Buylowsellhi. Since many of the agents answering really dont stand to gain anything (I dont work with buyers in Malibu), maybe you are misspoken to say that we are ill-intended to say "you cant time the market or any time is a good time to by". Maybe we speak what we know. Many Realtor, especially those who take time to participate in forums like this and are very active in their markets do have experience to base our determination on. I never just speak the party lines. I have been an investor and I have been right and wrong with timing. A Realtors license does not come with a crystal ball, sadly, but many of us work in the field not because we are con artists trying to make a this buck NOW, many of us actually LOVE what we do and arent in any hurry. I personaly believe that I can sell you a house today or one next year. I'll still be here when my buyer is ready. Handing the keys to a first time home buyer. Helping a family find a home large enough for the new baby. Provide investors with researched data to help them make an educated decision. These are all fantastic parts of my career. I dont ever wake up after a home closes and think "Wow, how I am so glad that I suckered that buyer into paying more than they had to for the home" Not only do those of us who are successful work something like 24/7 because we know that it is one of the most important transactions (purchase or sale) many people make but most of us own property and have to contenplate the same decisions. When I bought my first home, a bank owned foreclosure at a mere 138,000, I never guess that we would have an earthquake and it would go down to like 90,000 after the Northridge earthquake. It also came up to almost 550,000 in this last "top of the market" go round. I sold before it hit maximum but I didnt consider it a loss when it went lower than my purchase price, I didnt consider it a loss when I made only 200,000 and not 400,000 because mostly what I considered it, was my first home, the one I brought home my first child to. If you are only an investor, you may lack the emotional component but most home buyers dont lack emotional involvement and most Realtors dont lack the emotional component of caring, genuinely for a positive outcome to the homeowner they represent. Sure there is an investment component to real estate but it saddens me to think that people shouldnt by the home they want, when they want because it's all about investing. There are people all around caught in homes they thought were a good investment, who never thought about where they wanted to live or how they wanted to live. Now, they live in their investment, not their home.
BTW even foreclosures are not trending at 20-30% savings from fair market value. Of course, homes are worth what buyers will pay, not what sellers ask. If you are only willing to pay 30% off on a property, there is likely someone else willing to take it for 20% off and someone else emotionally attached willing to pay closer to full price. If you immediately offer 30% less than an asking price, you are likely not to receive any response from an REO seller, they wont even bother to counter. For the potential buyer, you should look at all the comperable sales for a home that interests you and make an educated offer.
These are the one things you'll see if you look at Agent posts from the beginning of time to the present:
"I would say that you cant go wrong"
"If you are trying to time the market you will lose"
Every one of them will say stuff like this. Even your own agent. Market timing is way easier in Real Estate than in any other market as the fluctuations take months and years instead of days and weeks. You dont need a crystal ball. All you need is this: It is the buyers market. Ask for everything, and you'll get it. If you dont feel like you're getting everything, dont buy, even if your own agent calls you crazy. If you can buy now, you'll likely still be able to buy 2-4 years from now. So use that kind of long term thinking as you shop. Understand that every agent that posts on this board is personally vested in seeing you buy sooner rather than later.
Look at every house you can in the neigborhoods you want to live in. Look at houses that look like too much money for you, and bid what you can afford on them. Dont make any bids that arent at least 20-30% below asking. And dont respond to counter offers.
If you play hardball like this, you likely wont find a willing seller right away. But there are enough sellers right now, and there will be for the next couple years, that eventually you'll end up buying a place at a price so low that it wont matter if prices continue to fall. So dont nessisarily wait, but dont nessisarily rush. Buy something now, only if it is at a price so low that it will make all your friends and relatives cry. If you cant buy that low, then wait.
Being a "Looky Loo" for several months to a couple years is a great thing because it will do two things:
1) It will educate you about the market.
2) It will put all the power in your hands. If you put yourself just in 'looking' mode and expect to NOT to buy, then the sellers and sellers agents will really have to go to the floor to coax you to buy.
