On the other hand, it is a buyer's market. And if someone can buy below market and get a good value, and plans on not selling for 5-7 years, it often will make sense to buy. Meanwhile, people graduating from college--assuming they've got a decent-paying job--who need a place to live certainly ought to consider buying. They've got to live somewhere, and in many areas of the country the huge spread between the monthly mortgage payment and monthy rent payment has closed considerably.
As Ron notes, by the time you notice the market turning up, you'll have missed the bottom. But my sense of it is that you're not trying to buy at the absolute bottom...just while prices are still low and you've got a reasonable assurance that they're on their way up. If that's where you're coming from, then wait awhile.
Hope that helps.
I had buyers wait because prices were going down but they lost their loans and not they have no choice but rent.
You certainly can wait but loan issue is critical right now. 100% financing is gone. If you are going for a condo you might not get PMI insurance on a low down property. Things have changed and are continuing to change.
If you find something you like put in an offer!
Astounding number of non professional here who must have crystal gazing balls! If you don't HAVE TO sell now, DO NOT SELL. If you don't HAVE TO BUY, don't buy. It's simple as that. It is my opinion that prices will fall for the foreseeable future also but that is my humble opinion. The certainty with which I read some statements here is truly astounding.
You might be interested in reading the attached reference published in business week. Nationally, the real estate market is overpriced from an upswing in valuations starting from 2000 onward. One illuminating fact is that since 1890, real estate has only returned 0.4% inflation adjusted, placing it well behind bonds and stocks.
It is well documented in a number of sources that you are financially better off renting and investing the difference of what you might pay to service a mortgage and property taxes. This is more true for the bay area with high property valuations. In many cases you can not deduct property taxes due to AMT exclusion rules, and the mortgage deduction only applies to the first 1M financed.
Buy a property only if you want the stability of owning a home and the lifestyle it might afford. Consider it a windfall if you happen to make any money on it after inflation, mortgage interest and property taxes.
Perhaps you should READ some of the comments below before commenting on them. I am a Realtor and I didn't suggest buying. Also, I happen to be a trained economist and led a financial planning group for a NYSE firm. First and foremost, the NEEDS of the client come first, rather in real estate or financial planning. I addressed the questions that Stephen needs to ask befor making a decision so that he can make an informed decision. And noone has a crystal ball.
Thanks for elaborating further. $1000/mo after tax advantage for renting? And you like where you live? Sounds like you should continue renting. If something does pop up that is truly a bargain and you love it, then think about purchasing. In the meantime, it appears that you have done your research and you are in an optimal situation.
Realtors may be knowledgeable on current and past prices for their area, but they are NOT experts on future price trends. Realtors are not economists and very few have any business or economic training to speak of. They are SALESPEOPLE. The reality is that they only get a commission if you buy, so they have an incentive to be less then accurate as to their assessments. The few competent Realtors with integrity would admit that prices are going down in most areas of California and buyers could save money by simply waiting for the bubble to further deflate.
If you can afford a home with a large down payment and conventional financing and don't care about prices dropping further, consider the purchase. But DON"T purchase with the expectation of future price gains. This was a huge bubble that needs to finish deflating. If history is any guide, prices will not rebound quickly when the bottom is finally reached.
Best of Luck,
You still obtain tax benefits no matter what time you purchase, I personally purchase properties continually as an investor no matter what time of the year or what the media state I make a ton of money, however there is more that comes into play on making those profits. GOOD LUCK
That being said--is it a bad time to buy when the REO's I have listed get 15-20 offers and overbid on the home driving the cost skyward? Should we allow 3% down with 580 FICO scores? Sub-prime scammers on the prowl again? Nope!! FHA!!
I got news for y'all--it's the wild, wild, West out here in the Greatest State of California. The timid need not apply!
There are several factors that should influence your decision. One, how long do you intend to stay in the home/area? If you think you might be relocating within the next three years, then you might want to consider holding off. Three years is actually considered a short term "investment", even in the stock market. However, if you would be happy in a house and have high expectations of staying in the area, then take advantage of the chaos out there now. The best time to buy is when everyone else is panicing. This creates outstounding opportunity. Another consideration would be the rent vs. purchase decision. Consider all your after tax comparisons before making a decision. Hope this helps.
If you are nervous I am nervous. You don't sound like you are in a position of having to buy right now. If you were my client I would sit down with you and have a conversation about what is important to you aout buying a home. From there we can figure out what is a good timeline for you and your personal goals. If that is now, lets get to work. If that is two years from now, lets come up with a plan to have you ready then. Don't try to time the market. No one can. Buy for your personal reasons. If you plan on living in the home for a few years especially in San Fran, it is a pretty safe bet.
