see how this goes before making major financial purchases).

So, this is a long response merely to say that for some future buyers, in some areas, now really just isn't the best time to buy. Also, to indicate that with the internet and so much information, it's pretty easy for buyers to do their own research. I don't mean this to be offensive, but I believe that it is always Buyer Beware, so I am much more comfortable doing my own research, rather than relying strictly on someone who only makes some $ when I make a purchase. I don't mean to denigrate Realtors- there some excellent Realtors, in fact I have one in my family. But in any big event in life- medical, financial, anything! just by my personality, I feel better doing my own research and getting multiple opinions.

Lastly, I am not an "anti-Housing" person. I believe that buying one's house is almost always in one's best interest, financially and maybe even emotionally, if one is ready to put down roots. I just think that we are in a rare period of time when one can come out ahead financially by waiting another 365-750 days to make this huge purchase. At the very least, I don't think I'd lose much financially by waiting, especially as I have a pretty nice and quite inexpensive rental that allows me to save. Since I also have an emotional component that indicates that it is better to wait (e.g. I will feel more comfortable having the flexibility to easily leave the area if my job doesn't work out), it is clearly better for me to rent. For others, especially for people with kids, I can see how the emotional aspect my outweight the financial aspect, especially if the plan is to stay in the same house for 7+ years.
2 votes Thank Flag Link Mon Apr 28, 2008
In defense of these buyers, there is every reason to believe that the market is more likely to decrease another couple of percentages in the next few months than it is likely to increase a couple of percentages.
2 votes Thank Flag Link Wed Apr 23, 2008
When prices are affordable. I will buy. Prices are not aligned with income or rent. It could take 3-4 years to correct.
1 vote Thank Flag Link Wed May 14, 2008
My fiance and I have been looking at houses extensively for about 10 months. We are currently renting and we both have great jobs. The reason we have not bought is two reasons: 1.) We can't help but wonder if the houses will drop in price significantly -- so yes we are looking for a better deal and 2.) Recently we read an article on taxes in counties where foreclosures are high and how property taxes etc. could sky rocket soon. We still tell ourselves if we find the house we LOVE we will buy it, but I am beginning to think we might hold out till after the summer to see if we can get a better deal.
1 vote Thank Flag Link Wed May 14, 2008
One of the things that I do feel has people waiting is the sub-prime mortgage issues. The general public knows little or nothing about mortgages, except thier monthly payment, and I think the media has publicized the sub-prime thing so much that Buyers are waiting for the storm in that industry to subside. I think people are a bit sceptical of all mortgages right now.

Thanks, Todd Norsted
Web Reference: http://www.toddnorsted.com
1 vote Thank Flag Link Tue Apr 29, 2008
Sellers are very unrealistic about the value of lakefront property in Alexandria. I'm not "afraid of trying" I just refuse to overpay. My guess is that there aren't too many people willing to pay top dollar for homes intended for seasonal use. There are currently forty-five lakefront homes on five of the most popular lakes (Carlos, Darling, Le Homme Dieu, Latoka & Geneva). Twenty-seven of these are listed between $500,000 and $2,595,000 with the lowest asking price at $324,900. I am guessing that the target audience is from the Twin Cities and again, those are awfully steep prices for second homes. Coincidentally there are no valid comps because nothing is selling on those lakes (last two closed sales were Jan '08 and Nov '07).
1 vote Thank Flag Link Mon Apr 28, 2008
Having seen markets go up and down several times in my 38 yrs. of experience, I believe that the experienced Buyers are having trouble selling their homes for the equity they feel they need to justify buying the new property. For unexperienced buyers, I think the media has scared them from taking that first step. Everyone says it's an election year, just wait it out, prices will go down before the election and then up after the election? I personally feel now is the time to buy. Sellers who really are serious Sellers are making good deals for the Buyers and the Lenders have no problem with working good affordable rates with qualified Buyers. I work in a market that has only one industry, tourism. We have had a slow down due to Buyers unable to sell in the areas they are moving from, but our prices have stayed stable and recreational properties continue to rise in value based on "law of supply and demand". The internet allows many people to live anywhere they can get good internet service, therefore, we have younger families now looking for a quality lifestyle and safe environment for their children. Small towns like ours and rural settings have become more popular with the younger working class.
1 vote Thank Flag Link Wed Apr 23, 2008
Yes they are afraid of trying to purchase a home. This is the best time to own a home. Buyers are sitting on the fence waiting for the better deal...the media has a lot to do with it.
1 vote Thank Flag Link Wed Apr 23, 2008
The national news is just that - national. Every market is different and just because house values are still dropping in some areas doesn't mean that it's happening across the country.

I don't believe any Realtor has a crystal ball. Therefore, who knows exactly when we hit bottom? For all I know yesterday was the lowest day for home values.

Now is an excellent time to buy. If you're waiting for that 'perfect' time to buy then you'll be kicking yourself once prices start to rise. You can't fret over 1 or 2 percent in real estate because it's never been an exact science (or never will be).
Web Reference: http://www.thegoheens.com
1 vote Thank Flag Link Wed Apr 23, 2008
The one thing that people answering this question will have to remember is that every market is local. In the Twin Cities, many areas are look to be hitting bottom, and some have even seen a 2%+ increase.
1 vote Thank Flag Link Wed Apr 23, 2008
Yes, I believe there are many potential buyers who would love to be moving into a home but have some challenges. The real estate prices in many parts of the country still are keeping many qualified first time home buyers out of the picture. One option to consider is finding a city where the cost of living is affordable compared with the available job wages. In my area, Boise, Idaho, the average home price is approx. $245K. Most two income families can afford to purchase a home and many have been able to move up into bigger homes with the appreciation of their first. I can feel the pain for those who are in a location where the average home price is over $400K. It would make sense if you wages were twice as much as a city like Boise.
1 vote Thank Flag Link Wed Apr 23, 2008
Suzy - I am currently working with six buyers and every single one of them is afraid to buy because the media keeps telling them prices are going to go down even further. Even though I show them data that proves otherwise for the Twin Cities, they still are believing the media over the facts. I also have a couple that want to get the works for nothing, but unfortunately, those deals are few and far between.
1 vote Thank Flag Link Wed Apr 23, 2008
Me again - great answers from all - and there are no BEST answers. I've really enjoyed all the feedback and opinions. It's the circle of life we're going through. I was in Real Estate back in the late 70's early 80's. Interest rates were up to 18% and they forecasted we'd never see 10% again. And look at us now. What's that wonderful ole saying . . . . when times get tough - the tough get going. This is a well needed adjustment period as I see it. Best of luck to us all !
0 votes Thank Flag Link Wed May 14, 2008
I asked this question (I'm in Alexandria MN) and I really appreciate the comments from the other Real Estate Professionals. But I especially appreciated the comments from Buyers. To the Home Buyer in CA - I want to say what I'd love to say to some of my young Buyers - but don't. Home Ownership is not worth giving up all the other things you do in your life because you are so "strapped" for money you can't even order a pizza - or go on vacation with your family. When money gets tight - so do your nerves. I'm way over 50 and I've seen marriages fall about because there wasn't enough money to pay the bills and all the fun was gone out of life.

If you were to ask me what I think - I'd have to tell you - continue renting until you have enough money saved for a substantial down payment and a mortage you can afford. Fun is an important part of a happy life - no matter where you live.
0 votes Thank Flag Link Thu Apr 24, 2008
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