3) Dont trust the agents, even your own, because they are going to get to put food in the mouths of their children as soon as you buy. They want you to buy soon, even if they try to spin it otherwise. The way the comissions are paid really protect the sellers interests better than the buyers in general, so get your advice from someone else, preferably an investor, or investment advisor, or the reports from investment banks. NAR is not a reliable source of info either as they basically just tell the agents what they want to hear. You should look for info from NEUTRAL third parties like Moody's, Standard and Poors, or government agencies about various markets.
This is confusing
This is complex
But it shouldnt be intimidating.
Learn a lot.
Dont buy till you get a place for a price so low it makes everyone around you cry.
One thing to remember that IS true that comes out of the agents mouths is this: Buy for location if you can afford to. Location is the ONE thing that you can never change. The structure is something you can tear down and rebuild from the ground up if you dont like it. But if you are a HOME buyer and not an investor like me, you should buy in a location that you like to live, and then customize your home to suit your needs later as it becomes affordable to do so.
Good Luck Sabine!
No way, no how I'm putting out an offer that's anything more than 30% below CURRENT comp sale prices. I've been reading a LOT about this subject, the more I read, the more I find a common thread - home prices will likely still fall between 20 and 30% of where they are right now. Yeah, yeah... I don't have a crystal ball, nor does anybody else. But if you look at what's happening in the central valley - Fresno, Sacto, etc... it's scary. Some places are down 50% already.
Now think about what can happen to the 20% down payment that the lenders are currently demanding to get the best rates... the market goes down 20% and *POOF* your hard earned, after tax down payment gets wiped out. All of a sudden you have 0 equity in the house you just bought.
The market will not start going up until the poisoned debt is flushed from the system. 2008 will see a wave of resets on ARMs, which is a 6 mo. leading indicator (it can take that long from the date you miss your 1st payment until the property becomes REO and back in the market). But that's not all, mid 2009 will see another wave on resets on option ARMs, which I can only believe a higher percentage of these will make it into the REO category.
Once the market hits bottom, it's not like it will skyrocket back up, it will take a while, credit will likely be really hard to get (from the few banks that may have stayed afloat) and a lot of folks' savings are getting hit hard by recession and inflation - there won't be that many buyers!! people will be freaked out about buying (maybe even more than we all are now).
The market will be at the bottom - in my humble opinion - when houses are affordable to the average family again. And by my calculations there's a lot more downside than there is upside right now. Economic conditions continue to weaken, commodities (the next great bubble) are through the roof, jobless rates keep rising, recession is upon us. Don't look for the residential market to recover until underlying economic conditions start to recover. Save your money, don't put it in the stock market for crying out loud! Be in CASH when the indicators point to the market recovering.
Track the home affordability index. Be patient - it will be years.
OR... put in a lowball offer for no more than 70% of comp sales in the last 30 days. But don't count on sellers to think you're being serious, and definitely don't count on bankers to jump at the chance to clear property from their books - they'll continue to be in denial right up until they get bailed out.
I really appreciate your feedback and advice. I have also thoroughly enjoyed Ted and buylosellhi's debate. I agree with both sides... i will leave it at that, I do not want to spark another investor vs agent debate... I am going to stick to the subject. I REALLY appreciate the ladies feedback. To answer Dot. My husband and I have a few challenges... firstly, we are self employed and will need a stated income loan. Secondly, yes we net 120K-140K a year... but our goal is to live in the US 9 months out of the year, and spend the rest time travelling... therefore, we do not want to get stuck with a huge house payment. We would LOVE to stay in Malibu(it's been my home for the last 12 years)... but unfortunatley that is not going to happen... the cheapest SF home In Malibu is an 800sq ft "Gambrel" shack built in the 40's up Corral cyn in the burn area... for $800K!!!!I don't think so! A condo will not work either, as we really value a back yard for our dogs, gardening etc. Therefore we are looking at Agoura, Westlake and TO..... T.O. seems to be the most affordable... there are some homes even in the low 400's(even 300's) on large lots. BUT, I am worried about the resale value in 5-8 years in a less than desirble area (think Los Arboles& Plantas) We would certainly look for a fixer and then make it ours... remodel and make it beautiful. But still, lacking location, location, location!!!