â€œâ€˜This country needs a cleansing,â€™ said billionaire real estate investor Sam Zell. â€˜We need to clean out all those people who never should have bought in the first place, and not give them sympathy.â€™â€
â€œGovernment attempts to slow the flood of defaults â€˜could be simply deferring another flood of foreclosures,â€™ Saccacio said in the statement. â€˜That could extend the length of time it takes the market to recover from this downward cycle.â€™â€
â€œThe subprime borrowing spree featured lax lending standards that allowed people to buy homes with little or no down payment, and many of those borrowers today have no incentive to pay off mortgages that are worth more than the homes they bought, Zell said.â€
â€œâ€˜That whole process has to be liquidated,â€™ Zell said.â€
In many areas, it is possible to rent homes for enough (or nearly enough) to cover the debt service, so buying investment properties might make sense, especially if you intend to hold them for some time (as others have pointed out).
If you are not a speculator, then there are other considerations to take into account. With the the current housing market slow down, many prospective home buyers tend to hold off making a decision because they are waiting for sign that the market has hit bottom. Many are reluctant to commit to a purchase when prices are still declining. The only problem with this strategy is that you can only know for sure that a market has turned around after the fact. The reality is that nobody knows when prices reach the top or the bottom.
A slow market is often thought of as an opportunity by some buyers, because it takes longer for listings to sell. The inventory of unsold listings tends to grow, giving buyers a larger selection of homes. An important advantage of buying in a slow market is that you have the chance to buy at a reasonable price, without having to compete with other buyers.
On the other hand, one risk of buying in a slow market is that the value of what you buy might drop before it rises. Or, prices could stay flat for some time.
In my view, the right time to buy is when you see the right house. I say this because, unlike other investments, a home is something you can use. The value, whether rising or declining, does not affect your use of it.
Anyone who has watched the real estate market over a long period of time knows that values fluctuate, but over the long term, they always end up higher than the previous high point.
Unlike the last down turn in the housing market (early to mid 1990s), mortgage interest rates are at historic lows. This provides an extra incentive for buyers to purchase now, rather than wait. By the time we know that the market has bottomed out and prices are on the rebound, not only will competition for available homes increase, but interest rates may be headed in the same direction. Locking in a mortgage at todayâ€™s exceptional rates and a home at today's bargain prices makes sense to me.
And rates aren't low??? If you wait for 5.5% to come back, you might end up with 8%. Rates are phenomonal right now IF you have the income, credit score, and downpayment to get low 6's.
My suggestion is to use this "slow" time to educate yourself on the inventory. This is work. You need to be out every Sunday at Open houses, and you need to be scouring the MLS. You'll be an expert in no time flat, and when a "deal" presents itself you'll KNOW, and you'll be ready. Luck favors the prepared.
In the meantime.... let's look at renting.... WHAT is it good for??? If your rent is $2,000 cheaper than your monthly mortgage/taxes/HOA dues, less tax savings.... you should start "paying yourself" that $2,000 and get used to making house payments. Pay it to your savings account if you're going to buy soon, or pay it to your INVESMENT account if you're not going to buy soon (or ever based on much of the advice I just read). That is the ONLY benefit to renting.... saving to invest... either in real estate or elsewhere.
So then the question is... WHERE are you going to invest? In the stock market? Is that a safer investment than real estate? Or wiser? Or easier? Won't the stock market continue to "soften" more????
Besides, if you put $100,000 into the stock market and get a 10% return you make only $10,000. But you can buy a $1 million home with the same $100,000 and a 10% gain is $100,000. Which will get 10% appreciation first????
Uhh.... that depends..... every neighborhood is different let alone every town, every state and every section of the country. In San Francisco every block can be different. So please don't take San Francisco advice even from a person who works out of town even 20 minutes away, let alone someone in another part of the country. That's just as bad as using someone's opinion on the overall stock market when you're considering buying shares in one particular company, in one small niche. Which will go up 10%? And when? Do you're own research.... and find experts who really know the exact area you are researching.... and then do the best job of answering that SPECIFIC question for yourself.
And while you're out at the Open Houses.... stick around for a while... count how many Buyers are coming through (to the new listings), engage a few in conversation... what you'll probably find is that there are a LOT of Buyers who are "waiting for the market to soften". So the "demand" is there.... waiting. And they are building up, and getting stronger. My plate of Buyer clients is getting bigger and bigger as they all wait. That leads me to believe we are at the bottom (not much of one since some neighborhoods are up over last year, some flat, and some areas and market segments down), and once they stop waiting and start buying.... prices will go back up.
