Why are so many people waiting to purchase homes when the selection is good, the prices, cheap interest rates?

Asked by Mark Hilgenberg, 92270 Tue Jun 3, 2008

I mean, if these people waite too long the market will shift upward and prices will go up. Then there becomes a buying frenzy and interest rates go up too. The old saying, "if you snooze you loose". Let's get going buyers. It's a great time to buy.

Help the community by answering this question:

+ web reference
Web reference:

Answers

16
Betty’s answer
Betty, Home Buyer, 90025
Tue Jun 3, 2008
im one of these "people"...and let me tell you i'm not waiting because of the media. I work in the construction industry, plan check time went from 10 weeks to one week...why? because no one is building anything...why? because banks aren't lending money to build anything. why? because they screwed people up with insane loans and those people are now loosing their homes and the banks are "losing" money and don't want to give out any more of thos fun 0% down interest only loans.

And now my job is also on the line. I can't afford 500K home on our combined salary while the whole industry is falling apart, and I don't have $100K to put down on a 500K home. Its called REALITY. Is it really hard for a REALTOR to see this?
9 votes
Don Tepper, Agent, Burke, VA
Sat Jun 7, 2008
I'm a Realtor, and I'll admit I'm baffled by the comments by most of my fellow Realtors. Read Betty's comments: They're real world. That's why many aren't buying. Read Jess' comments: Those are your buyers, and those are the criteria they're using.

To answer Tas' question/comment: Are the prices really good? No. They better than they were two years ago. But just because a house sold for $515,000 two years ago doesn't make it a bargain today at $325,000. Just because a townhouse old two years ago for $280,000 doesn't make it a bargain today at $140,000. Those are real world examples from Northern Virginia today (Annandale and Woodbridge, for those who know the area). The $325,000 property is still a dump, just 2 years older and more battered than at the peak of the bubble. The $140,000 townhouse is one of more than 2 dozen properties for sale, virtually all short sales and foreclosures, where the going price now is $95,000-$110,000. So: Cheaper, yes. A bargain: No.

And let's knock down this complaining about the media. Granted, they like to sensationalize. But the media isn't the cause of the foreclosures and short sales. The media didn't pull Wall Street's strings to come up with all the "clever" financing that led to the lending debacle. The media weren't out showing $500,000 properties to janitors, gardeners, and maids who--hardworking as they are--were earning the minimum wage. The media weren't lending billions of dollars to file clerks who used stated income loans to get $500,000 mortgages. The media weren't pushing 100% financing with firsts and seconds at 12% or 14% to people, telling them that there'd be no problem refinancing in a few months.

Meanwhile, let's look at the broader picture. The media aren't behind unemployment jumping half a percent just this past month. The media aren't behind $4 a gallon gasoline and $5 a gallon diesel. The media didn't get us into Iraq and the trillions of dollars that's costing us. The media aren't behind the multiple airline failures. The media aren't behind the shortages in our supermarkets of rice and corn and the huge increases in bread and milk prices.

So let's stop blaming the media. Today's potential real estate buyers know better.

Sure, if buyers wait too long, the market will shift upward. So? I've run comps for a couple of people on properties in Northern Virginia. (Woodbridge area) Prices are dropping there by $8,000-$10,000 a month. They have been since last fall. Consider the typical buyer's analysis: I wait 6 months to buy. Worst case scenario: Prices decline another $60,000. Best case scenario. Prices flatten out over the next couple of months, then begin rising (though not at $10,000 a month). So best case: Prices in 6 months might be $10,000-$20,000 higher than today. Hmmm. Let's see. Downside risk of $60,000. Upside risk of $20,000. Most likely scenario: Prices will be lower by another $20,000 or so. Buyers may not have all the facts that Realtors have, but they're not that dumb. If they wait, prices likely will go lower...maybe much lower. And if they're wrong, they're still buying near the bottom.

Interest rates? Yes, they may go up a bit. But they'll still be just fine in 6 months. It sue doesn't look like the economy is going to get so overheated in the next few months that the Fed is going to slam on the brakes.

Buyers and sellers aren't snoozing. Far from it.