In Agoura there are some in the 500's but they have very little yard. Westlake... I wish. I think the cheapest is a fixer for 625.
I have seen plenty of nice homes in T.O that I like for $600+ in nice areas...and they are NOT moving in that price range... I saw a home that I loved for $689 in a fantastic area. It has been on the maket for 6 months.. only one offer,turned down becuase it was a low ball. This is why I started this thread... Should i wait for these more desirable homes to come within my budget(under 500), or should I buy an old fixer? I will start looking now, but only buy if it is a GREAT deal... one I cannot walk away from. One that will "make my friends cry"....
I have 3 suggestions for you. 1) Wait 2) Wait 3) Wait. Any real estate agent that claims we will not experience a further decline in prices should give you a written guarantee. Let them put THEIR money where their advice is. The money you save by waiting will be money you won't owe to a lender and money you won't be paying interest on. The American Dream should be to enjoy your retirement, not be a slave to your debt.
Too many people do not understand that if interest rates go up, home prices will have to come down. Don't be influenced by fears of rising rates. Buyers can only buy homes when they are AFFORDABLE. Sellers are the ones that should be concerned about higher interest rates -- not you!! As a matter of fact, higher rates will help you pay less for your home, have lower property taxes, and have a chance to lower your payment when the cycle of lower rates comes around again. If you have to ask the question "Buy now or wait" -- I feel like you already have a gut feeling what the answer is. Go with your gut feeling!! When it's time for YOU to buy, I have 3 more suggestions 1) Location 2) Location 3) Location (but you knew those already!)
First the one question no one has wanted to ask in the last 5 years. Can you really afford it? By that I mean will you ever own your home? Many people tried to convince us to "buy" a home on the premise of a refi or super-long note. If you can only afford the house with an "if" in the situation, you may not be able to afford a house. (IF I refi in a few years, or IF I get that raise)
Once you know that you can afford the house ask yourself if the people who live in the houses you (not your realtor/broker/etc.) are going to call comps. If they make as much less than you then either the house is too expensive or they are likely to leave a nice vacant house in the next two years. Most likely both.
Next I ask if you can afford to lose the value of the house down to pre-bubble prices? If you live there long term and can afford the house for the life of the loan this only hurts your ego, but if you need or want to move this is a very real loss. It is especially large in a slow market like now when the only way to move a house is with huge discounts.
My opinion on timing the market is much more clear cut than the people who do it for financial gains and speculation. We aren't anywhere near the bottom yet. With 100k of income and a 30 year fixed (assuming you have 30 years of income left) I don't see financing more than $320k as good practice. Malibu may command a slight premium based on where your husband works and what he does, but untill you can live with your income peers for $280-$320k I'd say your getting taken.
rising interest rates will push home prices down even further and kill the market even worse than it already is. This downturn wont be forgotten by the small guy for a decade, which means people will be overcautious about buying inside their comfort range. So if interest rates go up, prices will come down to create equilibrium between supply and demand. Ultimately that will be a better time to buy because monthly payments being the same, a low price with a high interest rate is better than a high price with a low interest rate any day because there is greater tax benefit and less risk.
Im not trying to say that All agents are misguided. To be sure, there are good agents out there. They are just FAR outnumbered by bad agents. And when I say 'bad' agents, I mostly dont mean people who are knowingly diabolical. I mean people who really dont know as much about what their talking about as they claim. They THINK they know it, but most of them have not taken an economics class outside of an online RE economics class they passed in 3 days. They dont truely understand what conditions really affect the markets they claim to be experts in. They dont understand negotiation tactics. As you pointed out yourself, the barier to entry for the industry is extremely low. Low barrier to entry combined with high income potential attracts many more pretenders, than legitimately knowlegable people. I'd say the ratio in my mind after speaking with literally thousands of agents in the last thirty years is maybe 1 good one in a hundred. Even agents who are fundamentally good people, are typically not good agents. Their information sources include their bosses, the NAR, and the other agents they go to meetings with who all tell each other that 'its a great time to buy/sell'. Their sources are virutually never truely objective.