You said "loft" so I'm going to assume you are a SOMA buyer (hey Dallas or Chicago folks - any idea what part of town that is?) and if so, I believe you do still have some time, but not in that time I doubt it will go down much further... and chances are neither will interest rates.
By the way.... the Chicago, Dallas or even Santa Rosa, CA Realtors should have excellent advice for you if you ask the right question.... ask them where, in THEIR area, you can find investment properties that will cash flow. If you really aren't comfortable with the San Francisco market, investing outside of the city where a renter can pay all or most of your bills. Their doom and gloom is your opportunity. Be a contrarian... buy when everyone else thinks it's bad, and sell when everyone else thinks it will never stop going up.
Since our rent is quite affordable, the prudent thing to do seems to be to wait, while occasionally putting in a low offer on something that seems like a good deal that we like. While we might not get the perfect deal if prices turn around in SF, at least we're unlikely to have an albatross around our necks if they continue to fall.
I wanted to particularly thank Rick from Chicago as his answer was the most helpful. Obviously there is no crystal ball, but since this is likely the biggest investment I'm ever likely to make it is best to be careful about it.
Nicole Holmquist, Realtor, Century 21 Sierra Properties, Murphys, CA
Timing the marketâ€¦.how many buyers are waiting for the market to bottom out? My guess is there are a lot of people out there waiting to purchase their next home. They are unsure of when to buy - they donâ€™t want to buy now because theyâ€™re afraid they will hear that prices continued downward.
That is very understandable but you have to think - have you ever said â€ I should have bought X before the price went upâ€? Thatâ€™s going to happen to a lot of people across the country in the near future. Is that this week, next week or in a couple of months? Good question!
What are we seeing in Phoenix? Well the number of active listings has not continued to grow and the number of pending homes out there are starting to climb. Does that show the signs of the market changing? Or is it simply a blip on the radar screen?
Hereâ€™s a couple of things I think were interesting that was found on a site called Radar Logic. It showed that back in December of last year, 4 of the top 25 metros they track showed that prices have climbed. This doesnâ€™t sound like a big deal but considering over the last year or so all metros were down, I think it is good sign.
One other thing I liked was that over the last 5 years, prices for real estate in Phoenix, Arizona are still up about 9.4%. So when is it time to buy? I think weâ€™re in the best buying cycle weâ€™re going to see in a long time. When things do pop, do you want to be on the sidelines saying â€œI should have bought last springâ€? Or would you like to be in that new home and listening to your friends say â€œI should haveâ€¦â€?
To check out property values, etc. visit my website http://www.ValleyREAdvisor.com
As Realtor's we all see the value in owning property. We are bullish proponents of the benefits generally speaking of property ownership.
As agents for our clients we work on individual situations. If you are worried then it might be that your worries are valid in your situation.
If you are able to buy a property in San Francisco, have a stable job and want to put down roots then now is a good time to buy. SF property values will not decline over the long term.
The last time property values were in decline was in the late 80's early 90's, San Francisco saw a decline of 3%. In the Chronicle today the Case Schiller index showed values up 75% since 2000. This area has everythiing going for it. We have great education institutions, incredible research and development. We attract some of the best and brightest of each generation. San Francisco is a limited space so it can't do anything but become more valuable as time goes on because of its limited supply.
"Consider a typical home that sells for $218,900. You put down 20% and get a 30-year fixed-rate mortgage at today's rate of 5.5%. Monthly principal and interest come to $994.31. Let's say that 12 months from now the same house goes for 10% less, or $197,010. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs rise a point, to 6.5%, your monthly payment would be $994.94 and you'd have saved nothing. Meanwhile, home prices might steady and sellers might become less willing to negotiate. And you have spent a year living someplace you'd rather not be."
The link is below for your convenience.
If you want to live in the far-flung southern edges of the City--by all means--wait. Anywhere else--DON'T. Besides, the only way to know if prices have truly bottomed out is when they're going up again.
We have a stable economy, pent-up demand and limited good inventory. We have over-bidding and multiple bidding going on still. Get a good deal now and don't risk paying more in price or interest by waiting.
It is indeed a Buyers Market. Interest rates are still quite good and there is lots of inventory to choose from. Some Sellers are making even more concessions than price reductions such as providing assistance with Buyer closing costs. One theory on waiting is that what you might have saved by waiting (a lower price) might very well be eaten up by a higher interest rate. Bottom line is, if you plan to stay in the home for at least 4 or 5 years, then this is a great time to buy. Buyers have nearly all the negotiating leverage right now. Let me know if you need a Realtor in SF. I can refer you to someone there. Good Luck!
This is my 3rd decade as a full time broker so I have seen these markets before. You'll know 6 months after the market turned that it in fact did. In the meantime there are some excellent opportunities out there hence this is "a buyer's market".