Frankly, there are other good Realtors out there with similar perspectives on the economy. But it's not politically correct to voice them. So that's why most of the comments to this and similar postings from Realtors are likely to be along the lines of the question: "It's a great time to buy." If you're someone in Jess' position, it is. For the large majority of the population, the future isn't as rosy.
8 votes
Tas, Home Buyer, Madison, WI
Sat Jun 7, 2008
Fascinated by the divergence of opinions between realtors and buyers in general, but more specifically in response to this question. Suggests that the realtor's question is the wrong one to ask. I'd proffer instead: are the prices really good? are buyers getting those cheap interest rates? are sellers asking too much? does the overall economy justify buying a house if you're having to stretch financially to do so?

In short, while realtors seem to think that things are rosy, buyers are focused on larger economic issues which signal trouble if they are not fully prepared; rather than rushing in and buying at all costs, they are waiting to insure their financial stability. A house shouldn't be bought because it's a deal or borrowing is cheap. It should be, however, a decision that is reflected by the individual's own financial well-being, something that I think many are struggling to maintain. Hence, the higher inventory.
7 votes
Betty, Home Buyer, 90025
Tue Jun 3, 2008
Because the average homes cost 7 times the average income level and no one can afford them... The only reason people bought 600,000 homes with 70,000 income was because of the "creative" (i'll use the term loosely, because its "creative" if you're flipping and "silly" if you're planning to live there) financing.

There's no frenzy when your job is on the line and you can't afford to pay mortgage.
7 votes
Betty, Home Buyer, 90025
Sun Jun 8, 2008
the STRANGE thing is.... people who think buyers are MISSING THE BOAT are all the people who's job it is to sell homes.
6 votes
Scott Epstein, , Crystal Lake, IL
Tue Jun 3, 2008
Obviously every area is different as there are some areas that have had double digit growth over the past year. However, there are a few reasons why there is not going to be a buying frenzy. First, with all of these foreclosures and short sales, your buyer pool is much smaller than it used to be. Second, there are a lot of people that would like to buy a different home, but they need to sell their's first. Third, there is so much inventory out there right now that even if there was a buying frenzy, I'm not sure it would even put a dent in the amount of homes for sale b/c other's would see that and put their home's on the market. Fourth, even though interest rates have remained low, it is more difficult to qualify for a mortgage these days. Add that to people getting laid off and energy prices going through the roof and you could see why homes aren't selling so fast.
6 votes
Cindy, , Orlando, FL
Sun Jun 8, 2008
"The old saying, "if you snooze you loose". Let's get going buyers. It's a great time to buy. "

LMAO - yeah, I've heard that one before. In 2005. About a preconstruction property in Orlando for which they demanded a $15,000 "deposit" just for the honor of being on the waiting list. Fast forward three years - the subdivision STILL has never-sold homes bearing the builder's logo, and foreclosures rampant in the remaining ones.
3 votes
Jess, Home Buyer, 92530
Thu Jun 5, 2008
As a recent buyer (closed today) I can tell you why I bought and why if any little thing was different I probably wouldn't have.

1. Two income family. Prices are down, but in SoCal 'down' is still high. Even with good jobs a single income is cutting it close on a 'median priced home'.

2. Very secure jobs. She's a teacher and I work at an established staple industry. If we worked at any construction/retail/energy related job I wouldn't have chanced buying a home now.

3. We got exactly what we have wanted for the last 10 years. Anything less and it wouldn't be worth the risk of further depreciation.

4. We currently rent. Of course if we had a home already we couldn't have been able to sell it, so that would have taken us off the market right off the bat.

5. Excellent credit. Yup, we got a loan. Many others simply cannot at this point in time.

6. Had some cash. Even FHA and other programs need some cash up front. If you don't have the credit rating, you better have the cash. It's the only thing that makes up for it.

7. We were ready. We have 7 year old twin boys that needed space to RUN! If you don't have a driving need to 'find a place to call home', why not wait a bit longer and see where it goes?

8. Looking long term. We can afford the payments we chose and are not too particularly worried about any further drop in values. We will be at this home at least untill the boys graduate. Yes, all real estate is an investment, but to us it's not AN INVESTMENT. If we were looking for a true investment, I would certainly have waited longer.

9. We were a bit tired of looking. I was scanning listings for a year. Actively working with our Realtor since January. We watched prices drop that whole time, but when we came across our new home it was not 'perfect', but by far the best one we had found to that point. It was simply time to stop looking and start buying.