Regarding my market timing, I actually DID tell you when I planned to time the market in the very first paragraph of my previous post. I deliberately bought about 20M in residential RE in Silicon Valley in early 2002 when the market briefly dipped due to the .com bust and 9/11. I sold it all in early 2006, deliberately based on national market fundamentals, not local. On about 5M investment I made 12M in 4 years. That is the third time in 30 years that I've timed the market like that. I didnt improve the properties, I didnt do anything but hold them through a few good years. Im getting ready to do it again, this time in SoCal (again).
Now, my methodology for market timeing is a whole other game. A fool proof investing method cant be revealed in detail, or else everyone tries it and it immediatly becomes invalid. I'll just specify this: I look at things very broadly. And I only take information from objective sources. Even the smartest, best educated, and most morally upstanding agent cant provide independantly OBJECTIVE information, it will always be subjective. These are simply the rules. Sometimes subjective information can be good, but if Sabine is going to risk the largest investment of her life on someone's information about market conditions, I would adivse her to seek out someone objective, not subjective, which means not an agent. Her question was about market conditions. Getting info about that is not what agents should be used for. They should be used to hunt down technicalities in paperwork, and if you have a good one, to help negotiate a deal. They should not be used as advisors on market conditions, because an agent will always tell a buyer that its time to buy. That has never changed, in the 30 years I have been investing in real estate. In 30 years, talking to probably 10000 agents, I have never heard one say "I would wait if I were you." not one.
You have some good points like location and be patient in the offer process; unfortunately you dont know me or any of the other very good agents out there. To broad brush any of us is laughable. I am an investor too. I have skin in the game just as you. I have a client list that will pretty much shut down your claims as to what my intentions are.
Unfortunately the California government decided that if you want to assist people on a Real Estate transaction, you need a license. California made the rules not me and part of the rules came about from buyer seller disagreements and rip offs. Believe it or not Attorneys in the State of California need a license to transact for a client on a real estate deal.
My family has been inesting and developing Real Estate both commercially and residentially since the turn of the century (1900). This is what I have been around my entire life. Sure we have more people in the industry (that don't have my experience ) that we could do without, but until the State decides to raise the bar for admission into the business, we will all have to deal with the pitfalls of the current process. California is a huge consumer protection state, the Department of Real Estate is one branch of government that is here to stay.
Since you are such a good market timer tell us what month and year the bottom will arrive. We could set up a Trulia Market Bottom Pool and sell squares. We could take the proceeds and donate it to charity.
You really did not say anything different that I did, you claimed it is easy to time the market, but you never offered any way to do it, you just parroted me and then added a few jabs at the agent industry to make it appear you offered something different.
Oh yeah as a savy invsetor you never explained how rising interest rates would play a major part someone's investment in a property and assuming it is a home purchased that is not a strict investment property hoe the monthly payment as a function of someone's income gets all screwed up with rising interest; so then sitting out years could price a potential buyer out of the market. Yeah let's tell people to sit out for two years and not thell them that the average networth of a renter is 46 time lower than a homeowner.
So now what has all the pot shots the two of us have taken accomplished?
Some additions to the numerous answers that I can contribute: Waiting may seem conservative which is a very smart direction to head in these times, however one aspect that must be considered is that right now interest rates are at a very reasonable low. What if they go up, and you have just circumvented any savings you hoped to acheive by waiting for another drop in prices. Try calculating the financial implications over the lifetime of a 30-loan at 1% higher than what you can be approved at now, and maybe that will also help to contribute to your decision. The key in this market is to buy substantially under the market and have a hard-ball negotiator on your side helping you do that! Also, there is no such thing as a written (or otherwise)guarantee from a real estate professional, and nobody I know owns a cystal ball - so just use all the information available to make an educated decision, and afterward, hold onto your assets for as long as possible when dealing with real estate. Time, maintenance and improvements have proven rewards for homeowners traditionally. Happy hunting!
I think Barry has offered some very sound advice.
Don't feel like you have to jump at the opportunity to purchase something (that you don't really want) because you can afford it. Remember, when the market does correct itself it will be gradual, not a sudden upwards ascent. The opportunity for you to own a home of your choice will come. Give yourself patience.
As for the loan aspect, get in touch with a mortgage broker (at least two) and see what your loan options are.
Remember it is a buyer's market, and will be for months to come. Take your time.
One think we can say, is..interest rates are down and home prices are also down..it's a buyer's market and that could change. If you find a wonderful home at a great price..I wouldn't wait.
Being self employed will not necessarily mean you have to go stated. From my understanding, you can still go full doc on this.
As I said earlier, keep looking in your preferred area on a daily basis - or have an agent do that for you - and if something suitable comes up - jump on it!
All my best,
Bonnie, I was advised that ALL stated loans will be a thing of the past... hope that is not true! I know BofA (my bank) stopped doing them!
My husband and i own a business... we made 160K last year but do not want to count on that every year, so I am being conservative with the 100K figure. This is after taxes and expenses too... So I according to my math, if I put 100K down on a 500K house, my payments will be less than what I am paying for rent, plus I will have an additional write off. But... I want to get a deal... and i want to buy at the right time.... also, i would like to get a 15 year fixed if possible.... I know I will have to leave Malibu to do this... the cheapest home here is close to a million... yikes! So, to answer the question... I think I cannot afford to not buy.
I am glad you enjoyed the spirited discussion. I fight hard for my clients, I always enjoy a good challenge. Your challenge of financing will really press on you having money down, closing costs and reserves. Not impossible but not as easy as it use to be. Make sure to get your ducks in a row now. As Bonnie metioned talking to a lender now is key. A lender will help you "pre-package" before you actually apply.
Keller Williams Realty
CENTURY 21 Alliance - Medford, NJ
One way to tell when your window of opportunity is closing is to watch the inventory numbers... you can see them on this website, or on many local MLS numbers and likely in your local paper. You can afford to wait because there are so many homes on the market and so few buyers, but when that begins to change, the inventory numbers will also change. Inventory will adjust seasonally naturally, so if you see them going down in Q4 you can ignore it and if you see them going up in Q2 you can ignore that. But if they are going down in Q2 or Q3, it means demand is beginning to line up with supply again and the 'make your friends cry' window is closing. If you see it happening for 3-4 weeks in a row, dont panic. If you see it happening for 3-4 months in a row it means the window is probably starting to close. Due to the severity of this downturn, Its likely that even when the window starts to close, prices will not recover very fast, so your window will fairly long. So no matter what happens, dont panic and rush into a purchase. Just know that watching the local inventory will help you understand the length of your buying opportunity.
Also, I've found in my time that buying in Winter will nearly always be the best time to get a great deal in a seasonal market like the US. Maybe less so in SoCal, but still better. Agents will push their sellers to list in the spring and often will try to take their listings down the fall thinking nobody will buy. That means that more of the the sellers who remain listed in the winter are selling because the have to, not because they want to.
Hope you find a great home.
I suggest that you keep looking until you find that diamond in the rough! When you find the house that is right for you and your husband you will know it. Don't rule out looking in the neighborhood that is your favorite. You are wise, however, to expand your search criteria.
If you do find something in Malibu in your range you'd better jump on it as soon as it comes on the market!
All my best,
Keller Williams Realty
Interest rates are still pretty low, so that is a plus. Do you plan to be in your home longterm or just a year or two. If you are only planning to be there three years or less, I would probably not recommend that you buy. Are you looking in Malibu? Have you considered a condo (still very pricey in Malibu)?
If you "need" to buy, then you should go ahead. If you want to ride out the market and see if it does continue to decline then wait. There are many advantages and disadvantages of homeownership. The bottom line is that you and your husband are really the most qualified to answer this question.