I'm sure I could come up with a few more. As you can see, in my case there was a lot more things working to push me over to the 'spectator' side then there were things to keep me on the 'buyer' side. I would think that many other prospective buyer face similier choices and delimmas.
3 votes
ABR, BPOR,eP…, Agent, Toms River, NJ
Sat Jun 7, 2008
As a Realtor I encourage all my buyers to first educate themselves and not jump into buying just because prices have come down. Be sure that you have the income to support your purchase. Before applying for a mortgage, be sure that your credit report is in good-standing, have proof of your income. A reputable mortgage representative will educate you on the programs and will get you the best interest rates that are available for you. Do your homework first, paydown or payoff debt. Many buyers are waiting for the prices to drop even further but, right now, the inventory that is available at a good price is remarkable. Buyers don't wait. Opportunity is here now. Take advantage of it. But, remember, first do your homework.
2 votes
Monique Mart…, Agent, Corona, CA
Tue Jun 3, 2008
People listen to the media and the media is saying that homes are still going down. The economy is weak and so forth. So we have alot of people that are waiting for the media to say prices are coming up. People should realize that we need to get into something before its too late. Already I have seen properties getting mulitiple offers and people are over bidding than what the listing price is. If your a buyer and you see something don't wait put in an offer and get into a home that you can call home for a good number of years. The market will go up and back down. we go in cycles. It's up to you if your gonna get in this cycle or if your gonna wait for the next down market which be awhile once properties go up again.
2 votes
Debt Free Da…, , 85260
Sat Jun 7, 2008
The gloomers and doomers always miss the boat. This is the time to buy.
Web Reference:  http://getprequalified.com
1 vote
Monique Mart…, Agent, Corona, CA
Sat Jun 7, 2008
Yes there is a difference and as a realtor I'm not encouraging buyers to buy with out first educationg themselves and jumping into something just because prices have come down. I believe that if your gonna buy a home you should have to prove your income by providing to the lender income documentation. I mentioned earlier on that the reason alot of people are in forclouser is due to the creative financing that was available to anyone and everyone. Stated income was the way to go regardless of how much or how little money you made. Debt ratio is also very important because if you are using more than 45% of your income than you should first pay down or pay off some debt to insure that you won't face the challenges of making payments on time. I as a Realtor take pride in my job and I would hate to think that my clients felt I took advantage of them. There is a right time for everything and I have seen prices come down so much that it is exciting to know that there is opportunity for those that felt prices would never come down to what it has. And as a Realtor I know that the world is not rosey but when I'm selling a 2bedroom 1 bath home for $150,000 and I see it sold for over $300,000 2yrs ago it give me pleasure that opportunity is here once again.
1 vote
Monique Mart…, Agent, Corona, CA
Tue Jun 3, 2008
Yes we are facing REALITY. And as a Realtor I understant that this market is the way it is because of the insane loans that people were getting. Thats why lenders are now requiring down payments. Prices are so great that a house that was bought 2yrs ago at $500,000 is now on the market for $250,000. Builders are giving away crazy incentives to attract buyers. I believe this is great. FHA is still available and there are down payment assistant programs 1st time homebuyers can take advantage of. If nothing is selling of course banks/investors are not going to provide the funds to keep building new contruction. And the banks didn't mess up these people its the brokers that saw a quick buck to be made. Then the brokers screwed with emotions and preyed on these people. Not to say every broker out there is this way because their not. You see these people were buying homes not having to prove any income or assets. This is were it went wrong. Even if you qualified full documentation it was so much easier to raise the interest .25% to just state income. You can actually get into a home for as little as 3% if your not a 1st time home buyer. By the way out of curiousity where are you looking to buy? I'm sure you can find something under $500,000.
1 vote
Tman, , 30642
Wed Jun 25, 2008
Excellent post Don Tepper...



Like my grand Daddy likes to say:

.. "I don't make the news, I just end up at the parties..."


-
0 votes
Cesar, Home Buyer, Charleston, SC
Tue Jun 24, 2008
Seems like you are cheering for the market because it is too slow. You are a realtor. You work on commisons. You would love a buying frenzy. Your post makes no sense.
0 votes
John the Bru…, Home Buyer, Connecticut
Sat Jun 7, 2008
Don,

I had a response to this question penned, but then I read your answer. Wow. Just wow. You get it, my friend.

My line of work could bring me to VA, and if it does, I’ll be calling you…

-John
0 votes
Search Advice
Search
Ask our community a question

Email me when…

Learn more