All my best,
Keller Williams Realty
Fortunately someone in Sacamento pulled their head out of you know where an eliminated the provisional license. This will help to some degree. But I think we are both in agreement that the there are enough pretenders in my industry.
As far as economics go.................The smartest people end up working for the average, because the average are challenged by work and create, they go out and take risk that the smartest cannot deal with, I thnk it is called dumb luck (pun intended). Even better if you look at CEOs across this country, there are plenty that have not taken an economics classes and they somehow have built huge companies. Bill Gates never even earned a college degree. Michael Eisner of Disney never took a single business course and majored in Theater and English. Less that one third of the CEOs running the 1000 largest companies in the United States have a MBA. Dave Thomas built the Wendy's Hambuger company and did not even have a high school diploma. I can go on with the list. Your notion that an economics class is required is laughable at the least. I have a enconomics degree in the school of hard knocks. I know more about the ecnomics of my trade area than you will ever be able to figure out as an outsider. I manage over 35 tenants in a major anchored retail center. I owned and operated a retail (large) business (over 40 employees) in this trade area. Being both a business owner, a resident and a landlord on both the business and residential side, I see the mechanics of the local economics on a level you can't find in any book or newspaper. My connections with other business owners creates and even deeper knowledge.
Sure not too many agents have my background, but those of us who are on the ground knee deep in the trade area have a better handle on the economy than you would like to admit.
As far as judging who is subjective and who is not...........Braccae tuae aperiuntur
Last, telling us what the market did is not timing the market, that's just Monday morning quarterbacking. You said timing the market was easy. Well predict the bottom if it is so easy. It wont cause a run on the bank or the stock market to be shorted. This is only Trulia and very few people are even watching this.
If you are flipper or investor the same applies to the above. You better know what you are doing as an investor, this is not for weekend warriors or just becase there is a TV show called flip that house.
If you are just a buyer looking for a good deal for your family and you plan to be in the house for at least five years, then you are going to make a huge mistake trying to time this thing.
This forum is not set up for long posts, but a quick example if there is a small dip in the market, yet interest rates go up, then any percieved gain is going to be wiped out by interest and a higher payment. The Bank is like the house in vegas, it always wins. Look at a 30 year amortization table and look at the amount of interest you pay out over 30 years. Now think of all the people who refi and start the interest clock over.
When I got a 9.0% 30year fixed loan in 1994 I thought I died and went to heaven. Anyone who thinks that interest rates will never go back up to those rates some day are dreaming. Will this happen next week? No, but rates are low now, take advantage.
Look at 20 or more houses. The Realtor that will take the time to look at that many houses or more is a keeper, the ones that have the attitude that you should find the house on the first 10 tries do not have your best interest at heart.
This is the time when the rich get richer. They are not trying to time, they are out there taking action. I own rental property, I have skin in the game. I've seen it before and will hear the same thing in 5 year, when everyone claims how smart those people where who bought in this down market.
Population is growing not shrinking, there is only so much land on this planet and California is the land of milk and honey with great weather.
Here is a great article to help:
Next, where I am we believe we have hit rock bottom and/or are at it. Prices seem to be beginning to maintain. Again, markets are local. Have a local agent run the stats for you.
Sandy is right. Markets are local. So it is very important you find someone who knows and understands your local market well. No one has a crystal ball and knows what is going to happen tomorrow much less the end of the year so do some more research with a knowledgeable and reputable agent who knows the territory well. Are prices still declining in your area or beginning to stable off?
Interest rates are at historic lows, sellers are motivated. You don't want to wait for the market to go up. Buy when everyone is selling and sell when everyone is buying is the best way in real estate.
Well , you certainly asked what I think is one of the biggest questions in real estate today.
I googled "buy now or wait" real estate and found oodles of pages of websites and articles written on that very topic. I have attached a link for you from foreclosure magazine, that you may find interesting http://www.eforeclosuremagazine.com/real-estate-foreclosures
Although we have seen market corrections throughout the US, real estate is local in nature. Thus, I think it depends on how the market is performing in the area you are in. Contact a local REALTOR, as I am certain they can shed some light on the subject for you.